Thailand's plans to curb rice supply could send prices soaring

Over the past few decades, the price of rice has fallen steadily as supplies increased. Rice is a food staple in Asian countries and the lowered prices have helped fuel an uptick in demand for the good. Thailand has largely driven the increases in production and can control price swings with its ample supply. However, the era of cheap rice could be coming to an end.

According to a recently published report, the Thai government is considering enacting policy changes that would benefit Thai rice growers, who are suffering from low prices and are struggling to turn profits. The government is poised to abandon its position as the top rice producer in the world, and in doing so could drastically cut global stockpiles and send prices up, Bloomberg reports.

In March, the Thai government said it planned to stop a third planting in 2011 to improve rice quality and combat the hopper, a menace to crops that destroys them. The plan to cut plantings could slash the country's output by 2 million metric tons, roughly 20 percent of its shipment total.

Thai officials are less interested in supplying the world with cheap rice and are urging farmers to plant varieties that fetch more money internationally. Thai rice shipments surged 33 percent over the past 10 years, but the country is moving to curb its production. That, however, could prove disastrous for poorer countries, according to analysts.

The United Nations projects world food demand to soar 70 percent by 2050 and in February, its Food and Agriculture Organization urged Thailand and other Asian nations to grow more rice to help feed a quickly climbing global population and prevent food riots like those that broke out in 2008.

Kiattisak Kanlayasirivat, a director at the Thai office of trading company Novel Commodities, said the drop in supply from Thailand would send prices higher and hurt poor countries that rely on the nation's cheap rice. "I doubt whether it is a good policy, as cutting the supply may lead to food shortages," Kanlayasirivat affirmed.

Analysts have likened Thailand's ability to dictate rice prices to that of Saudi Arabia's control of the oil market. When oil prices rise, leaders turn to the Middle Eastern country to increase supply and bring down costs. If Thailand moves forward with its plans to cut supply, rice prices could climb precipitously.