And for many, the problems associated with the baht's strength were exacerbated when speculators were wrong-footed by changes in the market.

Vichai, president of Riceland International Ltd, said many exporters were long in rice in the hope Indonesia would buy more while the international rice price was declining due to fresh supplies from new harvests.

Thailand is the world's top rice exporter. Industry sources forecast that its rice exports this year might exceed a record of 6.0 million tonnes. The world's import demand this year is seen at 26.75 million tonnes.

High quality Thai rice prices have fallen by about $10-15 per tonne to a little over $300 on an FOB basis in recent weeks.

"It's a double whammy. The baht is at a high end now compared to our competitors' currencies. The bahtshould be compatible with our competitors, if not lower, otherwise the export sector will suffer," Vichai told Reuters in an interview.

"We bought rice at a high price in the local market. But when we collect money from buyers, we get much less in baht terms," he said.

"Those who stocked up rice for Indonesia before the country changed its procurement policy were badly affected. Some are still waiting for letters of credit. While waiting, their rice value has dropped by around 25 per cent. The problem is serious," he said.

Indonesian state commodities regulator Bulog is returning to its "silent operations" policy, buying rice by inviting private traders to sell the staple directly to the agency without open tenders.

The baht surged to 36.66 baht per dollar on Thursday, its highest level in 12 months and almost 36 per cent up on its all-time low of 56.90 per dollar in January. The surge was driven partly by capital inflows, dealers said.

Vichai said Indonesia had yet to send letters of credit for the100,000 tonnes of rice the country agreed to buy from the Thai government two months ago.

Although Bulog said it had no plans to cancel rice contracts bought through tenders, some private exporters were still awaiting the payment arrangements, he said.

Indonesia is the biggest rice buyer this year and the country is forecast to import as much as 6.25 million tonnes. Thailand sold around 1.2 million tonnes to Indonesia during the first eight months of 1998.

Vichai said the industry would have to address some long-term questions, but insisted the government should step in to compensate for shorter-term crises brought on by the baht's new-found strength.

"It is true that in order to boost our competitiveness we have to look at various factors, like how to boost yield and efficiency in the long run. But the exchange rate volatility is an immediate problem that the government must look into.

"I don't know whether the recent rise was driven by fundamentals or artificial factors, but the value of ourcurrency is now ahead of our competitors. And under this circumstance, it's rather bad," he said.

The Thai market has weakened since late last month despite the strong baht and impending Indonesia shipments.

The lack of nearby vessel loadings has pressured prices, particularly on higher grades, that might otherwise be moving to Iraq, Iran or similar destinations, according to Creed Rice market reports.

The lag time in opening letters of credit from Indonesia also had a dampening effect, it said.