Market competition resulting from costly domestic rice remains a key factor driving Thai exporters to seek openings in neighbouring countries where the rice trade is more prosperous.
Exporters say their performance was weak last year, mirroring the country's overall decline in rice exports, which plunged by 35% to 6.9 million tonnes.
"We expect a weak market for another year, as the industry is in a downward trend and local supply is mountainous," said Wanlop Pichpongsa, deputy managing director of Capital Rice Co.
"The government will likely run short of space to store the rice it buys every day from farmers."
His remarks were echoed by a UN Food and Agriculture Organization report last week that said the government's stockpile will probably surpass 18 million tonnes by year-end, a 40% jump from last year.
While these factors will eventually affect the Thai rice business, Thai exporters are already beefing up their rice investment abroad.
Mr Wanlop said Capital Rice will begin exporting rice from its venture in Cambodia this quarter after a test run went smoothly.
The company, the country's second-biggest rice exporter, is among several Thai firms seeking to enter the rice industry in Cambodia.
Capital Rice has joined with a local partner to operate rice milling with an initial capacity 3,000 to 5,000 tonnes a month.
Cambodia recently announced it will produce 9.3 million tonnes of rice paddy this year, with 4.6 million tonnes earmarked for domestic consumption. The upshot is that 4.7 million tonnes of paddy or 3 million tonnes of milled rice are for export.
All of this gives Capital Rice a chance to process and export rice for Cambodia _ especially to Europe, where duties are waived on certain items from less-developed countries.
Besides Capital Rice, other market leaders such as Asia Golden Rice are making Cambodia a part of their strategy for improved risk management.
Chookiat Ophaswongse, the managing director of Huay Chuan Rice Co, disclosed that he and Uthai Produce president Charoen Laothamatas are planning a 50-million-baht rice processing plant near Ho Chi Minh City.
"Vietnam also has high-quality fragrant rice but is short of facilities, especially for milling and processing," he said.
The Thai government's pledging scheme, which buys paddy at the elevated price of 15,000 baht a tonne, has not only boosted local prices but also driven down the competitiveness of Thai rice exports.
Exports are valued at about US$800 per tonne of milled rice _ far higher than the $430 a tonne offered by rivals.
Korbsook Iamsuri, president of the Thai Rice Exporters Association (TREA), forecasts Thai rice exports of 6.5 million tonnes this year. The total could be higher if the state is able to sell rice on a government-to-government basis.
But with the current low prices and slow world rice trade, it will be hard for the country to increase sales this year.
US Department of Agriculture figures forecast this year's global rice trade at 37.4 million tonnes, down by 4.35% from last year.
The TREA said foreign traders believe the Thai government will have to unload stocks at lower prices this year to reduce pressure, barring some disaster that drives up the cost of the grain worldwide.
An industry source has urged the Commerce Ministry to sell rice transparently after several dubious sales to traders with close ties to the government.
Siam Indica, an affiliate of the debt-ridden President Agri Trading Co, has been accused of ties to politicians in the ruling Pheu Thai Party, allowing the firm to win several rice sales from the ministry.
The company emerged as the third-biggest rice exporter last year, with shipments of 680,000 tonnes.
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- Writer: Walailak Keeratipipatpong