RICE-PLEDGING SCHEME
NCPO must focus on rice stocks
Petchanet Pratruangkrai
The Nation

BANGKOK: -- The problems over payments to rice farmers - and their solutions - are now rapidly becoming clear following action since the coup on May 22.

About 70 per cent of the debt of nearly Bt200 billion owed to the farmers has been paid while the funding has also been sought successfully.

The Government Savings Bank (GSB) yesterday came out top in an auction for a three-year loan worth Bt50 billion, offering the lowest interest rate among 12 participants from both government and commercial banks, according to Public Debt Management Office (PDMO) director-general Chularat Suteethorn.

The PDMO's term-loan auction aimed to pay off the debt owed to the farmers under the rice-pledging scheme.

GSB offered a 0.1 percentage point minus from the Bangkok Interbank Offered Rate (BIBOR), translating into an annual rate of 2.1792 per cent for the Bt30-billion loan, as the first lot to be forwarded to farmers via the Bank for Agriculture and Agricultural Cooperatives.

"The lending rate offered by GSB is below the government's three-year bond yield of 2.45 per cent per annum currently," said Chularat.

In addition, PDMO is also upbeat about opening new bidding for a Bt40-billion loan tomorrow, aiming to return money to the BAAC that previously advanced funds to pay the farmers off. The bank has advanced almost Bt40 billion for the rice payments.

As of yesterday, BAAC has made payments to 1.14 million growers worth Bt139.55 billion for 8.71 million tonnes of rice for the harvest season since last year under the rice-pledging project.

Out of the Bt195.45 billion (11.81 million tonnes of rice) under the rice subsidy project, 551,447 farmers were left waiting for overdue payments totalling Bt55.89 billion - equivalent to 3.1 million tonnes of rice.

The National Council for Peace and Order needs to not only solve the overdue payment problem under the rice-pledging scheme, but also to manage huge rice stockpiles - as many as 16 million tonnes - excluding incoming additional rice from the harvest season, according to BAAC managing director Luck Wajananawat.

"About 30 million tonnes of paddy rice are expected to enter the market in the upcoming year. With the low market price, the NCPO needs to find measures to manage those mounting rice stocks more efficiently," he said.

Luck said the rice price had dropped substantially. White rice in Nonthaburi was quoted at Bt5,400-Bt5,600 a tonne, while production costs were at Bt6,000-Bt7,000 a tonne, for example.

The market price of rice has dropped continuously during the past two years because of the enormous output of rice to 55 million tonnes of paddy, equal to 30 million tonnes of milled rice.

The ousted government was able to release only half of the stockpiles worth about Bt200 billion.


-- The Nation 2014-06-04

The whole rice thing turned out to be a financial.disaster. Get it behind us, take the losses and move on. Good thing the farmers are finally getting paid.

The whole rice thing turned out to be a financial.disaster. Get it behind us, take the losses and move on. Good thing the farmers are finally getting paid.

Is the NCPO conducting any sort of in depth stock take as over the years the figures have been all over the place so does anyone have even a decent guesstimate on what's actually in storage, what has gone ' missing ' etc. ?

The whole rice thing turned out to be a financial.disaster. Get it behind us, take the losses and move on. Good thing the farmers are finally getting paid.

Is the NCPO conducting any sort of in depth stock take as over the years the figures have been all over the place so does anyone have even a decent guesstimate on what's actually in storage, what has gone ' missing ' etc. ?

It seems much of the paperwork was lost in the floods. So even how much was paid to whom will be very difficult to find out...

The whole rice thing turned out to be a financial.disaster. Get it behind us, take the losses and move on. Good thing the farmers are finally getting paid.

Is the NCPO conducting any sort of in depth stock take as over the years the figures have been all over the place so does anyone have even a decent guesstimate on what's actually in storage, what has gone ' missing ' etc. ?

It seems much of the paperwork was lost in the floods. So even how much was paid to whom will be very difficult to find out...

Do you mean ' lost ' as in ' the dog ate my homework ' ?

"White rice in Nonthaburi was quoted at Bt5,400-Bt5,600 a tonne, while production costs were at Bt6,000-Bt7,000 a tonne,"

So why would a sane person grow rice?

"White rice in Nonthaburi was quoted at Bt5,400-Bt5,600 a tonne, while production costs were at Bt6,000-Bt7,000 a tonne,"

So why would a sane person grow rice?

Because the government was paying Bt15,000 a ton?

(I use the word "paying" loosely here.)

Note that "while the funding has also been sought successfully.

The Government Savings Bank (GSB) yesterday came out top in an auction for a three-year loan worth Bt50 billion, offering the lowest interest rate among 12 participants from both government and commercial banks, according to Public Debt Management Office (PDMO) director-general Chularat Suteethorn.

The PDMO's term-loan auction aimed to pay off the debt owed to the farmers under the rice-pledging scheme."

So the payments are STILL only being funded by loans, NOT actually paid-off out of government-spending.

This sort of 'spend-now pay-later' attitude is IMO fundamentally flawed.

Is this right?

About 70 per cent of the debt of nearly Bt200 billion owed to the farmers has been paid while the funding has also been sought successfully.

The Thaksin puppet government spent 600 billion baht and stilled owed 200 billion in payments for Bt400 billion in rice?

but also to manage huge rice stockpiles - as many as 16 million tonnes - excluding incoming additional rice from the harvest season,....The ousted government was able to release only half of the stockpiles worth about Bt200 billion.

Is this right?

About 70 per cent of the debt of nearly Bt200 billion owed to the farmers has been paid while the funding has also been sought successfully.

The Thaksin puppet government spent 600 billion baht and stilled owed 200 billion in payments for Bt400 billion in rice?

but also to manage huge rice stockpiles - as many as 16 million tonnes - excluding incoming additional rice from the harvest season,....The ousted government was able to release only half of the stockpiles worth about Bt200 billion.

So if the above is true ... Then it where did the other 400 billion go ?

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"White rice in Nonthaburi was quoted at Bt5,400-Bt5,600 a tonne, while production costs were at Bt6,000-Bt7,000 a tonne,"

So why would a sane person grow rice?

I think that's the key.

It may be that the world simply doesn't need all this rice and that the best course of action for the farmers is to grow something else.

Not sure what though.

So that means Thai farm loan aggregators and local big men can lock in almost a 30 basis point spread on the gap between Thai notes and farm loans and then re-lend the Thai securities as collateral to brokers who run repo books.

The newspaper headline is that the NCPO "must focus" on rice stocks. Not focus on the Thai economy as a whole, the escalating inflation, the high cost of food, creating jobs, adding value to the tourism product, equal before the law, one man one vote, and education. Rice stocks takes precedent over all other issues, so says the newspaper.

The whole rice thing turned out to be a financial.disaster. Get it behind us, take the losses and move on. Good thing the farmers are finally getting paid.

Is the NCPO conducting any sort of in depth stock take as over the years the figures have been all over the place so does anyone have even a decent guesstimate on what's actually in storage, what has gone ' missing ' etc. ?

It seems much of the paperwork was lost in the floods. So even how much was paid to whom will be very difficult to find out...

How was the paper work lost in the 2011 floods.....the scheme had not got under way before the floods happened....... are you just stirring the pot or trying to protect the former govt????

"White rice in Nonthaburi was quoted at Bt5,400-Bt5,600 a tonne, while production costs were at Bt6,000-Bt7,000 a tonne,"

So why would a sane person grow rice?

JR that seems logical but changing to another crop takes time and is expensive, and farmers have been conned into long term debts that they can't afford. Also the international prices of agricultural products are significantly affected by droughts, floods and changing demands. Its quite likely that the price of rice will go up again next year as El Nino hits much of Asia, Australia, India and Japan. So Ironically, Thailand maybe in a good position with a stockpile.

Things are looking to get worse for the small holders. There is a huge stock of unsold rice that will surely cause prices to drop even lower if released on the market. Unless subsidies are continued there will be little profit for any of the rice growers over the next few years, if not longer. What isn't mentioned in these stories is that the small farms of the Northeast, in particular, are hugely inefficient. According to the World Bank in 2005, the Northeast produced just one fifth of the country's agricultural GDP, despite having two fifths of the agricultural land. These, mainly small, plots were historically used to feed a family, with a bit of excess for barter, back in the pre -electricity, -mobile phone, -pickup truck days, which weren't so long ago. These days the plots remain the same size. There is some increase in production due to new seed strains, fertilisers, and some mechanisation, but there are also large increases in costs, and the need/desire for items that must be paid for in cash. At the same time, more efficient farms in Thailand's central plains, and other countries, are producing multiple crops per year, with larger yields, keeping prices low. It's an outdated system and really can't continue without huge subsidies. We can argue all we like about the correctness of subsidising farmers, in Thailand and elsewhere, but there is a big difference between directly paying someone a bonus based on how much land they have/rice they produce, and paying a middleman to buy rice at an inflated price and asking him to pass it on to the farmers. Even if the entire amount is actually passed on, there is still far too much room for corruption, falsifying documents, importing cheap rice, etc etc - even if the accounting is totally transparent, and the government is left with a huge stock of rice that it must try and sell. It would be far better for the farmers, and probably less costly to the country, if the government simply gave them all a cash payment every month based on the size of their family. It would certainly cut out the middleman corruption, and would solve the problem of how to subsidise those who rent rather than own their land. I'm in no way advocating this, simply pointing out how flawed the current system is.

Like it or not, the people need to choose between living an outdated lifestyle, with a 5 rai plot of land to feed the family, but nothing left over for modern goods, or changing what they do in order to live the modern life. By all means, offer incentives to wean them off small time rice farming, but continuing to subsidise them in such a wholesale fashion is simply delaying the time that decision must be made. Once again, it looks like the bitter medicine will come at a time when those who caused the disease are out of office. Probably leading to a return to where we were in the first place. A huge shakeup of the rural education system would be a good first step to breaking the cycle. And, for those who say it's not in the interests of the "Bangkok Elite" to do so, just look at who the rural poor have always voted for, and who really gains by an uneducated electorate? Both sides are at fault. The system needs changing. I don't believe the current coup will solve anything, but the previous governments were doing no better. At least this way the previously promised payments are being made. But what happens to this year's crop?

From the article:

"The Government Savings Bank (GSB) yesterday came out top in an auction for a three-year loan worth Bt50 billion, offering the lowest interest rate among 12 participants from both government and commercial banks ... The lending rate offered by GSB is below the government's three-year bond yield of 2.45 per cent per annum currently," said Chularat."

I think it's important to point out that these government-backed loans at lower-than-market interest rates are absolutely no different in principle (pardon the pun) from government-backed purchases of rice at higher-than-market prices. Both are a form of subsidies to support government financial and social policies. The only difference is they are subsidies directly benefitting different segments of the Thai populations. The loans are of benefit to the financiers and the purchases to the farmers.

I would think there is a pressing need for the government to sell the oldest rice stocks ASAP as the conditon will deteriorate and eventually will make the rice worthless if not sold. Hopefully a complete inventory is underway so they will know exactly what they have.

"White rice in Nonthaburi was quoted at Bt5,400-Bt5,600 a tonne, while production costs were at Bt6,000-Bt7,000 a tonne,"

So why would a sane person grow rice?

This is the evil of agricultural subsidies. Easy to start, but very painful to stop. If the stockpile is sold it will drive down prices still further. This policy has severely shafted local producers and the after effects will take years to unwind.

"This sort of 'spend-now pay-later' attitude is IMO fundamentally flawed"

True, same as USA, the UK and I would think most countries in the World, it's known as Government Debt.

From the article:

"The Government Savings Bank (GSB) yesterday came out top in an auction for a three-year loan worth Bt50 billion, offering the lowest interest rate among 12 participants from both government and commercial banks ... The lending rate offered by GSB is below the government's three-year bond yield of 2.45 per cent per annum currently," said Chularat."

I think it's important to point out that these government-backed loans at lower-than-market interest rates are absolutely no different in principle (pardon the pun) from government-backed purchases of rice at higher-than-market prices. Both are a form of subsidies to support government financial and social policies. The only difference is they are subsidies directly benefitting different segments of the Thai populations. The loans are of benefit to the financiers and the purchases to the farmers.

Bill besides you backing a rice scheme that now everyone with half a brain knows destroyed the farmers. Well done Shins, the farmers will have absolutely no money for a while and are off worse as before the rice scam.

You don't seem to realize that these are loans towards the government so a lower percentage is good. It is these loans that are used to pay your farmers for a program so royally screwed up by your side.

So maybe we should call you bill not so smart.

This has nothing to do with loaning to others.. its the government taking getting loans to pay of the farmers and to pay for the enormous losses from the rice project.

Could you please tell me your reasoning of your post ?

"White rice in Nonthaburi was quoted at Bt5,400-Bt5,600 a tonne, while production costs were at Bt6,000-Bt7,000 a tonne,"

So why would a sane person grow rice?

This is the evil of agricultural subsidies. Easy to start, but very painful to stop. If the stockpile is sold it will drive down prices still further. This policy has severely shafted local producers and the after effects will take years to unwind.

Everyone with half a brain could see it though there are still supposedly educated foreigners here defending the policy.

Now the only question is who should hurt for this.. the tax payer.. the farmers... or the Shins.

Personally id say it should be between the farmers and the Shins as the farmers kept supporting the Shins. The taxpayer (mostly office workers) who objected because they like most educated people knew what would happen should not pay for the mistakes of others.

On the other hand if you hurt the farmers too much they get militant, wish you could put the farmers and the Shins in a room and let them fight about who had to pay. It would solve one problem for sure.

From the article:

"The Government Savings Bank (GSB) yesterday came out top in an auction for a three-year loan worth Bt50 billion, offering the lowest interest rate among 12 participants from both government and commercial banks ... The lending rate offered by GSB is below the government's three-year bond yield of 2.45 per cent per annum currently," said Chularat."

I think it's important to point out that these government-backed loans at lower-than-market interest rates are absolutely no different in principle (pardon the pun) from government-backed purchases of rice at higher-than-market prices. Both are a form of subsidies to support government financial and social policies. The only difference is they are subsidies directly benefitting different segments of the Thai populations. The loans are of benefit to the financiers and the purchases to the farmers.

Bill are you really that out of touch to recognise the difference between a rice scam that was exactly that and defrauded all members of Thai society including the rice farmers? It bears absolutely no comparisons to the government-backed loans at lower-than-market interest rates which are compensating the farmers for their losses. The big winners here are Thaksin and his sycophants, the looser are the Thai people who will foot the bill, its not so smart.

It's a big over production!

Farmers that used to use crop rotation (up to 3 crops a year) stopped and have instead ONLY planted planted rice as the former government offered 15 000 per ton!

And for the past year the conditions have been good for growing rice in all major areas with rice production!

From the article:

"The Government Savings Bank (GSB) yesterday came out top in an auction for a three-year loan worth Bt50 billion, offering the lowest interest rate among 12 participants from both government and commercial banks ... The lending rate offered by GSB is below the government's three-year bond yield of 2.45 per cent per annum currently," said Chularat."

I think it's important to point out that these government-backed loans at lower-than-market interest rates are absolutely no different in principle (pardon the pun) from government-backed purchases of rice at higher-than-market prices. Both are a form of subsidies to support government financial and social policies. The only difference is they are subsidies directly benefitting different segments of the Thai populations. The loans are of benefit to the financiers and the purchases to the farmers.

I think it's important to point out that had there not been government-backed purchases of rice at higher-than-market prices there would be no need for government-backed loans at lower-than-market interest rates .

From the article:

"The Government Savings Bank (GSB) yesterday came out top in an auction for a three-year loan worth Bt50 billion, offering the lowest interest rate among 12 participants from both government and commercial banks ... The lending rate offered by GSB is below the government's three-year bond yield of 2.45 per cent per annum currently," said Chularat."

I think it's important to point out that these government-backed loans at lower-than-market interest rates are absolutely no different in principle (pardon the pun) from government-backed purchases of rice at higher-than-market prices. Both are a form of subsidies to support government financial and social policies. The only difference is they are subsidies directly benefitting different segments of the Thai populations. The loans are of benefit to the financiers and the purchases to the farmers.

I think it's important to point out that had there not been government-backed purchases of rice at higher-than-market prices there would be no need for government-backed loans at lower-than-market interest rates .

The fact that the bank that gives out these loans to the GOVERNMENT has quoted a lower as market interest rate does not mean a bad thing, if they can still make a profit then there is absolutely no problem. They might have had excess liquidity that they now loan out and make money on instead of letting it sit around. Only if this GSB would make a loss because of this it would be a subsidy this is not necessarily the case and without a real look at their liquidity and what they could loan out impossible to tell.

In general a loan to a government is a real secure loan.. if you have money lying around that you are not able to loan out or if your loan spread needs some more high secure loans then this is a good choice.

This of course goes way over the head of most red supporters as its economics.. and if they had known economics they would never have supported the rice scheme in the form it had.

Something else that comes out of this item is that they say 3.1 million tons of rice is equivalent to 55.89 billion baht.

It has been said in other topics that the NACC suspects around 3 million tons of rice is missing from the inventory.

If this turns out to be correct it will mean that in fact about 55 billion baht is missing.

Just what that "Missing" actually means is another thing.

It could mean that the tons have actually disappeared from the stocks (as in stolen), that they have been paid for but never existed in the first place, that it is rice that was paid for then taken out to be brought back and paid for again or several other underhand scenarios or a combination of all.

Whatever, if it does turn out that "Missing" is correct it is a huge chunk of money that could have gone a long way to double tracking the railway, among other needed projects.

I mentioned this in another thread yesterday, someone is going to have to make a brutal decision soon, as the rice stocks are not dwindling they're increasing, and nobody has killed the scheme, the farmers ARE going to have to halt their production, and if the scheme is dead, they have to go back to using the Millers, who know they can drop their buying price, simply because the supply outweighs the demand, it's economic suicide to continue subsidising the farmers, whilst unable to shift the current stock.

I mentioned this in another thread yesterday, someone is going to have to make a brutal decision soon, as the rice stocks are not dwindling they're increasing, and nobody has killed the scheme, the farmers ARE going to have to halt their production, and if the scheme is dead, they have to go back to using the Millers, who know they can drop their buying price, simply because the supply outweighs the demand, it's economic suicide to continue subsidising the farmers, whilst unable to shift the current stock.

Yes.. and of course the blame will fall on the military or anti government protesters while PTP is the reason of this mess.

If they just had given the farmers direct monetary aid and not bought up the rice and try to corner the market it would not have had these effects. It would have been cheaper, more transparent and the market would not have been soiled like this.

Everyone told them this would happen but they did not listen, now who has to suffer, tax payer, Shins or farmer. I would say never the taxpayer. Because they were against it from the start (anti government / democrats).

It would be cruel to let the farmer take the blows, but i doubt the government can get the money back from the Shins.

I bet other rice producing countries must hate Thailand right now too. Wonder what the WTO is thinking.

The whole rice thing turned out to be a financial.disaster. Get it behind us, take the losses and move on. Good thing the farmers are finally getting paid.

Is the NCPO conducting any sort of in depth stock take as over the years the figures have been all over the place so does anyone have even a decent guesstimate on what's actually in storage, what has gone ' missing ' etc. ?

Ask rubl. He has the facts at his fingertips, apparently.

From the article:

"The Government Savings Bank (GSB) yesterday came out top in an auction for a three-year loan worth Bt50 billion, offering the lowest interest rate among 12 participants from both government and commercial banks ... The lending rate offered by GSB is below the government's three-year bond yield of 2.45 per cent per annum currently," said Chularat."

I think it's important to point out that these government-backed loans at lower-than-market interest rates are absolutely no different in principle (pardon the pun) from government-backed purchases of rice at higher-than-market prices. Both are a form of subsidies to support government financial and social policies. The only difference is they are subsidies directly benefitting different segments of the Thai populations. The loans are of benefit to the financiers and the purchases to the farmers.

Bill besides you backing a rice scheme that now everyone with half a brain knows destroyed the farmers. Well done Shins, the farmers will have absolutely no money for a while and are off worse as before the rice scam.

You don't seem to realize that these are loans towards the government so a lower percentage is good. It is these loans that are used to pay your farmers for a program so royally screwed up by your side.

So maybe we should call you bill not so smart.

This has nothing to do with loaning to others.. its the government taking getting loans to pay of the farmers and to pay for the enormous losses from the rice project.

Could you please tell me your reasoning of your post ?

robblok, I don't disagree that the results of the Rice Scheme has hurt the farmers, but I don't believe that should be blamed on the program. The blame should be placed on the way the program was administered and the political impasse that led to the dissolution of the government and the loss of control over the ability to pay the farmers in timely manner and not the program itself. Governments subsidize interest groups, industries and all manner of enterprises all the time; and farming subsidies are prevalent in most Western countries. It's a good way to redistribute wealth from the urban to the rural areas. I hope whatever government is in charge in Thailand will continue to provide some kind of subsidies to farmers and other rural citizens.

These loans at whatever interest rates create national debt. This debt is covered by future tax revenues or bonds. If the government is loaning money at interest rates below the bond rate it is creating deficit and eventual national debt. The short term beneficiaries of these loans will be the farmers, but the long term beneficiaries will be the financiers who will buy the debt with future bond issuances. It's moving money from one pocket to the another which in an of itself is not a bad thing. The question is in who's pocket will the money eventually end up - and I say the financiers; and how much money will disappear during the moving around - corruption.