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

[mightyatom]

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.

As I am someone involved in import/export I feel qualified to add this comment.

The major problem that the government has with selling the stockpiles too fast, is that they would have to flood the global market with more than it is able to take. Under normal release conditions, it would take years to get rid of it all, even at a low price of $312USD per tonne which is what they are quoting.

If they want to sell it faster, they would need to drop the price to around $200USD per tonne, they should offload it over a couple of months.

However, this will have 2 major effects.

It will create outrage with almost every rice exporter from the middle east and east rice producing countries that will return later with a huge boycott as they move towards a lengthy period of very cheap global prices as wholesalers are top heavy with rice and want to buy less in the coming 2 years say, they won't like the price coming back up again as stocks are building up globally and that means there is a knock on effect keeping prices low until there is another global rice shortage caused probably by massive drought. Like 2007/2008.

Second is that the next harvest in Thailand will see massively shrunken prices and demand making it diffidult to sell the rice and almost impossible to sell at a profit putting every Thai rice farmer in the same boat as the 1.4 million farmers still awaiting payment. This will last for years to come, and I doubt the rice farmers can expect any subsidy after this as it will just see the economy being hit for possibly hundreds of billions per year, and this won't be acceptable for the people of Thailand already smarting at the losses so far.

Any subsidy for rice from here on will be seen as a pure populist policy.

In summary. This government with its amazingly corrupt system has seen the disappearance of at least 400 to 500 billion baht under the scheme, and also wrecked the entire industry that the vast majority of their voter base is 100% reliant on. They have knocked Thailand down from world's largest exporter to the 3rd largest and that will drop a lot more when they piss off the global rice exporters who already are hesitant about the quality of the infested and rotting rice in the reserves. Adding to that the huge price drop and demand for rice over the coming decade as a result of the scheme.

PTP and Thaksin are the only people anyone can blame for this . It is not just about the poor unpaid, it is about the killing of the entire industry.

Edited February 5, 2014 by mightyatom

[Scamper]

The end of the road for Pheu Thai is to be paved with mountains of stored rice as far as the eye can see. It is a monument to folly and a monument to greed. It served the interests of those at the top, at the expense of the entire country, it's standing as the world's premiere exporter of rice - now shattered in two short years - by a staggering debt, and by a mutiny of public outrage on the streets, including the financial institutions, and the farmers themselves. The Yingluck administration has lost none of its hubris. It is unrepentant. But it has ruined the financial underpinnings of the national economy. And has betrayed the public trust.

[Theequation]

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.

Exactly.

Sent from my iPad using Thaivisa Connect Thailand

[JRSoul]

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.

The stated aim of the policy was to lift the income of POOR rice farmers. Thaksin and Yingluk claimed it would be very profitable (an obvious lie or terminal stupidity).

A subsidy is expected to make a loss, but B700 billion has been spent and the poor farmers are still poor and the rice industry is in tatters. It would have been far better to hand the poorest million farmers B700,000 each and reap the economic flow-ons as they wasted it on new pick-ups, 60 inch TVs and mobile phones. At least then they would be paying some bloody tax.

[mightyatom]

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.

The next post agreed with you, but that just means there are more than one who got it wrong.

The rice pledging scheme was NOT a subsidy, there was already a good and competent 'subsidy' scheme in place by the Dems which was well thought out and better for all. It also never affected the industry, and made Thailand number one exporter.

The 'subsidy' scheme was removed by the Thaksin government and replaced by an offer to buy at massively inflated 'over market' prices making the government pretty much the only rice buyer in Thailand (if you could get on the scheme which was largely reserved for PTP voters).

It wasn't a subsidy, it was a monopoly as the government became a rice merchant.

They were paying almost $500 USD per tonne for paddy which you can probably buy from Vietnam for about $200 per tonne. This all was then subject to milling, transport and storage costs.

What the government 'claimed' to make a profit was to stockpile the rice and drive up global prices and then make back the deficit once they released the rice at a higher price. It did not work, they were so stupid that they did not realise that the buyers would just go elsewhere, and now they have cozied up to different sellers, so long as there are no problems the buyers will stick with who they know.

You can't come on here saying it was a subsidy scheme expected to generate losses, when the government claimed that they could make a profit, instead they have smashed apart the entire industry that is the livelihood of the majority of the population.

So no.... it is NOT clear from day one.

Edited February 5, 2014 by mightyatom

[steveromagnino]

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.

The government set a maximum budget of 500b baht, and repeatedly claimed it would be 'self funding' via BAAC within this limit. So we knew if would lose maximum of 500b baht, but the government CLAIMED it would actually not lose that much money, rather losses would be around 80b a year; so 500b would be enough for more than 4 years of the scheme.

They claimed the scheme would "The policy is aimed at supporting farmers and boosting Thailands agriculture sector, government spokeswoman Anuttama Amornvivat said. If the farmers have more income, they will spend more money in the economy, she said. When we spend more, the GDP will definitely increase significantly.""

http://www.irinnews.org/report/93899/global-thai-rice-policy-sows-worldwide-uncertainty

- we never saw this, at least not in any clear way.

The PT govt crowed about how it was going to be even lower than this, under 400b baht or 430b baht, depending at which time you listened to them

https://www.agriskmanagementforum.org/news/kittiratt-rice-pledging-scheme-will-be-under-budget

http://www.thairiceexporters.or.th/Int%20news/News_2011/int_news_061011-1.html

In March 2013 with the option to set aside budget, PT chose not to, because the scheme was still well within its limits apparently

http://www.nationmultimedia.com/business/Ministry-to-discuss-funding-for-rice-pledging-sche-30202960.html

No one knows how much the scheme is losing, this from the very pro govt ASian correspondent, notes govt predicted losses of around 70-80b a year (ie. easily within the 500b range as we should now have around 200-300b left, but actually the amount is zero); other experts claim annual losses of 100 - 260b per year, depending who you listen to;

http://asiancorrespondent.com/105941/bloomberg-on-the-pros-and-cons-of-the-rice-pledging-scheme/

In June 2013, govt claims losses of 260 billion to date were not true - "The 260-billion-baht figure is made up," said Mr Boonsong.

In June 2013, Kittirat claimed that he 'didn't know' if it was within the 500b limit, but seemed to think it was wrong accounting, implying it was still all fine

http://www.pattayamail.com/news/kittiratt-260-billion-baht-losses-not-entirely-incurred-by-rice-pledging-scheme-26953

He insisted losses were not even 200b baht, and that the scheme was still well within its limits, even in mid 2013

http://www.nationmultimedia.com/business/Kittiratt-tells-Moodys-rice-pledging-not-a-threat-30210596.html

http://www.capitalrice.com/index.php/riceupdates/archive/165

In June the cabinet tried to reduce the pledge price to 12,000b (which they u-turned on) but they stuck with the 500b ceiling AGAIN

http://www.thaigov.go.th/en/news-room/item/78001-cabinet-agreed-on-reduction-of-rice-pledging-price.html

The PM affirmed that the 500b baht amount was enough to keep the scheme going

September 17, 2013, Prime Minister Yingluck Shinawatra clarified about the budget ceiling of 500 billion Baht under the 2013/14 rice pledging scheme of which the amount 270 billion Baht was approved by the Cabinet in its meeting on September 4. According to PM Yingluck, the approved amount is part of the earlier approved budget ceiling which is a revolving fund from the release of stocked rice, not a new loan.

http://www.thaigov.go.th/en/news-room/item/79972-pm-clarifies-rubber-situation-and-parliaments-deliberation-of-the-2-trillion-baht-loan-act.html

Minister of Commerce emphasized that the budget for rice pledging was LESS than the previous Dems scheme and cost only 300b baht (not even 500b):

"Comparing to the previous government's scheme on "farmer income insurance" which requires more budget to support at around 70-80 billion baht and no rice stock on hand, the current governments policy is much more effective..

The total budget spent in this rice scheme was about 300 billion baht which is not more than the budget of the previous governments farmers income insurance scheme. .....later this year after government release the stocked rice, 85 billion baht will go back to the Ministry of Finance. Also by the end of 2013, 240-250 billion baht will certainly go back to the Ministry of Finance as well.

So it is certain that the budget spent in this rice scheme will be used wisely and transparently. It may cause government some burden but this budget is not higher than the previous government's annual budget."

http://www.thaigov.go.th/en/news-room/item/72404-the-governments-rice-pledging-policy.html

In October, then again in November, then again in December, then in January, then now, farmers were repeatedly promised that the only reason why payment was not being made was due to protesters, and payment would be released within 'a few days' - ignoring that the scheme was bankrupt, the rice stocks were massively lower, G2G sales claimed didn't exist and the government refused to take responsibility for borrowing money, instead blaming protesters, EC, Constitution Court, BAAC, etc etc - selection of claims made in the last 2 months

e.g. 18 Dec - payment to be released in 7 days

http://thaifinancialpost.com/2013/12/18/kittiratt-confirms-speedy-payment-of-rice-pledging-program/

e.g. 29 Jan - payment can be made, but has been delayed by protesters

http://www.thaigov.go.th/en/news-room/item/82404-pm-ready-to-testify-on-rice-pledging-scheme.html

e.g. 20 Jan - payment can be made by the BAAC paying it, or the EC agreeing to it, or maybe the constitution court, and nothing to do with the election, but anyhow its still no issue

http://www.thaigov.go.th/en/news-room/item/82280-deputy-pm-government-awaits-ecs-decision-for-payment-of-2013/14-rice-pledging-scheme.html

[Thai at Heart]

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

Ever tried to discount the price on a house that's been empty.for 5 years?

[tingtong]

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

maybe a similarly currupt African government?

there are many skins on this cat, if played right.

[tingtong]

the circle finally has been closing.

the shame/scam was successful!

the government will pay on an inflated price their high up and middlemen supporters (while to small scale farmers to benefit little), and launder the government fund to those private hands, taking the loss on the rice selling.

whatever happens, those billions of baht will be there, controlled by the selected supporters, ready for another round another time.

a simple way to fund a future election.

[Brevity]

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

How else could it have played out when you're paying considerably over market value and stockpiling it (to degrade or worse)? Did they really think that the other rice producing countries were going to do something just as insane? The rice pledging scheme is either the stupidest policy ever allowed to pass through government process or the most corrupt. Thaksin's government groupies who are responsible for doing this terrible thing to their countrymen must have no belief in karma or reincarnation.

[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.

As I am someone involved in import/export I feel qualified to add this comment.

The major problem that the government has with selling the stockpiles too fast, is that they would have to flood the global market with more than it is able to take. Under normal release conditions, it would take years to get rid of it all, even at a low price of $312USD per tonne which is what they are quoting.

If they want to sell it faster, they would need to drop the price to around $200USD per tonne, they should offload it over a couple of months.

However, this will have 2 major effects.

It will create outrage with almost every rice exporter from the middle east and east rice producing countries that will return later with a huge boycott as they move towards a lengthy period of very cheap global prices as wholesalers are top heavy with rice and want to buy less in the coming 2 years say, they won't like the price coming back up again as stocks are building up globally and that means there is a knock on effect keeping prices low until there is another global rice shortage caused probably by massive drought. Like 2007/2008.

Second is that the next harvest in Thailand will see massively shrunken prices and demand making it diffidult to sell the rice and almost impossible to sell at a profit putting every Thai rice farmer in the same boat as the 1.4 million farmers still awaiting payment. This will last for years to come, and I doubt the rice farmers can expect any subsidy after this as it will just see the economy being hit for possibly hundreds of billions per year, and this won't be acceptable for the people of Thailand already smarting at the losses so far.

Any subsidy for rice from here on will be seen as a pure populist policy.

In summary. This government with its amazingly corrupt system has seen the disappearance of at least 400 to 500 billion baht under the scheme, and also wrecked the entire industry that the vast majority of their voter base is 100% reliant on. They have knocked Thailand down from world's largest exporter to the 3rd largest and that will drop a lot more when they piss off the global rice exporters who already are hesitant about the quality of the infested and rotting rice in the reserves. Adding to that the huge price drop and demand for rice over the coming decade as a result of the scheme.

PTP and Thaksin are the only people anyone can blame for this . It is not just about the poor unpaid, it is about the killing of the entire industry.

Thank you for that. Nice to get a sensible answer.

[ikke]

The moment the Government sells with loss, they proof that they at least can deal with the situation.

Any well doing company CEO would do the same, don't look to the past, leave what went wrong and look forward, sell with loss and make up your mind for the next step (but learn and never forget why and what went wrong)

The EU did this many times with milk and butter subsidy and they needed to sell also with a huge loss ,any other government would do the same

The Dems and Suthep however block this and are now creating more problems and loss,

Suthep and his lovers cost the country billions more than the rice subsidy by there protests, but of course no follower wants to talk about that as they don't even have an idea about the daily loss that THEY cause.

[steveromagnino]

The moment the Government sells with loss, they proof that they at least can deal with the situation.

Any well doing company CEO would do the same, don't look to the past, leave what went wrong and look forward, sell with loss and make up your mind for the next step (but learn and never forget why and what went wrong)

The Dems and Suthep however block this and are now creating more problems and loss,

Suthep and his lovers cost the country billions more than the rice subsidy by there protests, but of course no follower wants to talk about that as they don't even have an idea about the daily loss that THEY cause.

No one on the Dems or Suthep side is stopping any sales.

The reason why there are no sales, is likely:

1. the amount of rice that can be sold is far less than the amount that is recorded in storage due to corruption

2. the amount of rice that can be sold is far less than the total inventory due to spoilage

3. even selling at the last minute on the open market, the government will still struggle to raise even close to enough money to pay off the scheme that up until now they are still claiming is completely solvent - rod made for their own backs

4. they don't want to lose face by selling at a loss more than they have already been doing (they already have been selling rice at 11,000b per ton or a loss of around 30%+ but covering it up) and also because it would be counter to their many statements to date that the scheme is sustainable - remember they were elected mostly on THIS policy only

5. they have repeatedly told us they have sold the rice in G2G deals, and it is only now that we are learning all those deals didn't exist e.g. enron/worldcom

6. Selling the required amount now will totally destroy rice pledging as well as the likely rice prices for the next 2 years as they dump substandard Thai rice on the world markets all at once, meaning that the scheme will likely collapse (costing approx. 10% of the total govt budget per year for this one item will not be acceptable) and the govt will collapse with it

Again...nothing to do with Suthep and his lovers or the Dems and Suthep - please correct your facts - how can a few protesters stop the govt from doing their business???!