Thai Govt's Agricultural Price-Pledging Policy Has Failed

[webfact]

AGRICULTURAL

Agricultural price-pledging policy has failed

Petchanet Pratruangkrai

The Nation

BANGKOK: -- Six months since the implementation of the price-pledging scheme for farm goods, it is time the Yingluck government reviewed the policy, which has cost Thailand more than Bt300 billion and left farmers unhappy as commodities prices remain low.

Since October, the government has spent a combined Bt301.27 billion to support price pledging of rice, cassava, garlic and red onions. But the policy has failed to shore up prices of these commodities, due to inefficiencies in the project. The government has focused exclusively on implementing the pledging scheme to encourage price increases, but has failed to support farming, marketing and trading processes, resulting in sluggish trade in both the export and domestic markets.

As it always does, the pledging system has led to corruption relating to the release of government stockpiles. Taxpayers will no longer be willing to subsidise farmers to the tune of billions of baht, while loopholes in the pledging and releasing processes allow corruption that benefits a small group of people.

Thai farmers' production costs for most commodities are higher than in neighbouring countries, while yield per rai is much lower. The Pheu Thai-led government does not have a plan to lower production costs or promote sustainable development of farming, and simply spends the national budget on short-term subsidies.

The production cost of Thai rice farming is Bt6,000-Bt7,000 per rai, while the cost of Vietnamese production is Bt4,900-Bt5,000 per rai. Vietnam has an average yield of 862 kilograms per rai, against a Thai yield of 448kg.

The current domestic market price of paddy rice is Bt9,000-Bt10,000 a tonne, while the pledging price is Bt15,000. Thai rice export volumes plunged by 50.3 per cent to 1.03 million tonnes from January to March 5 this year, as Thai rice is far more expensive than its competitors' crops. The government is expected to spend at least Bt220 billion on the two pledging projects for the main and second rice harvests between October last year and June this year.

Thai cassava production and yield per rai have dropped gradually over the past 10 years, while the budget for shoring up the price of the commodity has doubled this year under the government’s pledging scheme, requiring Bt40 billion for the current harvest season.

The price of cassava remains low at Bt1.30-Bt1.90 per kilo, while the pledging price is Bt2.75-2.90. Pledging of cassava began in February. While it aimed at shoring up the market price, traders have not been able to agree on a high pledging price since it does not reflect the market mechanism.

The cost of cassava production in Thailand, excluding breeding costs, is 85 satang per kilo, compared with 77 satang per kilo in Vietnam and 61 satang in Cambodia.

So far, less than 700,000 tonnes of cassava have entered the pledging project, compared to the target of 10 million tonnes.

The government recently came under pressure from thousands of garlic farmers in the North to extend its pledging scheme to cover the entire garlic crop. The government allocated only Bt70 million for garlic pledging, but this year production has exceeded 46 million kg. The government needs to raise its pledging budget for garlic to Bt1.6 billion if it wants to purchase all of the garlic supply in order to shore up the price.

Garlic growers have complained that they are suffering; the price of the crop has fallen to Bt7-Bt9 per kg, less than the production cost of Bt10 a kilo.

Last year, garlic traded at Bt30-Bt40/kg. Farmers say the government has implemented the pledging project inefficiently, without regard for total production.

The Bt70 million budget assigned to the Internal Trade Department to purchase garlic at Bt40 per kilo would be unable to shore up the price, as production has exceeded the government's expectations.

The budget for red-onion pledging was set at Bt1.2 billion. However, the current retail price is only Bt7-Bt8 a kilo, while the production cost is Bt5-Bt6 a kilo.

The government faces a problem of deteriorating quality of red onions. Bt289 million worth of the pledged crop is rotten. As a result, the government cannot release stockpiles to realise a return after subsidising the crop, as stockpiling has been done inefficiently.

Rather than increasing farmers' dependence on subsidies, which lead to huge losses each year, the government should support the development of farming, marketing and trading to allow the market mechanism to do its work.

The government should also encourage farmers to aim higher and upgrade their quality to ensure competitiveness ahead of the launch of seamless trade under the Asean Economic Community. Thailand can no longer afford to subsidise farmers' goods in the era of liberalisation.

-- The Nation 2012-03-12

[virtualtraveller]

The taxpayer in general didn't vote this govt in, and the govt can win the next election without their support, so they don't really care. I guess they think of themselves as modern day robin hoods.

[pimay11]

This scheme had only two goals in the beginning and still remains. 1. Vote buying. 2. The piggies at the trough becoming richer through corruption.

[Ricci]

This scheme had only two goals in the beginning and still remains. 1. Vote buying. 2. The piggies at the trough becoming richer through corruption.

exactly

the govt presents stupid schemes and ideas on a daily basis. how about keeping the face for once in a while and figure something out that can actually work?

[Buchholz]

No big deal as it's only 301.27 Billion Baht.

.

[sparebox2]

This scheme had only two goals in the beginning and still remains. 1. Vote buying. 2. The piggies at the trough becoming richer through corruption.

exactly

the govt presents stupid schemes and ideas on a daily basis. how about keeping the face for once in a while and figure something out that can actually work?

And how come Mark didn't think of it?

[SICHONSTEVE]

No big deal as it's only 301.27 Billion Baht.

.

Rolls Royce money for Fiat Panda results - why did'nt they listen to the experts who predicted this fiasco?? In fact, it's proving to be a WHOLE LOT worse than their warnings implied it would be, which takes some doing!!!.

It cost 300 biliion baht and the farmers are up in arms about it - so if the farmers are not benefitting then just where has this vast amount of money gone???? Pheu genious!!!!

Am I upset about the farmers plight - you bet I'm NOT!!! Serves them right. Still, they will be able to get further in debt when they start dishing out the 'red' credit cards to the peasants.

"Anyone wanna buy a farm" will be their clarion call!!!!! Unfortunately, there won't be too many offers.

Edited March 12, 2012 by SICHONSTEVE

[OzMick]

Subsidising basic crops with inefficient and corrupt systems leads to literally millions of people working their butts off to remain in poverty, while the rest of the population pays higher prices for essentials.

Trapped in poverty, farmers can't afford NOT to vote for the party that offers the highest subsidies, and can't afford a decent education for their children. So the cycle continues.

Unless of course, they realise that the party that paid lower subsidies paid directly to the farmer, and who offered lower cost education instead of some gimmick toy, might actually be better for them. I live in hope.

[OzMick]

This scheme had only two goals in the beginning and still remains. 1. Vote buying. 2. The piggies at the trough becoming richer through corruption.

exactly

the govt presents stupid schemes and ideas on a daily basis. how about keeping the face for once in a while and figure something out that can actually work?

And how come Mark didn't think of it?

You don't remember that the Democrats offered a rice guarantee price which was paid directly to farmers, cutting out the middle man. In its run under Thaksin the rice pledging scheme managed 37% to actual farmers, and not many of those were the poorest.

[spiritrace]

I really feel for the farmers. It is tough work and not much income. The statement: " the government should support the development of farming, marketing and trading to allow the market mechanism to do its work." is spot on. The government should have looked into why Viet Nam can produce twice as much rice per rai and do the necessary research to pass on to the farmers to increase production. A lot of Universities here in the US do exactly that and it is one of the greatest reasons the US has such high food production.

The money spent was a mistake. Put it into research and pass it on to the farmers at no cost.

The price of Thai Jasmine Rice has increased by 300% in some places here in the US. That really hurt our little restaurant. Now we have to charge for Thai Jasmine Rice.

[Thai at Heart]

The market is the illusion of a free market. Co-operatives and government milling is the only hope for any of the subsidy money to actually end up in the hands of the farmers.

[lannarebirth]

This scheme had only two goals in the beginning and still remains. 1. Vote buying. 2. The piggies at the trough becoming richer through corruption.

exactly

the govt presents stupid schemes and ideas on a daily basis. how about keeping the face for once in a while and figure something out that can actually work?

And how come Mark didn't think of it?

You don't remember that the Democrats offered a rice guarantee price which was paid directly to farmers, cutting out the middle man. In its run under Thaksin the rice pledging scheme managed 37% to actual farmers, and not many of those were the poorest.

The ones getting the money from this are the middlemen and the three crop per year land barons who are also politicians that just happened to build irrigation canals to their land.

[allan michaud]

Educate farmers on CROP ROTATION!

Doh!

[allan michaud]

Unless of course, they realise that the party that paid lower subsidies paid directly to the farmer, and who offered lower cost education instead of some gimmick toy, might actually be better for them. I live in hope.

Okay I agree, but which Thai political party would that be then? Certainly not the ironically named Democrats.

[whybother]

Unless of course, they realise that the party that paid lower subsidies paid directly to the farmer, and who offered lower cost education instead of some gimmick toy, might actually be better for them. I live in hope.

Okay I agree, but which Thai political party would that be then? Certainly not the ironically named Democrats.

It WAS the Democrats that offered subsidies that would directly benefit the farmers, and cheaper education.

[anterian]

look at this link, jump to Thailand

http://en.wikipedia.org/wiki/List_of_agricultural_universities_and_colleges

Just one agricultural college in Thailand, now look at other countries, say Indonesia.

[rubl]

2011-09-13

Deputy spokeswoman Anuttama said the rice price pledging scheme will start on Oct 7 and run to Feb 29, 2012. The estimated budget cost was 400 billion baht.

2011-10-07

Deputy Prime Minister for economic affairs Kittiratt Na-Ranong predicted on Wednesday that the government’s rice mortgage scheme would boost rice prices and as a result less than 15 million tonnes of paddy would have to be mortgaged by farmers. “Therefore, the cost of the rice price pledging programme will be less than the previously estimated 400 billion baht,”

The table as in #1 shows a total of THB 301 billion for pledges of all types of produce AND over the total fiscal year 2011 - 2012. Does this mean we still have THB 100 billion which can be used for other 'usefull' items ?

Edited March 12, 2012 by rubl

[belg]

the taxpayer in this country is a small minority and all the pledged taxpayer's money also falls in the hands of the middle men, never the poor farmer that gets 1/5 of the price you find in supermarkets

[Reasonableman]

2011-09-13

Deputy spokeswoman Anuttama said the rice price pledging scheme will start on Oct 7 and run to Feb 29, 2012. The estimated budget cost was 400 billion baht.

2011-10-07

Deputy Prime Minister for economic affairs Kittiratt Na-Ranong predicted on Wednesday that the government’s rice mortgage scheme would boost rice prices and as a result less than 15 million tonnes of paddy would have to be mortgaged by farmers. “Therefore, the cost of the rice price pledging programme will be less than the previously estimated 400 billion baht,”

The table as in #1 shows a total of THB 301 billion for pledges of all types of produce AND over the total fiscal year 2011 - 2012. Does this mean we still have THB 100 billion which can be used for other 'usefull' items ?

Such as paying off some debt?

[OzMick]

Unless of course, they realise that the party that paid lower subsidies paid directly to the farmer, and who offered lower cost education instead of some gimmick toy, might actually be better for them. I live in hope.

Okay I agree, but which Thai political party would that be then? Certainly not the ironically named Democrats.

Wrong. Their policies were actually preferred in a "blind' survey done in Isaan, but had to overcome the label of "murderers" after the BKK insurrection - which was exactly its intent.

[steveromagnino]

to be fair it's really only like a gift tax of 60,000b levied against each tax paying Thai for Thai farmers to continue to plod along. Personally I'd almost rather pay them twice as much and have 75% of the farmers cease work altogether and go do something else then outsource all the farming to the remaining 25%.

Sadly Kittiratt doesn't understand basic economics or is willingly turning a blind eye to the reality that major power brokers upcountry import rice from abroad and claim the subsidy (so it isn't even Thai grown rice) and use that money to help shore up political support for the future.

Thaksin I think openly said that the Thai government could hedge the massive loss on rice grown locally by buying rice on the spot market from neighbours and thus reducing the average cost per ton of rice and labelling it all Thai rice. Aside from the obvious idiocy of using average cost instead of absolute loss (it's the same loss plus admin costs and cost of capital as the new rice purchased is bought at market price not Puea Thai magic world of mirrors price) this would mean the 2nd time that Thaksin has degraded the name of Thai rice where quantity triumphs over quality - a clear lack of understanding of the power of the brand of Kao Hom Mali indeed (last time was the last time TRT ran crop pledging with equal degree of failure).

I think it would be fairer to just write up a cheque for each poor farmer of 30,000b and give them the cash whether they grow anything or not and say "from K Thaksin" and with a receipt saying "payable upon when you vote for me" At least it would be transparent.

[Thai at Heart]

to be fair it's really only like a gift tax of 60,000b levied against each tax paying Thai for Thai farmers to continue to plod along. Personally I'd almost rather pay them twice as much and have 75% of the farmers cease work altogether and go do something else then outsource all the farming to the remaining 25%.

Sadly Kittiratt doesn't understand basic economics or is willingly turning a blind eye to the reality that major power brokers upcountry import rice from abroad and claim the subsidy (so it isn't even Thai grown rice) and use that money to help shore up political support for the future.

Thaksin I think openly said that the Thai government could hedge the massive loss on rice grown locally by buying rice on the spot market from neighbours and thus reducing the average cost per ton of rice and labelling it all Thai rice. Aside from the obvious idiocy of using average cost instead of absolute loss (it's the same loss plus admin costs and cost of capital as the new rice purchased is bought at market price not Puea Thai magic world of mirrors price) this would mean the 2nd time that Thaksin has degraded the name of Thai rice where quantity triumphs over quality - a clear lack of understanding of the power of the brand of Kao Hom Mali indeed (last time was the last time TRT ran crop pledging with equal degree of failure).

I think it would be fairer to just write up a cheque for each poor farmer of 30,000b and give them the cash whether they grow anything or not and say "from K Thaksin" and with a receipt saying "payable upon when you vote for me" At least it would be transparent.

The obvious way out of this ridiculous surplus is to grow less rubbish, and concentrate to grow the best you can, and then switch farmers to other crops. You are absolutely spot on with this analysis.

I worked in agribusiness here and EU for a long time, the CAP couldn't even get the right results, but at least the farmers got paid...

Edited March 12, 2012 by Thai at Heart

[GeorgeO]

I really feel for the farmers. It is tough work and not much income. The statement: " the government should support the development of farming, marketing and trading to allow the market mechanism to do its work." is spot on. The government should have looked into why Viet Nam can produce twice as much rice per rai and do the necessary research to pass on to the farmers to increase production. A lot of Universities here in the US do exactly that and it is one of the greatest reasons the US has such high food production.

The money spent was a mistake. Put it into research and pass it on to the farmers at no cost.

The price of Thai Jasmine Rice has increased by 300% in some places here in the US. That really hurt our little restaurant. Now we have to charge for Thai Jasmine Rice.

There is no point in putting in place schemes that will articially increase the price of rice (as one example), particularly when there is a high risk of vast amounts of money disappearing from the scheme, as is the case in Thailand.

If the global price of a commodity is particularly high, then, under basic economic principles, local farmers should feel some benefit from this, as they should expect to receive a fair price for the raw crop; unfortunately, in Thailand, they do not.

It would be far better to put in place subsidies for rice (garlic, onion, etc.) farmers so that their products are able to compete on a global scale; this has been the core policy of the EU for decades. It also does away with many of the current opportunities for extraction of private benefits.

[Buchholz]

Jasmine rice to be more expensive after Songkran

BANGKOK, 17 March 2012 (NNT) - Thai Rice Packers Association has warned consumers to prepare to dig deeper into their pockets as jasmine rice will be more expensive after the Songkran festival.

Jasmine rice is expected to be at least THB10 higher per pack due to the jump in raw material costs including oil prices and the minimum wage.

Prices of white rice remain unchanged as April and May are the harvesting season for the second rice crops. Therefore, produce should be in surplus.

However, the Thai Rice Packers Association warned that the government rice mortgage scheme would affect the market mechanism and that the amount of rice in circulation would go down in the future.

Meanwhile, the Internal Trade Department disclosed that some middlemen were hoarding limes for price speculation. Such an act has worsened the difficulty of consumers who already have to pay as much as eight baht for a lime since the supply is very limited during March and April.

According to the Department, anyone found to hoard limes for price speculation will face a fine of up to THB 140,000 or a jail term of up to seven years or both.

-- NNT 2012-03-17

[Buchholz]

Bagged Rice Price Hike Gets Green Light

The government has allowed the bagged Jasmine rice price to increase 10 baht per pack after the Songkran Festival this April, given that the increase does not exceed the ceiling price.

Director-General for the Internal Trade Department Watcharee Vimooktayon said that bagged rice providers need not seek permission from her agency to raise the price for the five kilogram bagged rice, assuming the manufacturers do not increase it over 10 baht per pack.

Watcharee suggested that competition in the bagged rice market is very fierce so the increase may hurt their sales given that the consumer purchasing power has decreased.

Chairman of Bagged Rice Providers Association Somkiet Makkhayatorn said the increase of the bagged Jasmine rice has resulted from increasing production costs, the oil price surge, and the minimum wage hike.

However, he insisted that the price for refined white rice will not increase since it is the harvesting season during April to May, contributing to a high rice production output in the market.

Somkiet remarked that the government's rice pledging scheme will decrease rice distribution across in the market.

-- Tan Network 2012-03-19

Edited March 19, 2012 by Buchholz

[Buchholz]

Cabinet approves Bt1.4 Billion for buying excessive 200,000 tons of pineapples

The Cabinet Monday approved Bt1.4 Billion from the central emergency fund for buying excessive 200,000 tons of pineapples from farmers, a government spokesman said.

http://www.nationmultimedia.com/breakingnews/Cabinet-approves-Bt1-4-billion-for-buying-excessiv-30179210.html

[OzMick]

Cabinet approves Bt1.4 Billion for buying excessive 200,000 tons of pineapples

The Cabinet Monday approved Bt1.4 Billion from the central emergency fund for buying excessive 200,000 tons of pineapples from farmers, a government spokesman said.

http://www.nationmul...v-30179210.html

200,000 tons = 200 million kg

200 million kg @ B4/kg = B800 million

So what's the other B600 million allocated for?

[OzMick]

Silly of me, just realised. It's for the ice-cream.

[Colin Yai]

Cabinet approves Bt1.4 Billion for buying excessive 200,000 tons of pineapples

The Cabinet Monday approved Bt1.4 Billion from the central emergency fund for buying excessive 200,000 tons of pineapples from farmers, a government spokesman said.

http://www.nationmul...v-30179210.html

200,000 tons = 200 million kg

200 million kg @ B4/kg = B800 million

So what's the other B600 million allocated for?

"Administrative" costs of course ,

[pimay11]

Cabinet approves Bt1.4 Billion for buying excessive 200,000 tons of pineapples

The Cabinet Monday approved Bt1.4 Billion from the central emergency fund for buying excessive 200,000 tons of pineapples from farmers, a government spokesman said.

http://www.nationmul...v-30179210.html

200,000 tons = 200 million kg

200 million kg @ B4/kg = B800 million

So what's the other B600 million allocated for?

300 New Benz?