Thai Finance Ministry: BAAC has sufficient funds for rice subsidy

[tomacht8]

Supunnabul Suwannakij reported in Bloomberg, that the stockpile are now around 16 Million metric tons.

To get 16 Million ton milled rice you need 27 Mio ton paddy.

20% husk, 8-12% bran depending on the milling degree and 68-72% milled rice

Farmers get for Paddy 27.000.000 * 14000 = 378.000.000.000 Baht

Stockpile value milled rice 16.000.000 * 14277 = 228.432.000.000

Market price now 453,26 dollar/ton

Thailand has spent 678 billion baht since October 2011 buying about 29 million tons of milled rice from farmers.

That is 678.000.000.000 / 29.000.000 = 23.379 Baht per Ton for milled rice

29 Mio Ton – 16 Mio Stockpile = 13 Mio Ton sold rice in two years

If they sold different qualities of rice, lets say for 15.000 per Ton * 13 Mio = 195.000.000.000

So we have a stockpile with 228.000.000.000 Baht

and rice sales in two years 195.000.000.000 Baht

= 423.000.000.000 Baht

they spent 678.000.000.000 Baht

so 255.000.000.000 Baht out of the system already.

With this money they could build also 255.000 nice Houses each for 1 Million Baht

[moe666]

I keep wondering where the likes of GK and a few other PTP supporters are when this nonsense comes out. They where here talking it up and what a great deal it would be in 2011 but not a word in defense the last year. The only thing they can do is say on Mark did this or that when he was PM totally off topic.

[Baerboxer]

I keep wondering where the likes of GK and a few other PTP supporters are when this nonsense comes out. They where here talking it up and what a great deal it would be in 2011 but not a word in defense the last year. The only thing they can do is say on Mark did this or that when he was PM totally off topic.

Correct. And of course they will point our that this is a democratically elected government, who should be allowed to govern and not constantly blocked by those reactionary Dems and Judiciary. Democratic principles are always followed by PTP according to their sympathizers.

It would be interesting to put a real forensic accounting team in there and do a full audit. The real rice subsidy losses and where the money really went, what happened to the 120 million "emergency" flood budget, the subsequent 350 million water management budget and the items of overspending already claimed to be being investigated, i.e. the clocks etc.

Of course it will never happen. PTP are desperate to get their hands on the 2.2 trillion to keep the gravy train going as long as possible.

No other country in the world would put up with this amount of lies, corruption, contradictions, illegal actions and blatant hypocrisy from a government, regardless of how they were elected. Where is the PM/DM in all of this - making vague promises that never get delivered, claiming to fight corruption, never in parliament or doing her job etc etc.

PTP treat the public like some public company directors used to treat shareholders - little white lies, fudged creative accounting, promises of "jam" tomorrow", and all whilst lining their own pockets. Then "bang" suddenly it all comes crashing down.

It's a sad time for Thailand.

[Baerboxer]

I just want to know what kind of idiot would issue this government credit.

The idiots may be closer than you think. What better capital to invest in you home territory than that you have plundered from the same instituation?????

Indeed. What a clever plan. Plunder so much that you engineer a bankrupt situation. Then use the funds you plundered to by up all the assets cheap and make loans at very advantageous terms. Great way to solidify your power and control and financially weaken the opposition at the same time.

[Thai at Heart]

"I spy, with my little eye, another Red White-Lie !"

The bank says they don't have the money. Mr. White Lies says they do. Who do you believe?

The bank says they've run out of money, and were telling farmers yesterday that they should expect to wait an extra 45-days, other TV-posters yesterday were confirming that they've failed make payments on-time due to family-members who have deposited their rice at the mills, and IIRC one claimed that he had been denied withdrawing some of the money he has deposited with the bank.

Then in the OP the Deputy Finance Minster (one of 'Mr White Lies' flunkies) says that "the Public Debt Management Office will issue bonds" and "The BAAC will also earn additional money from sales of rice on a government-to-government basis", from this I would conclude that the BAAC are bankrupt, as they said, but that the government hopes to refinance them as-and-when.

So personally I believe the BAAC, and am surprised that the depositors and creditors aren't storming the bank's branches, demanding their money !

Why is the bank still open for business ? Why didn't the BoT or the government put in the cash-funds, to enable BAAC to continue to operate normally before this mess unfolded, surely it can't be that the whole system of government-finances is bankrupt ? How long before Moody's notices, and reacts to, this unfolding situation ?

Why there isn't a run on the back yet, God only know.

[tomacht8]

I keep wondering where the likes of GK and a few other PTP supporters are when this nonsense comes out. They where here talking it up and what a great deal it would be in 2011 but not a word in defense the last year. The only thing they can do is say on Mark did this or that when he was PM totally off topic.

Correct. And of course they will point our that this is a democratically elected government, who should be allowed to govern and not constantly blocked by those reactionary Dems and Judiciary. Democratic principles are always followed by PTP according to their sympathizers.

It would be interesting to put a real forensic accounting team in there and do a full audit. The real rice subsidy losses and where the money really went, what happened to the 120 million "emergency" flood budget, the subsequent 350 million water management budget and the items of overspending already claimed to be being investigated, i.e. the clocks etc.

Of course it will never happen. PTP are desperate to get their hands on the 2.2 trillion to keep the gravy train going as long as possible.

No other country in the world would put up with this amount of lies, corruption, contradictions, illegal actions and blatant hypocrisy from a government, regardless of how they were elected. Where is the PM/DM in all of this - making vague promises that never get delivered, claiming to fight corruption, never in parliament or doing her job etc etc.

PTP treat the public like some public company directors used to treat shareholders - little white lies, fudged creative accounting, promises of "jam" tomorrow", and all whilst lining their own pockets. Then "bang" suddenly it all comes crashing down.

It's a sad time for Thailand.

It would be interesting to put a real forensic accounting team in there and do a full audit.

incredible that such an investigation does not take place.

If you look back in more detail it gets really creepy.

So we have a stockpile with 228.000.000.000 Baht

and rice sales in two years 195.000.000.000 Baht

= 423.000.000.000 Baht

they spent 678.000.000.000 Baht

so 255.000.000.000 Baht out of the system already.

First:

I guess the value for the stockpile is relatively accurate 228 Bio Baht to marketprice Oct.2013

But

the world market can not absorb this additional storage amount next year.

The demand is not that great.

This is maybe only possible by lowering the selling price.

The world market price for a ton milled rice is continuously fallen from 552,09 $US/ton (Mai2013) to 453,26$ US ton (Oct2013).

Thailand does not bring its rice into the market and stockpiled them.

What happens to the world market price? The price falls!

On the futures exchange there must have some people earned fantastic money.

On the sales side, Thailand is not immune from the market. There's too much other providers / producers and substitution products:

In the evaluation conservative would say: A difficult to selling asset . The capital is due to the system anyway always bound, as unfortunately can not be turned into cash money. The next harvest comes soon added again.

Second:

and rice sales in two years 195.000.000.000 Baht

Deputy Finance Minister Tanusak Lek sayed:

“He said the government has spent Bt680 billion to purchase rice and returned Bt180 billion to the BAAC, adding that the BAAC has Bt500 billion revolving fund for rice purchases until the end of this year.”

First question is this returned Bt180 billion to the BAAC the money from the rice sales?

Second: Then he count : spent Bt680 billion minus returned Bt180 billion = Bt500 billion revolving?

My god

There is no more money that can revolving, if the money from the rice sales is not a cash position.

I fear that they burned Bt680 billion + Bt180 billion already.

The Bank of Agriculture and Agricultural Cooperatives (BAAC) reported they ran out of funds.No money.

Now they issue bonds for the Bt75 billion + hope there coming Bt24 billion from the rice sales soon in.

irresponsible

Edited November 24, 2013 by tomacht8

[Ricardo]

It would be interesting to put a real forensic accounting team in there and do a full audit.

incredible that such an investigation does not take place.

<snip for brevity>

Thailand does not bring its rice into the market and stockpiled them.

What happens to the world market price? The price falls!

On the futures exchange there must have some people earned fantastic money.

On the sales side, Thailand is not immune from the market. There's too much other providers / producers and substitution products:

<snip to brevity>

The Bank of Agriculture and Agricultural Cooperatives (BAAC) reported they ran out of funds.No money.

Now they issue bonds for the Bt75 billion + hope there coming Bt24 billion from the rice sales soon in.

irresponsible

Point 1, Where to find an international-standards "real forensic accounting team" in Thailand, and someone brave enough to send them in ? This is why the role of people like Moody's, as external assesors who aren't controlled by the local government, is so important.

Point 2, One might guess just where-in-the-World those futures-speculators might reside, a few with perfect knowledge of the real position with these Thai government-owned stocks, and the ability to trade on that knowledge, the potential for legal insider-trading might indeed be enormous.

And much more lucrative than for-example golf-caddying or speculative-investments in African-mining !

Point 3, The bank have reportedly stopped/delayed paying-out some depositors' funds, any income from rice-sales or bond-issues is in the medium-future, but there is this awkward immediate-problem. One hopes that someone in the government is paying attention, and that physical cash money to restock ATMs & BAAC-branches is being moved today Sunday, and that there will be BiBs outside every branch tomorrow-morning, to keep order when the worried account-holders arrive to try to withdraw their money. Worry about the accounting-entries once that's done !

The responsible authorities should also be making reassuring-announcements, to this effect, to try to contain the reputational-damage which was already done at the end of last week to a government-owned/backed bank.

I've never seen a bank-run at first hand, having moved here before Northern Rock went down, but the signs are exactly what I'd expect to see in one, and the longer the government prevaricate & blow hot air, rather than take the necessary tough steps, the more one wonders how far the rot spreads ? Is it systemic, rather than one shaky bank, with a cashflow-crisis ?

I myself just took the precaution of removing sufficient funds, from my own (different) bank, just-in-case. Others too might think that a wise precaution ?

I am wary to 'shout fire ! in a crowded theatre', in a situation like this, it might turn out to be irresponsible. But the management have said there will be a 45-day delay in being to get out, the government have sent a letter to alert the fire-brigade, and there is already a whiff of smoke about the whole affair.

Edited November 24, 2013 by Ricardo

[tomacht8]

It would be interesting to put a real forensic accounting team in there and do a full audit.

incredible that such an investigation does not take place.

<snip for brevity>

Thailand does not bring its rice into the market and stockpiled them.

What happens to the world market price? The price falls!

On the futures exchange there must have some people earned fantastic money.

On the sales side, Thailand is not immune from the market. There's too much other providers / producers and substitution products:

<snip to brevity>

The Bank of Agriculture and Agricultural Cooperatives (BAAC) reported they ran out of funds.No money.

Now they issue bonds for the Bt75 billion + hope there coming Bt24 billion from the rice sales soon in.

irresponsible

<snip to brevity>

I myself just took the precaution of removing sufficient funds, from my own (different) bank, just-in-case. Others too might think that a wise precaution ?

If this were not so sad.

If they get the 2 trillion in hand, then the next two generations will have to pay back with compound interest over the next 50 years, around 6 trillion Baht.

The farmers now have money.

So they will buy new TVs, Cars, some boxes of beer and some gold.

I will redeploy my portfolio.

They still believe that they have helped the farmers, but Thailand is not more rice export nation No 1 in the world,

the competitiveness is severely damaged for the next years.

Edited November 24, 2013 by tomacht8

[billd766]

From what little I know about finance any country or even big businesses can issue bonds without a problem.

The bond promises to pay the buyer a specific amount which amounts to the capital plus interest in X amount of time. The issuers of the bond get the money and everybody theoretically makes on the deal.

I can see 3 problems with this.

1. The bond is repaid at the listed amount which may not reflect the true value so the buyer may lose out.

2. To me more important. What happens if the bonds are not bought up in the first place.

3. Most important of all. What happens if the bond issuer has no money to repay the bond when it matures?

[SOTIRIOS]

............so what have they been doing with the money for the past 6 months......

....lending it out...........gambling........

...their payout won't be in another 45 days yet....

...and from being out 350B........ it has now risen to 500B or more....???

Wake up Thailand.....

[p_brownstone]

The Thai Government keeps using phrases like "Revolving Fund" to make this fiasco sound sensible - or even possible - however that's a complete misnomer.

A true Revolving Fund is where - for example - one takes a Loan from the Bank, buys Product with that money and then sells it on for, as a minimum, the same amount paid for the Product but most usually for a Profit - from that Income one pays off the Loan and uses the Profit for other endeavours.

One repeats the same process for as long as the Loan is still available and is being regularly repaid, or "Topped up" by the Borrower as per any agreement with the Bank.

In no way can this situation be funded by such a "Revolving Fund" arrangement.

Money is being borrowed from the (Government Controlled) Bank and used to buy a Product at well above the best possible Market (selling) price: Even if every Tonne of Rice purchased was immediately sold - not kept in Warehouses - the Scheme is buying at Baht 15,000.- per Tonne and selling at Baht 10,000.- per Tonne, as someone already Posted, add in Administrative and Storage Costs and the Government is losing over Baht 16,000.- per Tonne: Admin and Storage (and obviously Corruption) expenses must be paid from the BAAC Loan so whatever Loan Facility the Scheme has arranged with the Bank the amount outstanding, due to be paid back to the Bank, keeps increasing.

It's even more basic than Economics 101.

I can hardly wait to see what reception the upcoming "Bond" receives in the Financial Marketplace.

Patrick

[tomacht8]

The Thai Government keeps using phrases like "Revolving Fund" to make this fiasco sound sensible - or even possible - however that's a complete misnomer.

A true Revolving Fund is where - for example - one takes a Loan from the Bank, buys Product with that money and then sells it on for, as a minimum, the same amount paid for the Product but most usually for a Profit - from that Income one pays off the Loan and uses the Profit for other endeavours.

One repeats the same process for as long as the Loan is still available and is being regularly repaid, or "Topped up" by the Borrower as per any agreement with the Bank.

In no way can this situation be funded by such a "Revolving Fund" arrangement.

Money is being borrowed from the (Government Controlled) Bank and used to buy a Product at well above the best possible Market (selling) price: Even if every Tonne of Rice purchased was immediately sold - not kept in Warehouses - the Scheme is buying at Baht 15,000.- per Tonne and selling at Baht 10,000.- per Tonne, as someone already Posted, add in Administrative and Storage Costs and the Government is losing over Baht 16,000.- per Tonne: Admin and Storage (and obviously Corruption) expenses must be paid from the BAAC Loan so whatever Loan Facility the Scheme has arranged with the Bank the amount outstanding, due to be paid back to the Bank, keeps increasing.

It's even more basic than Economics 101.

I can hardly wait to see what reception the upcoming "Bond" receives in the Financial Marketplace.

Patrick

agree 100%

The shocking thing is, that the Treasury believes there are still currently BT500 Billion in cash lieing around in the BAAC.

They must have confused with the plus and minus symbols on their calculators.

.

[siampolee]

Going over this matter and reading the comments made by those involved in the government and other areas am reminded eerily of the matters leading up to the B.B.C. financial scam in 1996.

One does wonder just how economical with the truth all these government spokesperson are being,and how many hands may be in the till too?