KUALA LUMPUR, MALAYSIA - MALAYSIA has put on hold talks with Thailand to buy 300,000 tonnes of rice after stocks doubled to 180,000 tonnes and prices fell, Agriculture Minister Mustapa Mohamad said on Monday.

'Prices are coming down to US$800 (S$1,095) from US$1,100 about a month ago. That is because harvests have returned to normal and Vietnam lifted its export controls,' he said.

'But hopefully we aim to complete the purchase (of 300,000 tonnes of rice) by the end of this year,' he added.

State rice monopoly Padiberas Nasional Berhad , also known as Bernas, said earlier on Monday the government should not enter bearish global rice markets now to stock up on supplies as large orders risk sustaining or boosting prices.

Mr Mustapa said that if input costs keep rising then Malaysia's target of 86 per cent rice self-sufficiency by 2010 would be at risk. Malaysia currently produces about 70 per cent of the 2.2 million tonnes of rice it consumes annually.

'There is danger of production being affected. We have been getting reports that fertiliser and pesticide costs have gone up...Going forward, the increase in diesel and petrol will have knock-down effects on production,' he said.

Malaysia increased fuel prices this month.

Mr Mustapa said that 15 per cent broken rice variety, the lowest quality, now makes up half of total Malaysian rice consumption after the government introduced price controls.

'The price differential between the 15-per cent and 10-per cent variety is so big,' he noted.

The 15-per cent variety is RM1.80 (S$0.76) per kg while the 10-per cent variety is RM2.70 per kg.

The government was also studying whether Bernas should retain its rice import monopoly, he said.

'This study is to review the performance of Bernas as privatised entity, whether it has discharged its social responsibilities well, whether we should open up to other operators...,' Mr Mustapa said.

The study is being done by the Economic Planning Unit of the prime minister's department and will be ended in three months.

The median price quoted for benchmark Thai 100 per cent B grade white rice by Bangkok traders last week was US$795 per tonne, down 26 per cent from an April 24 peak of US$1,080.

The government had announced subsidies and incentives of up to RM1.73 billion for farmers and agriculture agencies in the country to boost domestic rice production.

Part of the funds are to be used to plant an extra 100,000 hectares in the eastern states of Sabah and Sarawak in Borneo island and in the the northeastern state of Terengganu.

Malaysia currently grows rice in some 680,000 hectares. -- REUTERS