Thai rice exports in 2012 may fall by half from this year to around 5 million tonnes as its prices are too high compared with those of rivals Vietnam and India, exporters said on Tuesday.

The drop could topple it off its position as the world's top rice exporter behind Vietnam, which aims to sell a record of more than 7 million tonnes this year through lower prices even as the Thai intervention scheme keeps its prices up.

In the face of intensifying competition, Thailand has revived talks with Indonesia - which recently bought 250,000 tonnes of the staple from Indian suppliers - to sell Thai rice in a government-to-government deal.

'Thailand's private rice trade has completely stopped now because of uncompetitive prices, at a time when there is cheaper rice from India and Vietnam available on the market,' Korbsook Iamsuri, head of the Thai Rice Exporters Association, told Reuters.

Thai rice exports this year were initially forecast at around 10 million tonnes and the country normally exports 9-10 million tonnes annually. In October, Korbsook said Thai rice exports next year could fall to 7 million to 7.5 million tonnes, as export prices have been pushed up by the intervention scheme and floods.

The Thai government intervention has propelled prices to the highest since October 2008 at $640 a tonne in September, when the new administration officially took power and pledged to implement the aggressive plan to support farmers.

The price of benchmark 100 percent B grade Thai white rice was at $610 per tonne on Tuesday, up from $450 to $550 it was offered since early this year. The 5 percent broken grade Thai white rice was offered at $595 a tonne.

Those were well above offer prices from India of $450 to $470 a tonne and higher than Vietnamese rice offers of $540 to $570.

The Thai government said it would purchase every grain from the major rice crop and would even accelerate the buying scheme after the crop was disrupted by the worst flooding in 50 years. The floods were expected to damage about 6 million tonnes of the major crop, from the 25 million tonnes it had expected to produce.

Industry sources said the government may have bought around 1.2 million tonnes of paddy from farmers so far, plus the carry-over volumes of 2 million tonnes milled rice it had bought from farmers from the previous crops.

Pressured by cheaper rice from India that has allowed shipments of 2 million tonnes, a top exporter in Vietnam said on Monday its export prices should be cut in order to attract buyers.

Indicative prices for Vietnam's 5 percent broken rice have dropped to $550 a tonne, free-on-board (FOB) basis on Tuesday, compared to a wide range of $540 to $570 last week. The 25 percent broken rice fell to $510 a tonne, from $520-$530 a week ago.

'The market has been quiet and no deals were sealed in the past week,' a trader in Ho Chi Minh City said.

Adding to the downward pressure, the Philippines said it would allow private firms to import 500,000 tonnes of rice from Vietnam in 2012, a sharp fall from this year.

Some Thai exporters have even switched to seeking rice from other origins for deliveries to their clients, as they struggled to secure cargoes to meet contract commitments due to the high prices, said Korbsook from the Thai Rice Exporters Association.

'In order to survive, some Thai exporters need to seek rice from Pakistan, Vietnam, Myanmar and Cambodia for deliveries to restore their clients,' she added.

Thailand is also in negotiations with Indonesia's state procurement body Bulog to sell rice in a government-to-government deal, industry and government officials said.

This came after Thailand was reported to have cancelled in September a proposed government sale of 300,000 tonnes rice to Indonesia.

'We are still negotiating about prices and terms of delivery,' said an official at the Thai Ministry of Commerce.

He declined to give details on the amount and prices, but traders close to the matter said the two countries were talking about 300,000 to 500,000 tonnes.

'Yes, we are in talks with the Thai government and PWO to rearrange the time delivery of the previous G-to-G rice import contract of 300,000 tonnes,' Bulog's CEO Sutarto Alimoeso said in response to Reuters queries. The Public Warehouse Organisation (PWO) is a Thai state-owned firm that handles government rice stocks.

'Previously it is stated in the contract that it would be shipped by the end of December. However, it is now impossible to deliver 300,000 tonnes in only one month because our destination ports are not able to handle that amount in only one month.'

He added that there should be no changes in the price which had been agreed in the previous contract. The Thai side insists that the price had been agreed by the previous administration.

'We are expecting the Thai government and PWO would respect the contract. In terms of the delivery period, our import permit is valid until the end of February, 2012,' Alimoeso said, but declined to reveal the price level agreed in the previous deal. – Reuters