Rice price cut hits govt hard

[drdoom6996]

Meanwhile, the prime minister said her Cabinet had cut the rice pledging price in order to maintain financial and monetary discipline.

Is that PTP speak for "WE STOLE IT ALL".

[OzMick]

I imagine that the pledging price of rice will increase sharply in about 2 years.

[TackyToo]

In my humble opinion there are two solutions to some of the problems:

Cut out the middlemen and the government in the rice trade and give farmers the chance to sell their products when and where they want to market rules as offer and demand.

On the other hand these farmers should learn and accept the fact that selling your vote to the host with the most will not improve their lifestyle.

[Thai at Heart]

The whole rice market is a screw up.

They can sell hom Mali apparently no problem but they don't have much of that and it's grown in the worst places with little systems available.

Meanwhile, in the middle of the country they get a lower subsidy, but produce in a far more intensive fashion, but can't sell it.

[rubl]

""This means that certain crops should be planted in appropriated areas for higher yields with lower costs.""

Didn't the government stress quality rather than quantity a few days back?
BTW some of what the PM said seems a bit wishy-washy. I'm only surprised that she didn't mention her dear brother who September 2012 in an interview said:

"If we manipulate the mechanism for two years, three years, then things will be moving naturally, Thaksin, who was ousted in a 2006 coup and has lived overseas since fleeing a 2008 jail sentence, said in Singapore today. The rice price in the world market is increasing."
http://www.bloomberg.com/news/2012-09-24/thai-rice-policy-should-stay-several-more-years-thaksin-says.html

[Globeman]

Yingluck has hinted the rice pledging price may increase but to many a farmer this will equate to a promise because that's what they want to hear.

There will be no overnight miracle that will see rice sales go through the roof so this hint / promise is going to fall flat and will add to the farmers's discontent and see more self-inflicted problems for the government.

The PTP just wants this problem to go away long enough to ensure sufficient support and an adequate international credit rating to go ahead with the 'big score' - the multi-trillion baht infrastructure program...

[waza]

Rice price cut hits govt hard

Not as hard as the rice scam has hit the treasury

[waza]

""This means that certain crops should be planted in appropriated areas for higher yields with lower costs.""

Didn't the government stress quality rather than quantity a few days back?

BTW some of what the PM said seems a bit wishy-washy. I'm only surprised that she didn't mention her dear brother who September 2012 in an interview said:

"If we manipulate the mechanism for two years, three years, then things will be moving naturally, Thaksin, who was ousted in a 2006 coup and has lived overseas since fleeing a 2008 jail sentence, said in Singapore today. The rice price in the world market is increasing."

http://www.bloomberg.com/news/2012-09-24/thai-rice-policy-should-stay-several-more-years-thaksin-says.html

Former Thai Prime Minister Thaksin Shinawatra said a rice-purchase program should be extended for several more years, rebuffing critics who say the policy has increased government debt and encouraged corruption.

Prime Minister Yingluck Shinawatra implemented the price- support policy to boost incomes of farming families whose support helped her Pheu Thai party win an election last year. The program, under which the government buys rice from farmers at above-market rates, reaps economic gains that are about three times the program’s cost, Thaksin said in an interview. http://www.bloomberg.com/news/2012-09-24/thai-rice-policy-should-stay-several-more-years-thaksin-says.html

Edited June 23, 2013 by waza

[jingjoke]

The whole rice market is a screw up.

They can sell hom Mali apparently no problem but they don't have much of that and it's grown in the worst places with little systems available.

Meanwhile, in the middle of the country they get a lower subsidy, but produce in a far more intensive fashion, but can't sell it.

I had not realized this, I presume wrongly that it depended on what plantings a particular rice farmer chose.

It's similar to great wines being from only specific regions with particular beneficial soils and weather. Hom Mali rice brief info at:

http://www.b-herbs.com/index.php?option=com_content&view=article&id=117&Itemid=183〈=en

[Thai at Heart]

The whole rice market is a screw up.

They can sell hom Mali apparently no problem but they don't have much of that and it's grown in the worst places with little systems available.

Meanwhile, in the middle of the country they get a lower subsidy, but produce in a far more intensive fashion, but can't sell it.

I had not realized this, I presume wrongly that it depended on what plantings a particular rice farmer chose.

It's similar to great wines being from only specific regions with particular beneficial soils and weather. Hom Mali rice brief info at:

http://www.b-herbs.com/index.php?option=com_content&view=article&id=117&Itemid=183〈=en

If you look at the year when they were top, Hom Mali was classified as 2mn in sales from a total of 9mn volume sold.

Read what they are attempting to offer, and what has been sold from the stocks already, it's classified as Hom Mali.

Hom Mali is predominantly grown in

http://www.chaiudom.net/index.php?lay=show&ac=article&Id=456494

"Thailand produces about 3mn tonnes of Hom Mali per year, of which 2mn is exported" "The Northeast is the major area for production of Hom Mali rice.....namely Surin, Roi-et, Maha Sarakham, Sisaket and Yasothon".

This is the problem with the way that all of this issue has been reported. The papers haven't even bothered to work out which varieities sell the best, and which prices and explained it to anyone. Now, what I do know is that there are very rudimentary irrigation systems in these areas, as opposed to other parts of the country, and that the farmers are in the large part, small holders. Unlike a lot of the other parts of the country, where there are fabulous irrigation systems enabling far more intensive growing, but with these subsidy prices, the price is way above the market for what is more generic types of rice.

Basically, the whole chase for "largest rice exporter" in the world, and the "worlds most wonderful rice", has been a bit of a sham. They have some lovely hom mali, but a small percentage of the total, the rest is placed in a far more competitive market.

As far as I know, the pledge price for true Hom Mali is 20k per tonne, but there is no mention whether this reduction applies to that variety. All they are talking about is 15k down to 12k, which as far as I know refers to other types.

http://www.thaiworld.org/enn/thailand_monitor/answera.php?question_id=1146

The government agreed to offer the same pledging prices for the second crop, ie, Hom Mali at 20,000 baht/tonne, other fragrant rice at 17,000 baht/tonne and ordinary rice at 15,000 baht/tonne

It has been overpaying for the generic stuff that has really broken this system completely.

Edited June 24, 2013 by Thai at Heart

[Thait Spot]

When you're in a hole, keep on digging

[Thai at Heart]

When you're in a hole, keep on digging

They will need a damn big hole to bury the unusable rice inside.

Dig away.

[Baerboxer]

if a farmer really can earn up to 500.000 baht... why complain about the poor farmer...that is a very good income

problem is not the farmer but the miller getting rich

and produce should be paid what it is worth, not subsidise with tax payers money

HM the King had a great plan so many years ago, to be self suffiecient, aka... not depending on tax payers money or others

so why stop that great inniciative ?

The self sufficiency ideal is a great idea but totally unworkable because the vast majority of people do not own land or enough land to implement it.

Sent from my GT-I9003 using Thaivisa Connect Thailand mobile app

I agree Aptley. And Western countries are such great examples of self-sufficiency too. The EU common agricultural policy speak volumes.

[pb1936]

What a delicious mess .... could bring the government down. At least I hope we will soon get a better exchange rate !

[Nickymaster]

"Earlier this week the government of Prime Minister Yingluck Shinawatra admitted that its rice scheme had lost $4.4 billion for the 2011-12 growing season, a huge sum for a program sold as cost-neutral"

Source:

http://online.wsj.com/article/SB10001424127887324577904578557050631839748.html

[AnotherOneAmerican]

If this scheme were really to benefit the poor, they should cap the rice price at 50k per farmer (not 500k).

Poor farmers don't have much land.

@apetley, almost all farmers have 2-5 rai of their own land.

The government gave small amounts to everyone.

Edited June 24, 2013 by AnotherOneAmerican

[whybother]

PM asks farmers for understanding on rice scheme
By English News

BANGKOK, June 24 – Prime Minister Yingluck Shinawatra said today that it is necessary to control total spending for the rice pledging scheme at Bt100 billion and that the reduction of the paddy pledging price by Bt3,000 per tonne is one of the means to achieve the goal.

She called a meeting of senior government officials to outline the government’s efforts to maintain fiscal discipline, improve farmers’ living conditions and find solutions to widespread corruption in the rice pledging plan.

A government spokesman said the prime minister told the meeting of the necessity of lowering the pledging price of paddy from Bt15,000/tonne to Bt12,000/tonne.

She instructed the commerce and finance ministries, the National Police Bureau and the rice checking committee to inspect warehouses nationwide to ensure transparency.

The prime minister said she would be willing to discuss with farmers to find resolutions to their grievances.

Meanwhile, farmers from the Central, Eastern and Western regions gathered at Government House today to show their support for the government’s rice pledging plan despite a reduced subsidy to Bt12,000/tonne.

Interior Minister Charupong Ruangsuwan urged farmers to air their opinions through provincial governors instead of having to travel to Bangkok.

He said provincial governors have been instructed to explain to farmers so that they understand the government’s latest move. (MCOT online news)

-- TNA 2013-06-24

[whybother]

Prime Minister Yingluck Shinawatra said today that it is necessary to control total spending for the rice pledging scheme at Bt100 billion and that the reduction of the paddy pledging price by Bt3,000 per tonne is one of the means to achieve the goal.

It wasn't necessary to control spending for the last 2 years.

[rubl]

With allegedly about 700++ billion spent on buying rice during 2011/2012 and 2012/2013 now saying to 'control spending to a total level of only 100 billion (per period?)' seems a bit late. Furthermore she doesn't say why the amount spent on pledging needs to be reduced neither has she indicated where the money has been lost. We only get a suggestion that pledging lower will reduce the total amount pledged, but doesn't give any indication how this may effect the amount or percentage lost.

In other words: "Dear farmers, as we can't spent too much and have some losses somewhere we have to cut you. My ministers with help of provincial governors and many other well-informed Pheu Thai people will explain all this to you soon in special organized 'good news' information sessions. To emphasize our good management, at the end of all sessions you'll get a free 5kg bag of rice from our stock, starting with the more matured years of 2005, 2006, 2007 and 2008. As you now good wines mature slowly and our unique Thai rice can be like that. Cheers.

[Thai at Heart]

With allegedly about 700++ billion spent on buying rice during 2011/2012 and 2012/2013 now saying to 'control spending to a total level of only 100 billion (per period?)' seems a bit late. Furthermore she doesn't say why the amount spent on pledging needs to be reduced neither has she indicated where the money has been lost. We only get a suggestion that pledging lower will reduce the total amount pledged, but doesn't give any indication how this may effect the amount or percentage lost.

In other words: "Dear farmers, as we can't spent too much and have some losses somewhere we have to cut you. My ministers with help of provincial governors and many other well-informed Pheu Thai people will explain all this to you soon in special organized 'good news' information sessions. To emphasize our good management, at the end of all sessions you'll get a free 5kg bag of rice from our stock, starting with the more matured years of 2005, 2006, 2007 and 2008. As you now good wines mature slowly and our unique Thai rice can be like that. Cheers.

Maybe the father's farmers grow more to make up the difference????

[NeverSure]

With allegedly about 700++ billion spent on buying rice during 2011/2012 and 2012/2013 now saying to 'control spending to a total level of only 100 billion (per period?)' seems a bit late. Furthermore she doesn't say why the amount spent on pledging needs to be reduced neither has she indicated where the money has been lost. We only get a suggestion that pledging lower will reduce the total amount pledged, but doesn't give any indication how this may effect the amount or percentage lost.

In other words: "Dear farmers, as we can't spent too much and have some losses somewhere we have to cut you. My ministers with help of provincial governors and many other well-informed Pheu Thai people will explain all this to you soon in special organized 'good news' information sessions. To emphasize our good management, at the end of all sessions you'll get a free 5kg bag of rice from our stock, starting with the more matured years of 2005, 2006, 2007 and 2008. As you now good wines mature slowly and our unique Thai rice can be like that. Cheers.

While it's not possible to audit this mess, there are clues and you are onto them. We've had lots of articles posted here. One recurring theme is that there is a "revolving fund" with the government owned Agricultural Bank for 500 billion baht to fund this scheme. Another was that the money was used up and that another 200 bil was needed. Thus your 700++ is most likely very accurate, to the best we can tell.

Then there was the article that stated that the government had raided the assets of the Ag Bank for 100 billion baht, taking 1/2 of its capital.

Now, any bank with 700++ billion bht in loans to just one thing but only 100 bil bht of its own capital is by any definition broke.

Next, the real reason the the government can/won't sell this rice is because it would realize the loss on the books of the Ag Bank and break it. As long as they sit on the rice and claim it's worth what they paid for it, then the loans from the Ag Bank appear to be cost neutral. And all the crap about fair trade and dumping at a loss is just that - crap. If selling the rice didn't shine the light on the losses, they could sell the rice to China and Africa at true market value and thumb their noses at detractors.

So the rice rots, the storage costs go up, but there is no paper loss.

When the day comes that someone smart enough to not listen to their lies calls it what it is, such as the IMF or Moody's, This government is broke. These are not long term 50 year loans like the 2 tril they are trying to borrow. This is current debt payable now with every bag of rice that's sold. The rice is the collateral.

[pedro01]

With allegedly about 700++ billion spent on buying rice during 2011/2012 and 2012/2013 now saying to 'control spending to a total level of only 100 billion (per period?)' seems a bit late. Furthermore she doesn't say why the amount spent on pledging needs to be reduced neither has she indicated where the money has been lost. We only get a suggestion that pledging lower will reduce the total amount pledged, but doesn't give any indication how this may effect the amount or percentage lost.

In other words: "Dear farmers, as we can't spent too much and have some losses somewhere we have to cut you. My ministers with help of provincial governors and many other well-informed Pheu Thai people will explain all this to you soon in special organized 'good news' information sessions. To emphasize our good management, at the end of all sessions you'll get a free 5kg bag of rice from our stock, starting with the more matured years of 2005, 2006, 2007 and 2008. As you now good wines mature slowly and our unique Thai rice can be like that. Cheers.

While it's not possible to audit this mess, there are clues and you are onto them. We've had lots of articles posted here. One recurring theme is that there is a "revolving fund" with the government owned Agricultural Bank for 500 billion baht to fund this scheme. Another was that the money was used up and that another 200 bil was needed. Thus your 700++ is most likely very accurate, to the best we can tell.

Then there was the article that stated that the government had raided the assets of the Ag Bank for 100 billion baht, taking 1/2 of its capital.

Now, any bank with 700++ billion bht in loans to just one thing but only 100 bil bht of its own capital is by any definition broke.

Next, the real reason the the government can/won't sell this rice is because it would realize the loss on the books of the Ag Bank and break it. As long as they sit on the rice and claim it's worth what they paid for it, then the loans from the Ag Bank appear to be cost neutral. And all the crap about fair trade and dumping at a loss is just that - crap. If selling the rice didn't shine the light on the losses, they could sell the rice to China and Africa at true market value and thumb their noses at detractors.

So the rice rots, the storage costs go up, but there is no paper loss.

When the day comes that someone smart enough to not listen to their lies calls it what it is, such as the IMF or Moody's, This government is broke. These are not long term 50 year loans like the 2 tril they are trying to borrow. This is current debt payable now with every bag of rice that's sold. The rice is the collateral.

Well thought out and I agree with you

[Mike Punter]

In my humble opinion there are two solutions to some of the problems:

Cut out the middlemen and the government in the rice trade and give farmers the chance to sell their products when and where they want to market rules as offer and demand.

On the other hand these farmers should learn and accept the fact that selling your vote to the host with the most will not improve their lifestyle.

Ignorance is curable, stupidity is not.

Only time will tell whether Thaksin's bet that the population at large is the latter rather than the former will prove correct.

The optimist in me hopes Thaksin got it wrong, the pessimist in me knows he didn't.