Loss-making rice sales 'only way out' for Thai govt

[webfact]

POPULIST POLICY
Loss-making rice sales 'only way out' for govt
Nakarin Srilert
The Nation


Krungthai Bank employees, dressed in black, submit a message yesterday to bank president Vorapak Tanyawong in protest over an alleged decision by KTB executives to grant loans to the caretaker government to pay farmers owed money under the rice-pledging scheme

Troubled pledging scheme can't get financing to pay angry farmers; as road blocks loom

BANGKOK: -- The caretaker government is being driven into a corner with only one choice left for securing funds to pay off protesting rice farmers - immediately releasing it stockpiles, which could result in huge losses.

However, the government will miss one sale that it had counted on after a Chinese trading partner under a government-to-government deal cancelled its contract to buy rice from Thailand.

The government has failed to find financing, as some legal issues remain unclear. It sorely needs at least Bt130 billion to pay off more than a million farmers who had pledged 10 million tonnes of paddy worth more than Bt160 billion with the government. Some groups of farmers in the Central region are still blocking some routes to the North and South in protest.

The Finance Ministry came up empty-handed when it held an auction for a Bt20-billion bridge loan last week, which was meant to be part of Bt130 billion in funds that the government planned to secure to settle bills with farmers. The success of the next auction scheduled for tomorrow is still in doubt.

The Office of the Auditor General has sent separate letters to Prime Minister Yingluck Shinawatra and Finance Minister Kittiratt Na-Ranong on its investigation into the rice-pledging scheme. It said the government should speed up its sales of rice from its inventory and report the results to the committee responsible for auditing the pledging project. Then the committee can close the books for all crops under the pledging project since 2004-05 in a bid to promote further public disclosure.

Caretaker Commerce Minister Niwatthumrong Boonsongpaisan said the government would proceed with the sale of 400,000 tonnes of rice from the state's stocks, doubling its previous sale plan, by auction. It would disclose the terms of reference for the auction tomorrow. Interested parties are required to submit quotes by next Wednesday. The auction results will be made known on February 14.

Bt10 bn for 1 million tonnes

Niwatthumrong said the government would realise some proceeds from the sale of rice this time.

"If we can release 1 million tonnes of rice, we will have made Bt10 billion," he said.

The government has tried both to sell rice and secure a loan so that it can pay farmers as quickly as possible, he said.

Last month, the government sold 1 million tonnes of rice, with 860,000 tonnes via private traders for export and the remainder via the agricultural futures market.

China-based Bei Da Huang has cancelled its order for 1.2 million tonnes from Thailand, citing concerns over legal problems, he said.

The National Anti-Corruption Commission claimed in its graft probe into the rice-pledging project that the G2G counterpart with the Thai government should be a state-owned enterprise under the central administration, but Bei Da Huang is a provincial enterprise.

The Thailand Development Research Institute has recommended that the government in the short term should raise funds by releasing rice from stockpiles instead of securing new loans to pay farmers what they are owed. Then it should suspend the pledging project in the long term.

"As the only way out, the government is about to sell rice from the stockpiles immediately," TDRI economist Ammar Siamwalla said.


-- The Nation 2014-02-05

[chooka]

But who is going to buy the old rotting rice? The politicians may have to put their hands into their own pockets.

[JoeThePoster]

Bt10 bn for 1 million tonnes

Still about Bt 3k per tonne more than the market price.

[Robby nz]

The stuff they have sold is the new seasons rice that the farmers haven't been paid for.

The old stuff still sits somewhere rotting quietly away.

Where it is and how much of it there is nobody seem to know, or if they do they aren't telling.

[NongKhaiKid]

In reference to the lead picture I would suggest any alleged decision by KT bank executives to grant loans isn't a decision at all but simply obeying orders from above.

If the bank has respond to the government there may be a ' little something ' in it for the top people but equally it may be a case of self-preservation to avoid joining the unemployment queue. The executives involved may well be in the good books of the government but are they ready to face a potential backlash from depositors ?

[Neurath]

Bt10 bn for 1 million tonnes

Still about Bt 3k per tonne more than the market price.

Yeah, selling 1mil tonnes at 10,000 baht per tonne doesn't make 10 billion if you pledged to pay the farmers 15,000 per tonne. You would have lost 5 billion not made 10.

[cornishcarlos]

Or they could just take their ill gotten gains and depart into the sunset !!!

Probably the best move....

[Ricardo]

Bt10 bn for 1 million tonnes

Still about Bt 3k per tonne more than the market price.

Yeah, selling 1mil tonnes at 10,000 baht per tonne doesn't make 10 billion if you pledged to pay the farmers 15,000 per tonne. You would have lost 5 billion not made 10.

But it does generate some desperately-needed cashflow, to pass to the BAAC, to use to help repay the governments debt to the anxious farmers.

The sales were always going to be loss-making, under this scheme, but the current default is more of a cashflow-problem, where loans & budget-for-losses have been insufficient to generate the funds to honour the government's immediate-debts.

[Katipo]

Doesn't anyone else find it strange that the government is seeking loans rather than just selling the rice? It was obvious a long time ago they were never going to get the price they thought they would, so better to sell for something than stockpile it and borrow the money.

[JRSoul]

Bt10 bn for 1 million tonnes

Still about Bt 3k per tonne more than the market price.

Yeah, selling 1mil tonnes at 10,000 baht per tonne doesn't make 10 billion if you pledged to pay the farmers 15,000 per tonne. You would have lost 5 billion not made 10.

As I understand it, they are paying B15000 for paddy and there are considerable losses in weight when it is milled. Add to this milling, storage and transport costs, and the loss will be considerably more than 5 billion IF they could find someone willing to buy at that price with the risk that what arrives may not be latest crop, or the crop before, or the crop before that.

Edited February 5, 2014 by JRSoul

[NongKhaiKid]

BBC World is re-running an interview with the Caretaker Commerce Minister recorded 12 days ago in which he said things like " doing pretty well recently with rice sales ', " no the rice isn't being sold for less than it was bought for " then he said " well " and launched into a ramble worthy of YL speaking in English.

On being asked if he knew how much the scheme had cost he said the account hadn't been closed so they were working on estimates.

[allan michaud]

Bt10 bn for 1 million tonnes

Still about Bt 3k per tonne more than the market price.

Yeah, selling 1mil tonnes at 10,000 baht per tonne doesn't make 10 billion if you pledged to pay the farmers 15,000 per tonne. You would have lost 5 billion not made 10.

But it does generate some desperately-needed cashflow, to pass to the BAAC, to use to help repay the governments debt to the anxious farmers.

The sales were always going to be loss-making, under this scheme, but the current default is more of a cashflow-problem, where loans & budget-for-losses have been insufficient to generate the funds to honour the government's immediate-debts.

Only yesterday this guy was quoted as saying they were selling 500,000 tons for 10 billion!

[MaxLee]

Of course the Krung Thai Bank director cannot risk to make the nasty nasty Finance Ministry lose face, so that's why he's using the Thai-(Chinese) way of consideration and disclosure of the REAL intention....

Amazing S ©HINA

[wprime]

Doesn't anyone else find it strange that the government is seeking loans rather than just selling the rice? It was obvious a long time ago they were never going to get the price they thought they would, so better to sell for something than stockpile it and borrow the money.

But if they sold it at a loss then people would lose face.

[AleG]

Bt10 bn for 1 million tonnes

Still about Bt 3k per tonne more than the market price.

Also, since they need 130 Billion to pay the debts to the farmers they would need to sell 13 million tons, not 1 million. They are going to be a tiny little short of money even if the succeed in this sale.

[fakename]

Hey, I have a good idea. Why dont they just sell the old rice, at double the price of the competitors, then everyone will be happy? Well, they was a good idea, until I thought more about it.

[Melyn]

BBC World is re-running an interview with the Caretaker Commerce Minister recorded 12 days ago in which he said things like " doing pretty well recently with rice sales ', " no the rice isn't being sold for less than it was bought for " then he said " well " and launched into a ramble worthy of YL speaking in English.

On being asked if he knew how much the scheme had cost he said the account hadn't been closed so they were working on estimates.

This is another reason the PTP administration needs to stay in power. They have silenced the civil service after one lady spilled the beans and they got rid of her.

The true costs of this scheme in terms of money lost, whose hands it ended up in, how much got to the farmer and on the rice side - how much was imported, how much bought several times, how much remains and what state it's in.

Then the tablet scheme.....

Sent from my Nexus 7 using Thaivisa Connect Thailand mobile app

[belg]

how can one except anything else than a loss , when rice price is normally 8000 baht /ton and governement abused tax payers money to give them 15.000 baht per ton

so how can a profit be created? waiting till international rice price jumps to 20.000 baht???

thai economics, no need to try to understand THAINESS

[Utley]

Government steps to get out of rice debacle:

1. Put an immediate end to the ill-thought out rice pledging scheme. Stand tall and take what ever political heat comes your way - you are after all supposed to be leaders of the country.

2. Immediately cancel all contracts for rice storage to shore up your precious little financial reserves.

3. Sell every grain of rice you can find for any price you can get. Use the proceeds to pay off what you owe the rice farmers to what ever extent you can.

4. Start the printing presses to finish the farmer's payoffs. If you are afraid of the political heat this causes, see the second part of item 1.

Your wounds are all self inflicted; stop whining like a little child and take your medicine. People respect leaders who make hard decisions even if they don't agree with them. If you don't believe this, read the biography of Harry S. Truman.

Or - pull an Obama and blame it all on Bush.

[GentlemanJim]

Bt10 bn for 1 million tonnes

Still about Bt 3k per tonne more than the market price.

Yep, and 5 billion short of what it cost, so they will not have 'made' anything.

The maths now becomes alarmingly clear. 130 billion is needed just to pay for the current rice that has been accepted in the last round of pledging. 500-800 billion of the 'rotational fund' is nowhere to be found. We are told this week there are 10.1 million tons of rice in stock. Even if ALL the rice could be sold at 10K baht per tonne that would raise 110 Billion baht and the rice warehouses would be empty. The purse would still be 20 billion short, BUT just say they could do it we would have 500-800 billion gone already, plus 110 billion paid to farmers now desperate since October, still 20 billion short AND every rice warehouse empty. Now can someone please explain where the money has all gone, because it clearly cannot be recouped as the warehouses would all be empty. So somewhere in the order of 610-910 billion whoops I forgot the 20 Bill shortfall, so 630-930 billion baht has gone and they are now trying to blame Suthep ( and some folks on here believe that as well ! ).

Oh my darling Thailand, what have they done to you. If only they cared for you one tenth as much as I do, but they have the right to vote and implement policy and as much as I and my family love you, I have no rights to care for you at all.

Edited February 5, 2014 by GentlemanJim

[englishoak]

Do these clowns not know about cutting your losses, recovering what you can and moving on ? guess not ....

[ginjag]

Doesn't anyone else find it strange that the government is seeking loans rather than just selling the rice? It was obvious a long time ago they were never going to get the price they thought they would, so better to sell for something than stockpile it and borrow the money.

A similar situation to Thai Airways, 4 A340s sitting on tarmac overpriced --why not sell at a bargain than waiting for DOOMSDAY.

[englishoak]

Doesn't anyone else find it strange that the government is seeking loans rather than just selling the rice? It was obvious a long time ago they were never going to get the price they thought they would, so better to sell for something than stockpile it and borrow the money.

A similar situation to Thai Airways, 4 A340s sitting on tarmac overpriced --why not sell at a bargain than waiting for DOOMSDAY.

im thinking its the same all over, second hand houses falling to bits same price as a new one opposite they wont budge... second hand cars nearly same as a new ... planes as you say rice that will rot...................just plain stubborn stupidity.

[skills32]

Bt10 bn for 1 million tonnes

Still about Bt 3k per tonne more than the market price.

Yep, and 5 billion short of what it cost, so they will not have 'made' anything.

The maths now becomes alarmingly clear. 130 billion is needed just to pay for the current rice that has been accepted in the last round of pledging. 500-800 billion of the 'rotational fund' is nowhere to be found. We are told this week there are 10.1 million tons of rice in stock. Even if ALL the rice could be sold at 10K baht per tonne that would raise 110 Billion baht and the rice warehouses would be empty. The purse would still be 20 billion short, BUT just say they could do it we would have 500-800 billion gone already, plus 110 billion paid to farmers now desperate since October, still 20 billion short AND every rice warehouse empty. Now can someone please explain where the money has all gone, because it clearly cannot be recouped as the warehouses would all be empty. So somewhere in the order of 610-910 billion whoops I forgot the 20 Bill shortfall, so 630-930 billion baht has gone and they are now trying to blame Suthep ( and some folks on here believe that as well ! ).

Oh my darling Thailand, what have they done to you. If only they cared for you one tenth as much as I do, but they have the right to vote and implement policy and as much as I and my family love you, I have no rights to care for you at all.

But the big problem for the government is there is probably only 5 million tonnes in stock. If they sold all the rice they have then they will have to answer questions as to where the missing rice is. More embarrassment.

[Suradit69]

Doesn't anyone else find it strange that the government is seeking loans rather than just selling the rice? It was obvious a long time ago they were never going to get the price they thought they would, so better to sell for something than stockpile it and borrow the money.

But if they sold it at a loss then people would lose face.

Certainly not a problem here at TV where, if someone has nothing intelligent to say, he can just throw in this dead horse and consider himself quite the lad.

Obviously all politicians in every country make a (usually futile) effort to appear less clueless than they are, but the face-saving ship left port awhile ago, as did the idea that commenting on it could be thought clever.

"... then people would lose face."

[Suriya4]

The whole point is that this scheme is a subsidy scheme.

I.e. Government MUST loss money selling the rice.

Is it not clear from day one?

All discussion here are expecting the government from NOT losing money from this scheme.

I wonder who give you that idea.

[Skint]

Many posts about rotton rice, do explain where this comes from? There is no problem with this seasons rice which these farmers are waiting payment for.

The people in the bank dressed in black protesting should be sacked.

Sent from my iPhone using Thaivisa Connect Thailand

[gabruce]

I'm not sure how accurate their estimate of 10 billion from 1 million tons, however taking the government at their word I note that:

- Pledging price was 15,000 for paddy rice and 20,000 for fragrant rice - correct?

- Their estimate is a sale price of 10,000/ton - not sure if this is for paddy, fragrant, or a blend

- I would guess that this is for current harvest rice rather than 2 year old rice - if so then the 2 year old rice will sell for a lot less - I think we are getting some of this rice in Chiang Mai now - being passed off as 1 year old - very poor quality

- As someone else noted, the original tonnage won't match the current tonnage due to moisture loss (and spoilage)

- There are also storage and transportation costs to figure in

At the end of the day the loss is going to be substantial per ton. They may be lucky to recoup 50% of their investment in rice - less if they are unlucky or if at rots before it's sold. Let's just hope that the rice industry in Thailand isn't destroyed.

[gabruce]

Many posts about rotton rice, do explain where this comes from? There is no problem with this seasons rice which these farmers are waiting payment for.

The people in the bank dressed in black protesting should be sacked.

Sent from my iPhone using Thaivisa Connect Thailand

Why should they be sacked? They believe they are safeguarding the bank and therefore their jobs.

Just like the BAAC before when the caretaker government told them to use their liquidity (essentially depositors money) to pay for the rice. It would almost certainly have caused the bank to collapse. So it seems like a reasonably prudent thing to do, don't destroy the place where I work.

[mightyatom]

But who is going to buy the old rotting rice? The politicians may have to put their hands into their own pockets.

And hand back the 400 billion they stole?

No way.