Global rice prices will extend declines as Thailand is forced to offload grain from record stockpiles accumulated under a state-buying program, according to the Vietnam Food Association, the main shippers group.

Exports to China and Africa from the second-largest shipper will drop this year on increased competition from Thailand as well as from India and Pakistan amid a global glut, said Truong Thanh Phong, chairman of the Ho Chi Minh City-based group.

While Thailands reserves built up as the government paid farmers above-market prices since 2011, the program is now short of funds and unpaid growers are demanding stockpile sales. The unrest by the growers adds to opposition targeting Yingluck Shinawatras caretaker administration, which has faced months of demonstrations. Phongs comments reflect concern among exporters about the pace of sales from holdings that are large enough to cover 39 percent of annual world import demand.

The rice market has seen fierce competition for the past two years due to the global surplus, said Phong, who has been chairman of the group for 13 years. Global prices will decline this year because theyre guided by Thai rates, he said.

The price of new-crop Thai 5-percent broken white rice, a benchmark grade, tumbled 23 percent last year and was at $460 a metric ton on Feb. 12. The Vietnamese 5 percent-broken variety is about $395 a ton, higher than $370 for old-harvest Thai grain, Phong said, without giving price forecasts. Rough rice fell 0.3 percent to $15.81 per 100 pounds in Chicago today.

Thailand spent 689 billion baht ($21 billion) in the past two years buying from farmers to boost rural incomes. That spurred the buildup in the inventories to 14.7 million tons this year from 6.1 million tons in 2010, according to the U.S. Department of Agriculture. The program is set to lapse at the end of this month as Prime Minister Yinglucks caretaker administration doesnt have the authority to extend it.

Given the caretaker governments troubles in securing financing to pay farmers for their paddy pledged during the past wet-season crop, it seems likely that they will try to increase sales, said David Dawe, Bangkok-based senior economist at the Food & Agriculture Organization. If they are sold too soon and all at once, the global price will fall, but if they are sold too late then the quality will continue to deteriorate.

Thai farmers blocked roads in the provinces and protested in Bangkok this month, urging a faster pace of sales from the stockpiles so that the government can make missed payments to growers. It may take about five years for the state stockpiles to be sold off and a further slump in prices is possible as more of the grain is shipped out, Thai Rice Exporters Association President Chareon Laothamatas said on Feb. 5.

Thailand plans to sell about 1 million tons a month from stockpiles during the first quarter, Deputy Prime Minister and Commerce Minister Niwattumrong Boonsongpaisan said on Feb. 17. The government will clear all remaining payments to farmers within six to eight weeks using short-term borrowings, Finance Minister Kittiratt Na-Ranong said the same day.

Vietnams exports are forecast at 6.5 million to 7 million tons this year, with shipments of 1.2 million tons seen this quarter and 3.5 million in the first half, Phong said. The country shipped 6.68 million tons in 2013, the lowest level in four years, according to VFA data.

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Rice Rout Seen Extending as Thai Sales Quicken: Southeast Asia