Thailand says China to buy 2 million tonnes of its rice

A farmer works in his rice field in Nakhonsawan province on Nov 14, 2014. -- PHOTO: REUTERS
A farmer works in his rice field in Nakhonsawan province on Nov 14, 2014. -- PHOTO: REUTERS

BANGKOK (REUTERS) - China will buy two million tonnes of rice from Thailand, the Thai prime minister said on Friday, easing pressure on a military government struggling to shift a giant stockpile amassed under its predecessors'controversial buying scheme.

A memorandum of understanding (MoU) was signed during the two-day Greater Mekong Subregion (GMS) summit that started in Bangkok on Friday. Further details would be discussed during the meeting, Prime Minister Prayuth Chan-ocha told reporters.

Thailand, for decades the world's top rice exporter, has around 17 million tonnes in stockpiles. Only a tenth of this is of standard quality, according to a state audit. The stocks were accrued under the state-buying programme of ousted Prime Minister Yingluck Shinawatra's government.

The scheme caused as much as US$15 billion (S$19.7 billion) in losses. Farmers were paid well in excess of the market value, pricing Thai rice out of export markets.

There had been several claims by the previous government of sales to China, none of which were confirmed by the Chinese side. But China's premier on Friday confirmed a deal had been signed.

"Both sides witnessed the signing of the MoU in regards to agricultural produce," Chinese Premier Li Keqiang told a news conference in Bangkok.

Mr Prayuth said Thailand would reclaim its former position as the world's number one rice exporter in 2015. The 17 million tonnes currently in stock would be sold within the next three years, he added.

The government plans to increase domestic rice sales through new markets for farmers nationwide, he added, without elaborating.

Thailand's 5-per cent benchmark broken rice was at $413 to$415 a tonne on Friday. Vietnam's asking price was at US$390 to US$395 a tonne.