With the government controlling a massive rice stockpile, exporters are warning that long-stored grains will eventually erode buyer confidence in Thai rice quality and damage the country's storied rice export industry.
"The latest report that Iraq will not buy Thai rice until the quality improves is a very good example," said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.
"The Thai Commerce Ministry is duty-bound to accelerate direct talks with the Iraqi authorities to defend and clarify such allegations, as I believe Iraq still needs to purchase Thai rice given its current price drop."
Mr Chookiat said Thai rice shipments to Iraq fared well in the first half of last year before the country halted purchases in the second half on concerns about Thai rice quality.
Thailand could have sold 300,000-400,000 tonnes more to Iraq last year without the halt.
In all, Thai exporters shipped 703,869 tonnes to Iraq in 2013, down by 9.6% from the year before.
Normally, Iraq's import demand is between 1.5 million and 1.6 million tonnes a year.
Sermsak Kuonsongtum, executive director of Chaiyaporn Rice, a leading exporter to Iraq, attributed Iraq's decision to halt purchases of Thai rice to dissatisfaction over quality and concerns about the accuracy of certain exporters' shipment weights.
According to the rice trading industry, in previous years a single Thai rice exporter, Siam Indica, dominated exports to Iraq.
That company was alleged to have close ties with the government, buying rice stocks at cheaper prices than those offered to other rice exporters.
But Surasak Riangkrul, director-general of the Foreign Trade Department, said media reports about Iraq's ban on Thai rice are exaggerated, adding that Iraqi officials have yet to speak to Thai counterparts about the issue.
Iraq would not be the first country to halt purchases of Thai rice.
In 2001, Indonesia rejected a purchase deal for 30,000-40,000 tonnes of Thai rice struck by Indonesia's rice-buying agency, Bulog, and Thailand's Public Warehouse Organisation, citing the substandard quality of the rice delivered.
Mr Chookiat defended the quality of Thai rice, saying shipments handled by the private sector are strictly inspected and the problems lie with state control of rice stocks.
"In fact, as far as we're aware, the deteriorating rice quality and degraded rice in the government's warehouses only apply to domestic rice, not exports," he said.
According to Mr Chookiat, it is anyone's guess how long the government's stockpiled rice has been mouldering in the warehouses.
The question mark hanging over quality is one reason why rice exporters have offered relatively low prices and a tepid reception to the government's tender proposal to dispose of its rice stocks.