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Laos has experienced a rather high inflation this year, largely due to rising food prices. Now there is a development in the region going on that might be worth to watch.

According to a recent article in the Bangkok Post, the Pheu Thai-led administration in Thailand has pledged to pay farmers 15,000 Baht per tonne of paddy from the next harvest on, which starts in November, while the current market price is at about 11,000 Baht/t.

This movement away from a market price that is determined by supply and demand could result in an increase of the export price of Thai 5% white rice from the current 550 $/t to 800 $/t  and put Thai exporters in a difficult position.

The anticipated policy change has already led to reactions in Viet Nam, where exports are delayed and supplies are reduced, resulting in Vietnamese 5% white now trading at price levels now close to the Thai 5% white whereas in the past it was up to 100 $/t cheaper.

Thailand and Viet Nam intend to strengthen their cooperation in exporting rice.

The development matters not only because Thailand and Viet Nam are (in that order) the biggest rice exporters of the world (albeit not the biggest producers) but also because it may influence the price of rice in Lao PDR.