The government of Thailand introduced a new pricing policy, beneficial for incomes of farmers and to help relieve rural poverty. He is offering to buy unmilled rice at 15,000 Thai baht per metric ton, equivalent to 50% premium on current market rates. In addition, it compensates farmers if market prices fell below a benchmark. However, this scheme has the potential to alter price changes in local and global markets. In addition, private exporters are in a disadvantage and it puts Thailand’s high global exporting position in harm. Its impact on the global market will depend on how much rice the government is planning to store and export as there will be less rice in world markets if taken away. Thailand is the 3rd largest rice exporter, therefore the government’s decisions will have implications in the global market.
With the new price policy introduced in Thailand, having 1/3 of global shipments of 30 million tons, buyers, such as cereal makers, Kellogg and General Mills will definitely be either benefited or in disadvantage. For Kellogg, a major importer and use of rice in its cereal production, especially in its Rice Krispies cereal, this policy may impact them as there may be less rice in world markets due to the storage amount by the government, increasing international prices. In addition, as Kellogg’s cereal plant in Thailand uses Thailand’s local rice production as a raw material serving to South East Asian markets for its ready-to-eat cereals, there may be