The decade-worst drought is expected to trim Thailand's rice production by 15-20%, giving greater room for rice prices to rise and the government to dispose of stocks.
Charoen Laothamatas, president of the Thai Rice Exporters Association, said demand was likely to increase in line with lower supply in Thailand and other rice-exporting nations because of the extremely dry weather caused by the El Nino weather phenomenon.
In Thailand alone, the drought is expected to cause overall production to drop to about 35 million tonnes of paddy or 18-19 million tonnes of milled rice.
Earlier, the Agriculture Ministry estimated the drought would shave this year's main crop by 2% to 26 million tonnes. The estimate was based on a delay in rice farming for two months until August. However, if the drought is prolonged, the yield may be much lower.
"Paddy prices have a chance to exceed 9,000 baht a tonne from 7,500 to 8,000 baht now because of anticipated low supply," said Mr Charoen. "However, how far the prices will rise will also rely on the production of our competitors, the extent of the drought impact and the world's economy."
The association forecasts Thailand's rice shipments will be 9.5 million tonnes worth about US$4.77 billion this year.
In the first six months, Thailand shipped 4.5 million tonnes of rice, down by 1.1% from the same period last year.
In a bid to boost exports in the second half, the association will propose the government sell its outstanding stocks, conclude more government-to-government deals, stabilise the baht's movement, improve long-term rice management, develop irrigation and introduce proper zoning, Mr Charoen said.