Rice farmers seek 40% profit margin

[Lite Beer]

Rice farmers seek 40% profit margin
Petchanet Pratruangkrai
The Sunday Nation

BANGKOK: -- Rice farmers yesterday proposed that the National Council for Peace and Order set a price for rice based on the average production cost plus a 40 per cent profit margin so they can survive.

The proposal could be another option if the NCPO abolishes the former government’s loss-making rice-pledging scheme.

General Chatchai Sarikalya, deputy economic chief of the NCPO, yesterday chaired a discussion forum with the permanent secretary of the Commerce Ministry to listen to comments from the public sector and related stakeholders on how to assist rice growers.

Chatchai said eight rice farmer associations participated in the discussion and their proposals had been categorised into three key areas: reduce production costs, particularly the cost of fertilisers and insecticides; develop irrigation systems so farmers have thorough access to water sources; and improve rice quality.

"We will bring all ideas and comments gathered from the rice farmer associations, academics and related agencies to the head of NCPO next week [this week] to be further reviewed," he said.

Vichian Phuanglamjiek, president of the Thai Rice Growers Association, said that the staging of the forum showed that all parties wanted to help farmers.

However, Vichian said rice growers still need the rice-pledging scheme as farmers throughout the Kingdom would benefit from it.

Currently, the rice price is only between Bt4,000 and Bt6,000 per tonne, meaning farmers sold rice at a loss given the average production cost was between Bt7,000 and Bt7,700 per tonne.

He said that if the NCPO or a new government wanted to abolish the rice-pledging scheme, measures should be implemented to allow farmers to stay in business. The price could be based on the average production cost plus 40 per cent profit.

This would be the equivalent of an average rice price of between Bt10,000 and Bt12,000 per tonne, allowing all farmers to survive.

Ravee Rungruang, chairman of the Western Rice Community, said that he had proposed the government sector give financial assistance to farmers - about Bt2,500 per rai - to boost production.

Ravee said a mechanism to control the amount of rice going into the market should be set up. A long-term farmer development plan should also be set up for the next five or eight years.

Vichian also proposed that the NCPO control the cost of land rental fees as a key measure to control the cost of rice production.

He said the NCPO or a new government should implement measures to control the fee at about Bt1,000 per rai per during the rice harvest season, as the fee had increased markedly over the past two years.

"The land rental fee is currently between Bt1,000 and Bt2,000 per rai compared to between Bt500 and Bt1,000 per rai a year ago," he said.

Vichian said farmers had suffered from higher production costs during the past two years of the pledging scheme, with the cost Bt15, 000 per tonne of paddy rice. But despite pledging project ending, rental fees had not decreased.

For instance, a farmer would pay about Bt40,000 per round of rice plantation if they rented 20 rai.

Chookiat Ophaswongse, honorary president to the Thai Rice Exporters Association, agreed measures had to be introduced to reduce production costs.

He said costs here were high compared to some rival markets because of the high cost of agricultural equipment. The government needed to find sustainable measures to ensure low production costs and increased value to help farmers in the long run.

-- The Nation 2014-06-08

[retell]

One thing i dont understand is why small farmers do not work together to buy the expensive machinery , a group can borrow the money more easily and they all can use the machines ,

They did like that in holland like 100 years ago and it worked great

Also with the high price as they propose better have 24/7 look out on the border for rice smugglers

[UbonRatch]

Well now. That is a ridiculous margin. The days of 40% profit margin are 40 years old. (then again, where are we here?)

Any major corp is doing well to make anywhere close to 20% nowadays, and major corps control their suppliers to a 15% margin max.

Not asking for a lot, are they?

[BSJ]

The wife and I did a walk around of her paddy yesterday. Everything looks normal....well except for the dam. Water level is down and it looks like it needs a clean out.

I think it would be more profitable to grow another crop...but with the infastructure the way it is it's hard to change.

[Tokay]

Too bad the farmers who killed themselves didn't hold out just a little bit longer. Tragic.

[ezzra]

" However, Vichian said rice growers still need the rice-pledging scheme as farmers throughout the Kingdom would benefit from it."

Oh well, if the farmers want more pledging, sure why not? give them few hundreds of billions more

just for the rice to rote at the silos or be sold at the loss, where else in the world

a farmer grows something knowing full well that he doesn't have to worry how to sell it?

only hear they are able to buy crops from another country and sell it as their own..

self reliance is virtue you have to earn, but by the look of it Thai farmers are still like to suckle

on the government's tits for ever.....

[LuckyLew]

How about they sell it for fair market value

If the profit is no enough for them to sustain their business then they can either get into a new line of work or tell their kids in Bangkok to send more money back home

[ChrisY1]

One thing i dont understand is why small farmers do not work together to buy the expensive machinery , a group can borrow the money more easily and they all can use the machines ,

They did like that in holland like 100 years ago and it worked great

Also with the high price as they propose better have 24/7 look out on the border for rice smugglers

I agree...but unfortunately, these people cannot work together like that....no-one is trustworthy ....the kids even sell off their parents farms.....I don't see how they could work with communal machinery.

Cooperatives are common in many countries.....possibly with education and efficient training programs, it could eventually be viable.

Farmers need to diversify....

[selftaopath]

Well now. That is a ridiculous margin. The days of 40% profit margin are 40 years old. (then again, where are we here?)

Any major corp is doing well to make anywhere close to 20% nowadays, and major corps control their suppliers to a 15% margin max.

Not asking for a lot, are they?

Thanks; agree. Where is "free market" in Thailand? Some many business hide behind monopolies. Can't the ever learn to be competitive/modernize/ use their intellect/wit to figure it out. Seems like many want "a guarantee" for everything. There are no guarantees in life --- well non that I've found - yet.

[BSJ]

One thing i dont understand is why small farmers do not work together to buy the expensive machinery , a group can borrow the money more easily and they all can use the machines ,

They did like that in holland like 100 years ago and it worked great

Also with the high price as they propose better have 24/7 look out on the border for rice smugglers

I agree...but unfortunately, these people cannot work together like that....no-one is trustworthy ....the kids even sell off their parents farms.....I don't see how they could work with communal machinery.

Cooperatives are common in many countries.....possibly with education and efficient training programs, it could eventually be viable.

Farmers need to diversify....

Yes diversity is the key. But sometimes there are obstacles to be overcome. Part of the problem is ones land can be surrounded by the land of other family members who are less inclined to change. Your land could be a key part of the water distribution on the family plot and you growing a different crop may need lots of changes to water management. To me it seems simple enough but to them it isn't a good idea!

Looking at organically grown crops it seems like a good idea to reduce the amount of pesticide and herbicide being used, to only use natural fertilizer. Isn't that what farming once was? With our 21st century knowledge, why aren't more people doing it?

Diversity sounds like a good idea.

[selftaopath]

" However, Vichian said rice growers still need the rice-pledging scheme as farmers throughout the Kingdom would benefit from it."

Oh well, if the farmers want more pledging, sure why not? give them few hundreds of billions more

just for the rice to rote at the silos or be sold at the loss, where else in the world

a farmer grows something knowing full well that he doesn't have to worry how to sell it?

only hear they are able to buy crops from another country and sell it as their own..

self reliance is virtue you have to earn, but by the look of it Thai farmers are still like to suckle

on the government's tits for ever.....

We live in rural Isaan. There are many rice farmers. I don't see many/any bustin their asses working all day... day in day out. It looks like "part time " work. Maybe I'm not looking in the "right" direction or maybe this is unique to this village. Not sure... just what I observe. I do see a lot of hammock use daily by (seemingly) able bodied men use however.

[haroldc]

Thailand's rice productivity (metric tons per hectare) is very low, about 2/3 of Vietnam, and less than 1/2 of the highest-yield countries. The way to help rice farmers increase their income is to teach them how to increase yield, not to pay them to continue being inefficient and uncompetitive producers.

[Johpa]

Well now. That is a ridiculous margin. The days of 40% profit margin are 40 years old. (then again, where are we here?)

Any major corp is doing well to make anywhere close to 20% nowadays, and major corps control their suppliers to a 15% margin max.

Don't know much about margins of agricultural products, not even sure we are talking gross (GPM) or net margins or something inbetween, but elsewhere in the business world 15-20% GPM is standard for high volume sellers (Costco, Amazon) and 40% margins are standard for small volume sellers. I would imagine that traditional small rice producers would be happy to get 40% GPM and would collapse into poverty at 15%.

[lomatopo]

Maybe best to pay some farmers Not to grow via a direct subsidy, for a season? Maybe on some sort of rotation basis? Meant to match supply to demand. Saves the expense (seed, water, fertilizer, labor), more efficient use of resources (water), less fertilizer run-off, re-invigorate the soil.

[Tatsujin]

Look, this whole rice scheme was a scam from day 1. Increase the monies paid to the farmers and the costs for EVERYTHING else went up also. They should be looking into who owns the land, who owns the machinery, who owns the milling companies, who owns the storage companies, who owns the transport companies . . . all of it . . . that's where the money is being "lost" . . . and it's also where the money can be saved in the future to lower costs of "production" . . . .

[timewilltell]

The a Elephant in the room that everyone is ignoring is the corruption and the idiocy of the pledging scheme. At the very outset many of us forsaw the paddy rental prices going up, fertilizers and seed prices rising and the fact that the middlemen, millers and warehouse owners taking all the benefit along with the huge rice farmers. The small farmer was doomed from the outset. Also the fact that people will fall over themselves to grab more profit yet need to be forced to take a loss. It is the nature of greed.

The proposals seem to ignore these issues as well as the supply and demand of the market. That said the farmers do need help and stability which cannot be achieved long term with schemes that are short sighted, ignore the huge pressure from corruption and ignore the world market prices.

In order to produce stability you need to have a controlled supply and some control on costs of production. Government controls on these factors have never worked very well even in the more accomplished industrial economies. So really market forces need to be able to act.

The best way to help the farmers would be to control production costs better by providing a low cost supply of land for paddy at a controlled price to drive private rental prices back down to where they were before the stupid pleading scheme was introduced. Fertiliser and other material costs should decrease as less rice will be grown if the inflated pledging price disappears, set up a team to control middlemen profits and keep check on millers pricing to cut down corruption.

Additionally set aside a healthy sum from the budget to provide much much better education in the rural schools, looking outwards with language and business courses to supplement the mainstream subjects and give the younger generation the basis for greater opportunity of career choice. Provide free workshops and government funded learning centers to educate on alternative crops that can be grown with some sort of incentive programs to enable farmers to switch to an alternative if meeting certain criteria.

This is the direction they should be traveling rather than the continued ideas of subsidy and controlling market price which is beyond them

Sent from my iPad using ThaiVisa app

[chainarong]

To get that profit margin fella's you are better robbing a bank and splitting the proceeds, if you like to price yourselves right out of the world markets go ahead ,what you propose is exactly what the PTP promised you and look what happened , you need to stop looking at the dollars and start looking at what you can do , how you can do it and most important the cost to do it , in 2014 if your rice harvest is to small for a 10 to 12% profit , sorry ,you are in the wrong business.

[englishoak]

I do not understand why they cannot just take a successful model from another country and implement it here, its not like they arnt used to copying things.. yields here are ridiculously low compared to many other rice growing nations.

[comeondoit]

well timewilltell i think you put the finger on the right spot, but unfortunately thais do not accept teaching from foreigners

[WhizBang]

One thing i dont understand is why small farmers do not work together to buy the expensive machinery , a group can borrow the money more easily and they all can use the machines ,

They did like that in holland like 100 years ago and it worked great

Also with the high price as they propose better have 24/7 look out on the border for rice smugglers

I agree...but unfortunately, these people cannot work together like that....no-one is trustworthy ....the kids even sell off their parents farms.....I don't see how they could work with communal machinery.

Cooperatives are common in many countries.....possibly with education and efficient training programs, it could eventually be viable.

Farmers need to diversify....

Absolutely agree. Thais simply do not trust each other. It runs even deeper than that, in that family members will turn on one another over money or a few rai of land.

Absolutely pathetic.

[chotthee]

One thing i dont understand is why small farmers do not work together to buy the expensive machinery , a group can borrow the money more easily and they all can use the machines ,

They did like that in holland like 100 years ago and it worked great

Also with the high price as they propose better have 24/7 look out on the border for rice smugglers

I agree...but unfortunately, these people cannot work together like that....no-one is trustworthy ....the kids even sell off their parents farms.....I don't see how they could work with communal machinery.

Cooperatives are common in many countries.....possibly with education and efficient training programs, it could eventually be viable.

Farmers need to diversify....

Yes diversity is the key. But sometimes there are obstacles to be overcome. Part of the problem is ones land can be surrounded by the land of other family members who are less inclined to change. Your land could be a key part of the water distribution on the family plot and you growing a different crop may need lots of changes to water management. To me it seems simple enough but to them it isn't a good idea!

Looking at organically grown crops it seems like a good idea to reduce the amount of pesticide and herbicide being used, to only use natural fertilizer. Isn't that what farming once was? With our 21st century knowledge, why aren't more people doing it?

Diversity sounds like a good idea.

Thais are smart enough to NOT collectively gatherstheir saving and give it to Farangs (with innocent name like John Deer, etc.). Farang want Thais money, Farangs will have to rob or colonize Thailand, which Farangs have never once succeeded, after many many tries by Portuguese, French, English, Dutch, Japanese, Chinese, Singaporean, and American, etc.

[WhizBang]

We live in rural Isaan. There are many rice farmers. I don't see many/any bustin their asses working all day... day in day out. It looks like "part time " work. Maybe I'm not looking in the "right" direction or maybe this is unique to this village. Not sure... just what I observe. I do see a lot of hammock use daily by (seemingly) able bodied men use however.

The hard work only happens a few times a year, during planting and harvesting. And that usually lasts less than a week. The rest of the time is spent sleeping and drinking.

[Stradavarius37]

<script type='text/javascript'>window.mod_pagespeed_start = Number(new Date());</script>

Thailand's rice productivity (metric tons per hectare) is very low, about 2/3 of Vietnam, and less than 1/2 of the highest-yield countries. The way to help rice farmers increase their income is to teach them how to increase yield, not to pay them to continue being inefficient and uncompetitive producers.

I agree with this completely. I also support subsidies, as a means of increasing income for this staple crop. But the pledging scheme was just stupid and needs to be flushed.

[AnotherOneAmerican]

One thing i dont understand is why small farmers do not work together to buy the expensive machinery , a group can borrow the money more easily and they all can use the machines ,

They did like that in holland like 100 years ago and it worked great

Also with the high price as they propose better have 24/7 look out on the border for rice smugglers

You don't need any machinery to grow rice. Here is planting, about 2 hours work to plant the field.

No need to borrow money for equipment you can't maintain.

Edited June 8, 2014 by AnotherOneAmerican

[englishoak]

One thing i dont understand is why small farmers do not work together to buy the expensive machinery , a group can borrow the money more easily and they all can use the machines ,

They did like that in holland like 100 years ago and it worked great

Also with the high price as they propose better have 24/7 look out on the border for rice smugglers

I agree...but unfortunately, these people cannot work together like that....no-one is trustworthy ....the kids even sell off their parents farms.....I don't see how they could work with communal machinery.

Cooperatives are common in many countries.....possibly with education and efficient training programs, it could eventually be viable.

Farmers need to diversify....

Yes diversity is the key. But sometimes there are obstacles to be overcome. Part of the problem is ones land can be surrounded by the land of other family members who are less inclined to change. Your land could be a key part of the water distribution on the family plot and you growing a different crop may need lots of changes to water management. To me it seems simple enough but to them it isn't a good idea!

Looking at organically grown crops it seems like a good idea to reduce the amount of pesticide and herbicide being used, to only use natural fertilizer. Isn't that what farming once was? With our 21st century knowledge, why aren't more people doing it?

Diversity sounds like a good idea.

Thais are smart enough to NOT collectively gatherstheir saving and give it to Farangs (with innocent name like John Deer, etc.). Farang want Thais money, Farangs will have to rob or colonize Thailand, which Farangs have never once succeeded, after many many tries by Portuguese, French, English, Dutch, Japanese, Chinese, Singaporean, and American, etc.

Many tries like when ? If they had really wanted to they would have already, its not like the Thais have ever won any conflict or even try, ask the Japanese yeesh

Thailand has managed to keep its independence by negotiation and concessions with many conflicting nations at the same time, by playing them off against each other thats all. The world has moved on since the 1800s

Paranoid much

[rreddin]

One thing i dont understand is why small farmers do not work together to buy the expensive machinery , a group can borrow the money more easily and they all can use the machines ,

They did like that in holland like 100 years ago and it worked great

Also with the high price as they propose better have 24/7 look out on the border for rice smugglers

I lived in a rice farming village for four years. During that time quite a bit of land was taken out of growing rice and put into sugar cane production and growing tapioca on the driest land. This change mainly came about as the farmers became too old to manage their farms and handed the husbandry to their children. These people wanted a high value crop that was less labour intensive. In the main,these people have full-time jobs and hire labour as and when needed.

It is three years since I left the village. I went back yesterday. Even more land had been taken out of rice production. It seems now that only the land with the most reliable water supply is under rice cultivation. I have walked those paddies many times in previous dry seasons at and after harvest time. The striking feature is how small many of them are. Too small to make mechanised planting and harvesting efficient. This is a consequence of land division between children on their parent's death.

If rice growing is going to be a profitable business, farming methods are going to have to change. Mechanisation requires less labour but bigger paddies than at present. That requires a reorganisation of farms and farm labour, possibly into co-operatives but there are other models. That will hasten the social change that is already taking place in rural areas, which will have important consequences for the country and that is something no government, at least during my time here, has grasped. It looks like they still don't get it.

[Pralaad]

Here is a thought . Instead of coming up with idea's on how to rot the government, how about they come up with idea' show to grow and to whom to sell the rice.

And if unable to use a brain where and how to sell either rent the land or get a job just like millions of other people out there.

This "waiting for hand outs" culture really need to stop.

[lomatopo]

Thais are smart enough to NOT collectively gatherstheir saving and give it to Farangs (with innocent name like John Deer, etc.).

Correct. They give it to Thais who own the local distribution rights for Deere, Ford, Kubota, Yanmar, etc.

Even though Farangs do their best to maintain buffalo health here, most (buffalo) are being replaced with tractors (Farangs can be replaced with ATMs).

And you can look forward to "tractor racing" in the future instead of buffalo racing.

Edited June 8, 2014 by lomatopo

[scorecard]

<script type='text/javascript'>window.mod_pagespeed_start = Number(new Date());</script>

Thailand's rice productivity (metric tons per hectare) is very low, about 2/3 of Vietnam, and less than 1/2 of the highest-yield countries. The way to help rice farmers increase their income is to teach them how to increase yield, not to pay them to continue being inefficient and uncompetitive producers.

Agree, I add two more points:

- Somehow / sometime some of the rice farmers will need to realize / decide that continuing as very small scale farmers with no machinery is no longer viable. But when this happens society, thinking long-term, has a responsibility to ensure these folks, in fact all citizens have options through better levels of education and much better awareness of the bigger picture of Thailand and the world to help them make future plans.

- All governments, all parties, all countries have some level of responsibility to ensure that the country is producing enough quality food to feed the population and at an acceptable cost.

[lomatopo]

The way to help rice farmers increase their income is to teach them how to increase yield

Meh, They have enough rice for domestic consumption, and there is a bit of a glut on the world commodity markets keeping prices in a range, and downward trend currently. I doubt the answer is to produce more unless you think you can make up a loss on volume?

There have been Royal projects focusing on rice agriculture since 1961. Presumably that's been enough time to jump start and educate?