“We will not back off,” Kittiratt said in an interview yesterday. “If we cannot help our farmers, what is the point of being the government in this country? I’m not proud of being the largest exporter. I’m proud that Thai farmers can grow and sell their products at reasonable prices and they can smile.”

Prime Minister Yingluck Shinawatra aims to insulate the country of 66 million people from a global slowdown by lifting incomes of poorer Thais who propelled her party to victory in a July election. The plan to guarantee rice prices may boost export rates by almost 20 percent and erode the nation’s share of the global market, said Sarunyu Jeamsinkul, deputy managing director at Asia Golden Rice Ltd., Thailand’s largest shipper.

“That will be trouble for exporters,” Sarunyu said by phone from Bangkok. “It would be difficult to get deals done at that price.” The export price may climb to $750 a metric ton, Sarunyu said. It was at $629 as of Sept. 7, the highest level since December 2009, according to the Thai Rice Exporters Association.

Shipments from Thailand, which accounts for about 31 percent of world rice exports, are expected to fall to 8 million metric tons next year from an estimated 10 million tons this year, according to the U.S. Department of Agriculture. Exports jumped 55 percent to 8.3 million tons this year through Sept. 5, according to the Thai Rice Exporters Association.

“I believe that if we have to suffer with smaller export amounts, the total value of exports will be more,” Kittiratt said in Bangkok.

Prices Are ‘Reasonable’

The government plans to pay 15,000 baht per ton ($497) for unmilled white rice and 20,000 baht for Hom Mali fragrant rice, as much as 47 percent above current market rates, according to Bloomberg News calculations based on data from the Thai Rice Mills Association. Purchases are due to start on Oct. 7.

Thailand’s effort to raise farm incomes may fuel price gains across a region that the USDA estimates accounts for 87 percent of global rice consumption.

“We’re not talking about pushing up the price three, four, or fivefold so that people will switch to consume bread or other grains,” Kittiratt said. “I’m confident the price we’re offering is reasonable. I’ll not be happy if the price surges higher than what we suggest.”

Thaksin’s Policy

The price of 100 percent grade-B Thai rice, the benchmark for Asia, has gained 21 percent since the election on expectation that Yingluck would resurrect a policy first introduced by her brother, Thaksin Shinawatra.

In 2008, when Thaksin’s allies were last in power and the government had a similar policy, it bought a total of 10.5 million tons of rice from almost one million farmers, according to the Bank for Agriculture & Agricultural Cooperatives. Losses from selling rice below purchasing costs were estimated at 43 billion, data from the bank showed.

Local prices rose to a record 17,000 baht per ton in April that year and export rates hit an all-time high of $1,038 per ton the following month after India, China and Vietnam curbed shipments, spurring unrest from Haiti to Egypt.

“Everyone in the business can look at the price of rice five years ago and the price of wheat five years ago and look at the percentage increase,” Kittiratt said. “What we’re suggesting isn’t even trying to outpace other comparable choices. What we’re trying to do is to beg for the understanding of buyers and consumers.”

‘No Supply Shortage’

The USDA raised its estimate for global rice production to a record 458.4 million tons for the 2011-2012 crop, buoyed by larger expected harvests in Brazil, China, the Philippines and the U.S., according to a Sept. 12 report. That would be a second year of record supply, outpacing consumption and lifting ending stocks to the highest level in nine years, the USDA said.

Global trade in rice is estimated to fall 4.2 percent to 31.8 million tons next year, the USDA said.

“As we go forward, demand and supply fundamentals are going to come to bear,” Ofon said. “There isn’t a shortage of rice in the market. We’re actually seeing a decrease in per capita consumption of rice in this region. As people get richer they switch from rice to other higher protein meals.”

Bloomberg