Between January and September the value of Thai rice exports rose around 25 percent from the same period last year, reflecting higher world prices, supported by strong demand and the baht's appreciation, according to commerce ministry data. 

Prices are likely to rise further as the Thai baht, which has risen more than 6 percent against the U.S. dollar so far this year, puts pressure on exporters to quote higher prices in a bid to offset currency losses.

Thai 100 percent B grade white rice was quoted at $338 per tonnes, up nearly 10 percent from $308 last year.

"Prices, which are already firm on the back of goverment buying, will rise further next year," Chookiat said. "It could be higher than $350 a tonne as demand surges."

The Thai government buys rice from farmers every year to help keep domestic prices attractive during the harvesting period when around 23 million tonnes of paddy comes into the market.

In the crop year starting in November, the government will pay farmers 200-600 baht per tonne more than last year, pushing market prices higher, traders said.

The goverment will pay 6,700 baht per tonne for 100 percent white paddy, up from 6,500 baht, and 9,300 baht per tonne for fragrant paddy, up from 8,700 baht.

The Thai government said last week it would open a tender to sell up to 900,000 tonnes of rice this week as it would help exporters to get higher prices.

"It is a good time to release our stocks as overseas demand is strong while India and Vietnam have less rice to export," Pisut Chalakornkul, head of the Public Warehouse Organisation, told Reuters.

But Thai rice prices would be capped by March 2008 when Vietnam, the second biggest producer, harvests its main crop.

"It would be a short-term disruption and prices could soften by that time as Vietnam will be ready to sell, but I don't expect prices to fall sharply because Vietnam might not have a huge crop," one trader said.

Vietnam has said its paddy output was likely to drop 0.7 percent to 35.6 million tonnes in the crop year starting in February because of bad weather and farmers converting some of their fields to raising fish and other crops.