Pledging Scheme Could Destroy Thai Rice Exports

[webfact]

EDITORIAL

Pledging scheme could destroy Thai rice exports

By The Nation

The only beneficiaries from govt rice subsidies will be brokers, millers and middlemen, not poor farmers

Thai politicians lack the political will and courage to help improve the capacity of our farmers. Government subsidies implemented for farmers are aimed at short-term solutions and artificially inflate prices. As a result, Thai farmers are losing their competitive edge. Thailand does not have sufficient research and development centres to develop Thai rice strains to move ahead of other countries that are fast catching up with Thailand.

The newly introduced rice policy of the current government will make things even worse for Thai farmers. The rice pledging scheme is an exemplary case of how a short-sighted rice subsidy policy will severely affect Thai farmers.

Dr Ammar Siamwalla, a prominent economist at the Thailand Development Research Institute (TDRI), has recently pointed to the downside of the rice policy. It will become a tax burden, create a price advantage for Vietnam and add a price burden for local consumers.

Prime Minister Yingluck Shinawatra used the rice pledging programme during her campaign to attract farmers, who account for a majority of Thais. Although the subsidy is an attractive campaign feature, the programme will not strengthen Thai farmers. It will further weaken them and make them more dependent instead of enabling them to stand on their own.

The failure of previous governments' subsidy programmes is evidenced by the fact that most Thai farmers are still living in poverty and are desperately reliant on government support. The assistance programmes should have made our farmers stronger, but that is not the case.

First of all, the high pledging price will distort the market. The Yingluck government plans to buy paddy at Bt15,000 per tonne from farmers, compared to the market price of around Bt9,000 per tonne of white rice. The artificial high price of Thai rice will erode its competitiveness on the global market, especially compared to cheaper rice from Vietnam. The government may claim that the pledging scheme will push up rice prices on the world market because the Thai rice price is considered a benchmark. But Thailand does not have the influence to ask the other Organisation of Rice Exporting Countries to increase their prices in parallel, in the same fashion that the Organisation of Petroleum Exporting Countries do.

It is estimated that the price of Thai white rice on the world market will rise from US$500 to $800-$850 per tonne after the rice pledging programme. But, in reality, Vietnamese producers will offer much lower prices than Thai exporters because they don't have any reason to increase their price.

The scheme also puts pressure on rice prices on the domestic market, as prices are set to rise from the current Bt15 per kilogramme to Bt20. Consumers will not mind spending more on rice if the farmers receive benefits, but they do not.

Farming should be supported to ensure the continuation of our food security and traditional lifestyle. But price rises will now likely come from speculation. Already, some rice brokers are hoarding produce ahead of the implementation of the pledging policy.

The main beneficiaries of this pledging scheme will be the rice millers, not the farmers, especially the small-scale farmers with no silos or equipment to dehydrate paddy to the level required by the pledging scheme.

The government of the late prime minister Samak Sundaravej implemented a rice pledging programme that left a burden of more than 5 million tonnes of stockpiled rice that the succeeding government was forced to sell at a loss to rice exporters and millers.

Subservient small farmers are the target group of the government's subsidy. But they are unable to pledge their rice because they don't have storage facilities. They have to rush to sell their paddy at a lower price to middlemen. Most of these buyers have the facility to store and dehydrate the paddy. They can keep stock in their facilities and wait to cash in on the subsidy programme.

This programme will in no way serve its stated purpose to help farmers - not to mention the fact that such massive schemes like this are an open invitation to corruption.

These policies have weakened farmers' ability to compete. The government does not provide sufficient research and development work to assist farmers in improving their methods and yields. Big corporations meanwhile control the new technology to develop farming and refuse to share this information with the majority of farmers.

To sum up, small farmers have become weaker and big corporations have become stronger as they manage to control both the production and the market.

In fact, farmers don't want these subsidies that have only short-term results, but they do want policies to help them in the long run, such as good irrigation, innovations to improve rice strains and an assistance programme to help improve their productivity. It is unfortunate that Thai governments, this one in particular, never focus on how to promote the capacity of our farmers in a sustainable manner.

-- The Nation 2011-09-09

[Ricardo]

The rice-farmers of Laos & Cambodia & Vietnam add their thanks, for a scheme which will suck-in their cheaper rice across-the-borders, to those of the already-rich rural middle-men & warehouse-owners, who will enjoy a rash of new luxury-cars, on the proceeds of the policy. After deductions for political-contributions to the right political-party, natch.

One hopes the poor Thai farmers might see some small part of the benefits, for show.

And the poor people, who hoped that the new government might somehow magically reduce their cost-of-living, will perhaps consider switching to eating cake, as the retail-price of rice continues to soar !

Edited September 9, 2011 by Ricardo

[aussiebebe]

Oh, how easy Thai politicians have it! Back home, politicians have to lie to promote their policies whereas in Thailand they just say what they are going to do and convince people that it's somehow in their interests. I'm not even Thai and even I remember reading about how rice was stockpiled under PM Samak's tenure. The effects of rice-pledging are so widely-know and demonstrated in recent history that the real question should be why Thai electorate were suckered in by such a policy from the outset.

The rural electorate may give votes but they don't contribute money to an election campaign, quite the opposite, they gleefully receive a stipend for voting while wrongly believing that a rice-pledge will benefit them financially. I don't see how lack of education or illiteracy impacts the fact that they should really have remembered it not working not so long ago, but there you go. Yingluck's party secured the support of the farmers through an election promise to implement a tried and tested rice-pledge policy which has been proven to benefit the same businesses from which the majority of political election funding surely comes from.

[DNPBC0]

I entirely agree with aussiebebe. The reinstatement of Thaksin’s disastrous pledging scheme is no surprise given his influence over the new government’s policies and illustrates the foolishness of allowing his out-of-date fancies to dominate the economy. Once again we will see an increase in the already unjustifiable profit of the millers and additional corruption along the long chain between the farmers and the domestic consumers/importing countries. There is desperate need for a new comprehensive study of the Thai rice industry with a detailed examination of the profits made all along the chain and ways of increasing farmers’ income by cutting out middlemen and improving efficiencies. The whole industry needs reorganising. Farmers are aging and are not being replaced by the younger generation, and Thailand faces the same problem as the rest of the world – rising fertiliser and transport costs due to the increasing costs of oil. Rice farmers are a major resource of growing importance in a world of increasing food scarcities, and Thailand urgently needs to support them directly, vigorously and effectively.

[Emptyset]

Are there any actual studies to show which scheme farmers do better under? Reading articles about the last time PPP implemented it, the reason why millers benefited so much is because the scheme that year was implemented when farmers had already sold most of their paddys. So in a lot of cases the extra went straight to the miller. The obvious long-term solution (other than gradually moving ppl out of farming into more productive industries) is publicly owned rice storage, allowing farmers to store their paddy free or for a nominal fee. But that's not going to happen, given millers generally have good political connections.

[OzMick]

Remember when the tax on petrol dropped - a big survey of fuel stocks so that retailers could be reimbursed.

BP estimates 3,000,000 tonnes are rice are currently being hoarded waiting for the rice subsidy. Anybody hear even a suggestion that millers/exporters should have to declare their stocks so that the new subsidy is not payable, or even a windfall profits tax, or of a pig with wings?

[elgato]

"The scheme also puts pressure on rice prices on the domestic market, as prices are set to rise from the current Bt15 per kilogramme to Bt20. Consumers will not mind spending more on rice if the farmers receive benefits, but they do not."

The poor people here won't mind the price increase as long as the Bt300 minimum wage scheme goes through!

[lungmi]

Alternative solution we have in my area (Democrat stronghold at the Burmese border)

Agricole cooperative with rice mill, biofarming school and savings bank for members, low credit interest for fertilizers, shared agricole machines, discount on diesel, and other small advantages. (The manager studied in Denmark for agricole cooperatives)

The farmers are still poor with many problems, but they are confident that this is a good way for development.

Me too. I put my Visa money (800 000 BHT) in the savings bank, better interest in different ways.

Edited September 9, 2011 by lungmi

[rubl]

BUSINESS

Rice-pledging scheme: BAAC lacks liquidity for ample stockpile

By THE NATION

Published on September 9, 2011

The rice-pledging scheme is expected to cost Bt400 billion for the 2011-12 crop and the Bank for Agriculture and Agricultural Cooperatives does not have adequate liquidity to finance this, Luck Wajananawat, president of the BAAC, said yesterday.

The bank has liquidity of only Bt90 billion, which could only help the government build a stockpile of 6 million tonnes. But the rice crop will amount to about 25 million tonnes, and the government has promised to buy it all from farmers to boost the price to Bt15,000 per tonne.

The government will start the scheme on October 7.

Luck said he had consulted with the Finance Ministry on the first loans of Bt100 billion. The other three state banks - Government Savings Bank, Krung Thai Bank and TMB Bank - will join in the syndicated loans.

More loans will be needed if the price of rice does not reach target.

The Commerce Ministry will operate the scheme while the bank will only provide financing, he said.

The government owes the BAAC about Bt140 billion for previous subsidy projects but is expected to compensate the bank only Bt36 billion in the next fiscal year, Luck said.

The Commerce Ministry recently allowed blacklisted millers to participate in the pledging scheme, which sparked fears of widespread corruption.

Critics of the programme predict that taxpayers will have to foot the huge bill of the subsidies while consumers pay more for white rice. Meanwhile rice exporters such as Vietnam with lower prices will gain much of the global market share.

Meanwhile, the government insists that its policy to shore up rice prices will not create special privileges for specific groups of traders or exporters.

"The price-pledging scheme is not the government's measure to pull up rice prices for anybody," Commerce Minister Kittiratt Na-Ranong said yesterday.

The meeting of the National Rice Policy Committee today will come up with clear conditions so that the pledging project can proceed, he said.

The government aims to subsidise the production of an estimated 25 million tonnes of paddy rice this season.

It will closely monitor rice prices to ensure the subsidy will reflect real production costs.

The government will also find ways to prevent any possible losses from the project by inviting government agencies and surveyors to join in the meetings, Kittiratt said.

To maintain the quality of the rice kept in warehouses, the government will closely supervise all rice flowing into supplies from harvesting, polishing and stocking.

It will also rush to find a way to release its stocks to keep quality high for government rice rather than store it for lengthy periods.

The Public Warehouse Organisation will play a big role in producing cheaper packaged rice, which will help alleviate the high cost of living for consumers.

The Commerce Ministry will contact buyers to persuade them to accept the higher prices of Thai rice under the programme.

"The scheme is designed to ensure that farmers can sell their rice at a fair price, particularly since their costs will rise from the increase of the minimum daily wage to Bt300 and minimum salary to Bt15,000," he said.

-- The Nation 2011-09-09

[Crushdepth]

Why do these populist policies all require loans or the issuing of bonds to finance them?

[Ricardo]

Alternative solution we have in my area (Democrat stronghold at the Burmese border)

Agricole cooperative with rice mill, biofarming school and savings bank for members, low credit interest for fertilizers, shared agricole machines, discount on diesel, and other small advantages. (The manager studied in Denmark for agricole cooperatives)

The farmers are still poor with many problems, but they are confident that this is a good way for development.

Me too. I put my Visa money (800 000 BHT) in the savings bank, better interest in different ways.

Excellent example for the rest of the country to follow, but somehow I don't think it will happen, the rural-elite (who are important to PTP) millers & middlemen would simply never permit it.

Whatever they may say at election-time, about helping the poor or sidelining the elite, the truth is that they intend to remain in-control.

[OzMick]

Alternative solution we have in my area (Democrat stronghold at the Burmese border)

Agricole cooperative with rice mill, biofarming school and savings bank for members, low credit interest for fertilizers, shared agricole machines, discount on diesel, and other small advantages. (The manager studied in Denmark for agricole cooperatives)

The farmers are still poor with many problems, but they are confident that this is a good way for development.

Me too. I put my Visa money (800 000 BHT) in the savings bank, better interest in different ways.

Steps in the right direction! :jap:

[animatic]

Love those

'18 inspectors from the PMs Office' checking on corruption in the provinces,

and assigning the provincial governors to oversee the programs looking for corruption...

Someone has to make sure the kickback %s go ALL THE WAY

up to the puyais bosses; Transparently so no one sees them pass.

Edited September 10, 2011 by animatic

[lannarebirth]

Love those

'18 inspectors from the PMs Office' checking on corruption in the provinces,

and assigning the provincial governors to oversee the programs looking for corruption...

Someone has to make sure the kickback %s go ALL THE WAY

up to the puyais bosses; Transparently so no one sees them pass.

I believe they are looking for excuses to replace provincial governors which are centrally appointed. Maybe they'll pull a Chuwit type relevation out of their ass and send their man from PTP to replace the governor.

[Emptyset]

Alternative solution we have in my area (Democrat stronghold at the Burmese border)

Agricole cooperative with rice mill, biofarming school and savings bank for members, low credit interest for fertilizers, shared agricole machines, discount on diesel, and other small advantages. (The manager studied in Denmark for agricole cooperatives)

The farmers are still poor with many problems, but they are confident that this is a good way for development.

Me too. I put my Visa money (800 000 BHT) in the savings bank, better interest in different ways.

Excellent example for the rest of the country to follow, but somehow I don't think it will happen, the rural-elite (who are important to PTP) millers & middlemen would simply never permit it.

Whatever they may say at election-time, about helping the poor or sidelining the elite, the truth is that they intend to remain in-control.

Why would they not allow it? If farmers want to band together and do something like this, how could PT or anyone else stop them? After all the cooperative Lungmi speaks of was set up by farmers themselves, not by the government, wasn't it? (I'm not a huge fan of cooperatives set up by governments anyway, bottom up is far preferable, was reading about the cooperatives started by Chavez, sounds like a massive scam that's helped almost no one to me).

[Ricardo]

Alternative solution we have in my area (Democrat stronghold at the Burmese border)

Agricole cooperative with rice mill, biofarming school and savings bank for members, low credit interest for fertilizers, shared agricole machines, discount on diesel, and other small advantages. (The manager studied in Denmark for agricole cooperatives)

The farmers are still poor with many problems, but they are confident that this is a good way for development.

Me too. I put my Visa money (800 000 BHT) in the savings bank, better interest in different ways.

Excellent example for the rest of the country to follow, but somehow I don't think it will happen, the rural-elite (who are important to PTP) millers & middlemen would simply never permit it.

Whatever they may say at election-time, about helping the poor or sidelining the elite, the truth is that they intend to remain in-control.

Why would they not allow it? If farmers want to band together and do something like this, how could PT or anyone else stop them? After all the cooperative Lungmi speaks of was set up by farmers themselves, not by the government, wasn't it? (I'm not a huge fan of cooperatives set up by governments anyway, bottom up is far preferable, was reading about the cooperatives started by Chavez, sounds like a massive scam that's helped almost no one to me).

"Why would they not allow it ?"

Because the rich & influential, and the politicians & poo-yais, the BiBs & local-government officials would lose-out !

"how could PT or anyone else stop them ?"

Intimidation & death-threats usually work quite well. Actual deaths even better.

Agree that bottom-up co-ops are much better than top-down, but I suspect that the old war-cry of 'Communism !' would be trotted-out, I'm sorry to be so cynical and would love to be proven wrong on all this.

If one believes that PTP and the Red-Shirt movement is truly intended to benefit the poor, rather than put a particular set of rascals back into power, then I will be proven wrong.

And our local villagers will stop pestering us for loans 'to tide them over', which rarely if-ever would get repaid, unless we accepted their gold or chanot-papers or computers or motorbikes as security. And still enjoy a 50%+ default-rate even then. One could make good money, lending to the poor, so long as you don't much mind breaking-arms or the misery that it often entails.

[cutter007]

Why would they not allow it? If farmers want to band together and do something like this, how could PT or anyone else stop them? After all the cooperative Lungmi speaks of was set up by farmers themselves, not by the government, wasn't it? (I'm not a huge fan of cooperatives set up by governments anyway, bottom up is far preferable, was reading about the cooperatives started by Chavez, sounds like a massive scam that's helped almost no one to me).

Easy for them to stop it. Try donating money for a community center somewhere in isaan. My guess is 90% of the time you won't get provincial approval. Even if you are offering to fund 100% yourself. They don't want people to have centralized places to meet, and I am sure one of the main reasons is that single individuals are powerless but grouped together they wield some power, and that's the last thing the politicians and middlemen want.

[Emptyset]

Easy for them to stop it. Try donating money for a community center somewhere in isaan. My guess is 90% of the time you won't get provincial approval. Even if you are offering to fund 100% yourself. They don't want people to have centralized places to meet, and I am sure one of the main reasons is that single individuals are powerless but grouped together they wield some power, and that's the last thing the politicians and middlemen want.

Interesting.

[zzaa09]

Why do these populist policies all require loans or the issuing of bonds to finance them?

Rackets of a criminal organisation usually require a subliminal misdirection.

[Emptyset]

If one believes that PTP and the Red-Shirt movement is truly intended to benefit the poor, rather than put a particular set of rascals back into power, then I will be proven wrong.

They're not all scum that want to oppress the poor and workers you know. These former Triumph workers (http://www.prachatai.com/english/node/2275) who set up the 'Try Arm' co-operative to produce garments (more here: http://trendsoutheast.org/2011/all-issues/issue-09/jittra-kochdech-try-arm-from-lingerie-protest-to-social-enterprise/) are all solid red shirts... so is Junya Lek Yimprasert who founded Thai Labour Campaign, she's quite passionate about co-operatives. None of these people have any faith in Thaksin and they're fully aware of the limits of PT. Just a shame there aren't more people like them aet the top of the movement, rather than on the sidelines.

The same goes for the Thai parliament, of course. Even the sort of technocratic careerist MPs one finds who're relatively clean don't understand labour issues or workers needs. A parliament of urban technocrats and (mostly) corrupt upcountry businessmen with little space for those with experience in labour, activism, community organising etc... there may be one or two exceptions.

[Ricardo]

They're not all scum that want to oppress the poor and workers you know.

Thanks, I do know that, their nascent movement has been hijacked by a leadership with another agenda, but at grass-roots level there are people with a genuine gripe, and a few good moves (like co-ops) which could help improve things. As a socialist-biased European I fully support that, and wouldn't call those people "scum that want to oppress the poor and workers", they are the poor and workers.

The "scum" usually floats at the top !

But how much support do Red-Shirt leaders like Khun-Thida really get, at present ? Once the election was over, there were immediate efforts to sideline her, from her fellow leaders.

The Red-Shirt/PTP leadership promised a serious-increase & a universal national minimum-wage, and kept on promising it even after the election & Thaksin's order (sorry ... 'opinion') to make it for a few provinces only, but have now caved-in to 'the Boss'.

The real people need to take control of their movement from the politicians.

Edited September 12, 2011 by Ricardo

[rogerdee123]

Today's AWSJ has an article about this issue. You can read it here. It seems to be well balanced and points out both the potential and the risks of this scheme :-

http://online.wsj.com/article/SB10001424053111904103404576559883108037792.html

[Emptyset]

The real people need to take control of their movement from the politicians.

I agree. Actually that's one reason I'm hoping that rural ppl get access to the internet and learn to use computers/tablets etc. Obviously it doesn't mean they're not going to be taken by propaganda from various sides still, but it will give them access to a much wider range of news sources than they have now.

Coincidentally, there's an article about rice co-operatives around Khon Kaen in the Bangkok Post today. It's called 'Drying the tears' - it seems there's actually a department of the Ministry of Agriculture (Cooperatives Promotion Department) which works alongside Khon Kaen University to support these local co-operatives.

[zzaa09]

Coincidentally, there's an article about rice co-operatives around Khon Kaen in the Bangkok Post today. It's called 'Drying the tears' - it seems there's actually a department of the Ministry of Agriculture (Cooperatives Promotion Department) which works alongside Khon Kaen University to support these local co-operatives.

It's a start, as a number of growing rice-farmer collectives are making headway throughout the regions.

Hopefully, they can organise and operate without government assistance.

[Emptyset]

Coincidentally, there's an article about rice co-operatives around Khon Kaen in the Bangkok Post today. It's called 'Drying the tears' - it seems there's actually a department of the Ministry of Agriculture (Cooperatives Promotion Department) which works alongside Khon Kaen University to support these local co-operatives.

It's a start, as a number of growing rice-farmer collectives are making headway throughout the regions.

Hopefully, they can organise and operate without government assistance.

Do you say this because state help is essentially unreliable? Obviously, as I said, bottom-up is preferable but in an ideally surely the state would offer as much assistance as it can (assistance, not interference obv). Also another article in the BP today which I missed earlier, about a rice co-op in Roi Et. Maybe they read Thaivisa and decided to investigate haha. The state does offer training programmes in commerce/marketing etc; which the members of the co-operative undertook, and they're hoping to start exporting the rice themselves soon, thus controlling the whole process from 'production to marketing'.

[Buchholz]

Thai Rice Exporters Slam Rice Pledging Scheme

The Thai Rice Exporters Association feels that the government's rice pledging scheme will have a severe impact on Thai rice exports and that Thailand will lose a significant share of the global market as the world's leading rice exporter.

At Le Meriden Hotel in Chiang Mai, the Thai Rice Exporters Association and the Vietnam Food Association held the 8th Thai-Vietnam Rice Trade Cooperation conference with issues like rice production, trade and the 2015 ASEAN Economic Community on the agenda.

Thai Rice Exporters Association Chairman Chukiat Ophasawaong commented on the current Thai rice export climate, stating that since the beginning of last year, Thailand has exported a record-high eight million tons of rice and projects that the number will reach 11 million by the end of this year.

He said that this is due to the rice scheme that was implemented by the previous government, which distorted the free market and allowed high competition.

However, he expressed concerns about the current rice pledging scheme in which the government will buy jasmine paddy rice for 20,000 baht per ton and pay 15,000 for white paddy rice, which will drive Thai rice prices up by 300 US dollars per ton.

The current global rice price is at 530 US dollars per ton.

The rice pledging policy will have a direct impact on global market mechanisms since Thai rice exporters will be unable to compete with rivals offering better prices.

According to information from the US Agriculture Department, Thailand's rice exports are expected to decline by 20 percent, or two million tons, as a result of the rice pledging scheme.

The Thai Rice Export Association chairman added that the government's rice pledging scheme may benefit rice farmers as they will earn higher incomes.

The rice price guarantee, however, distorts actual market mechanisms, which will subsequently affect the public as rice prices will soar.

Other rice-exporting nations will benefit from the Thai rice pledging scheme.

-- Tan Network 2011-09-19

[Buchholz]

Rice: Unstable staple for half the world?

Hong Kong (CNN) – Care for some Japanese sushi, Spanish paella or Vietnamese pho for your next meal? Or maybe just a steamy bowl of white rice to go with your Filipino adobo, Indian red curry or Indonesian beef rendang? About one of every two people in the world relies on rice as a staple food, according to the Manila-based International Rice Research Institute. So if the price of rice jumps, nearly half of the global population could be impacted.

HSBC noted Tuesday that the cost of the consumable commodity is rising – and will continue to do so. Over the past six months, the global bank has found the price of rice has risen by 7.2%. In that same period, the price of another staple – wheat – has fallen 4% while the IMF’s World Food Index shows the average commodity price has dropped 2.2%.

So, what’s wrong with rice? It turns out Thailand, the world’s biggest rice exporter supplying one-third of global demand, is a primary cause.

New Thai Prime Minister Yingluck Shinawatra, just elected in July, is following through on a domestic campaign promise that’s pushing the international price of rice.

Continues:

http://business.blogs.cnn.com/2011/09/22/rice-unstable-staple-for-half-the-world/

CNN - September 22, 2011

.

[Buchholz]

Thailand launches new rice price policy

Thailand, the world's biggest rice exporter, launches a new pricing scheme today.

The BBC's Rachel Harvey asked Ammar Siamwalla, senior economist at the Thailand Development Research Institute, about the potential consequences of the new policy.

Click to view BBC news video interview

-- BBC 2011-10-07

.

Edited October 7, 2011 by Buchholz

[Buchholz]

.

Mr. Siamwalla is going to take a lot of heat for what he says in the interview.

Hopefully, for his sake, it's only verbal.

.

[ginjag]

Thailand launches new rice price policy

Thailand, the world's biggest rice exporter, launches a new pricing scheme today.

The BBC's Rachel Harvey asked Ammar Siamwalla, senior economist at the Thailand Development Research Institute, about the potential consequences of the new policy.

Click to view BBC news video interview

-- BBC 2011-10-07

.

I viewed with interest this rice topic, and the senior economist spelled out to our Rachel who is getting the money for the rice, the vast majority of rice produced by the 10% are NOT POOR-his words, it's the vast majority of little farmers producing the small per cent that are poor............I hope Rachel is beginning to see the light, for a vast majority of her reporting has been a little one sided, favouring the reds, up to a point especially during the reds big stance and chaos in Bkk they created.