The prospects for continuous growth in rice yields have been examined within the context of a simulation model where demand parameters for both rural and urban populations and for different income groups have been used. Coupled with available estimates of supply response parameters, the prospects for a rice surplus in year 2000 appear moderate. On average, only 157,000 metric tons of rice surplus would result if current prices were to prevail. If prices were allowed to adjust, only a negligible price decline would result. That is also the case in the more favorable scenario of high growt of rice yields. Domestic demand would be capable of absorbing the increased rice surplus without an appreciable decline in price. The analysis of the proposal to support rice prices through procurement of domestic production has led to the conclusion that even massive increase of domestic procurement would result in very small price increases while at the same time causing serious storage capacity and budgetary problems for the government.