Rice farmers seek 40% profit margin

[citizen33]

Reading this thread I couldn't help wondering whether the 40% profit margin mooted was what it seemed. My impression is that what is being discussed is a 40% return over production costs excluding the farmers' own labour. When some posters talk of the usual profit margins of private companies, this refers to profit after wage costs have been met. So are we comparing like with like? I guess I should know more, but in my village most neighbours just grow for the family. For people with a limited number of rai there does not seem to be much money in growing for the market. Many are only part-time farmers anyway, having other jobs for most of the year, and often buying in the labour/machine hire at planting and harvest time. In my own family some members who now live in Bangkok/Chonburi pay a bit towards costs to get their share.

[reiltin]

Extraordinary profit margins run through the body of sales and service commerce here,served by a Venal feudalistic system more prevalent in the 16th century.Sadly... some if not all of the rest of the world believe in pricing to what the(unceasingly competitive) market will bear.The global market dictates the price.Welcome to the 21st century Thailand ,you are ill equipped to deal with it.Adapt or die.

[tim armstrong]

Timewilltell - a very good summary of the issues, I agree totally with you. But as I'm sure you know, getting conservative farmers to change their attitudes is a universal problem. For a century Australian wool growers had a virtual monopoly on the best wool in the world, my family amongst them. Several prolonged droughts, competition from other fibres, and rising costs put them under pressure. Would they cooperate with each other - never, but they also thought someone else should oversee the marketing of their product. Were they ripped off ? - yes, many times. But of course they still expected a minimum price even when demand was low, because they were the backbone of the nation. The wool industry still survives but after a huge transformation

Unfortunately its hard to change some farmers views that everything depends on them - especially about food. I see so many similarities between farming in Thailand and whats been happening elsewhere in the world for the past 50 years. Sadly Thai farmers have just got to extract their heads from the paddies, wise up, and become more efficient, diverse and assertive... and travel to other farming countries. Now maybe that would be a worthwhile investment in their future.

[Chris Lawrence]

Any changes to the rice pledging scheme has the potential of being loss making? Its a social program to distribute wealth to the poorer people.

What about the rice stock piles? So the Junta will use this to trade against the local farmers? for next years crops? They can oversupply the market forcing the local price down and letting them buy at a cheaper rate.

"The markets also say that this coup may not succeed. Two auctions of government bonds failed in the last few days, reflecting a lack of faith in the new government. Usually bargain hunters jump into the stock market after coups because of “Teflon Thailand’s” ability to bounce back from turmoil. This time analysts are warning investors to stay on the sidelines and expect more trouble. Manufacturers are worried their supply chains may be cut off.

Now is the time for Thailand’s foreign friends to step up with a clear warning to the junta. U.S. Secretary of State John Kerry said there is no justification for the coup, and Washington has cut off military aid and cancelled joint exercises. If troops kill civilians in the streets as they did in 2010, the Obama administration will have little choice but to suspend wide-ranging ties with its ally.

Thailand’s elites are desperate enough to hold power that they may not care about the economic and diplomatic damage. Gen. Prayuth appeared in gold braid at a press conference on Monday and threatened to “use force and enforce the law strictly” against protesters. He stalked off stage when a reporter pressed him on an election timeline. Soldiers set up loudspeakers at one protest site to taunt Mr. Thaksin’s supporters as paid lackeys and stooges of foreigners." Pattaya daily news

Most TV members are FOREIGNERS! This is what the junta thinks of us. A pawn in their scheme to strangle control.

"The bitterness on both sides is a contrast to the last coup, which was largely accepted as an opportunity to push the reset button on a political impasse. But the military proved unable to run a modern government. After the constitution was rewritten in 2007, the Thaksin side realized that the royalists were determined to suppress the will of voters. They are rightly reluctant to let the army and the palace get away with a repeat.

The only way to put a stop to such coups is for the democracy supporters to triumph decisively, restore the democratic 1997 constitution and hold the junta members accountable. Past putschists have granted themselves amnesty; if Gen. Prayuth and his gang won’t leave peacefully, they deserve to go on trial for tearing up the constitution. Thais are shocked that their generals are stuck in the 1950s. It’s time to drag them into the modern world." Pattaya daily news

This rice sheme is a smoke screen to what is really happening. I am not saying that it didn't happen, but really a kangroo court? Thailand has lost money and deserves to know about any graft or corruption. But, what about the floods that brought the country to its knees and lost money, affected GDP and forigen investment? Doesn't the country also desreve a diligent examination of why works that were recommended didn't happen. These works were proposed in a water mitigation report from Thailands leading expert in 2007.

Now you are having the junta sitting on committees with vested interests in local companies. These practices is what some of this fight is all about.

The more this goes on the more holes develop in the feet of the junta.

Trying to be fair to all people is a great quality. I don't think this junta understands this quality, and are locked in the 1950's.

It would be great to work out a fair system of rice pledging, but the Junta has the Aces to keep screwing the farmers?

[robblok]

If the farmers want a 40% profit margin, then the onus is on them to produce a product that yields that. The onus is not on the tax payer to make up the short fall

I'm sure all businesses from the local somtam stall, to the biggest hotel chains would like a yearly profit margin of 40%, doesn't mean they get it. Perhaps they (businesses) should all lobby government to ensure they get their 40% profit, each and every year?

I think Thailand needs to face reality - rice farming in its current form is not sustainable, its inefficient and uncompetative, This obsession with rice farming is a romantic notion used to reinforce the idea of 'being Thai'

Agriculture is not just any industry. It is the most important and only essential industry. For that reason alone agriculture should always be subsidized when it becomes unprofitable to the point that the industry is shrinking. We can do without new cars and fancy clothes and Smart phones and credit cards. We can not do without food.

Also, subsidies are not just provided for economic reasons. They are also provided for social and cultural reasons. You might think of small rice farmers as just "a romantic notion" but others, Thais in particular, might see support for them as a effort to preserve Thai traditions and culture. Western countries subsidize arts for the same reason.

There's also an economic argument that can be made for encouraging the distribution of agriculture among many small producers rather than have it become concentrated into a relatively few, large enterprises.

I do think some consideration should be given to limit the subsidies or price guarantees suggested in the subject article to small farmers. Just how and where the line between small and large enterprises should be drawn would be a challenge. But IMO it is the small farmer that needs these to survive; and it is the small farmer that Thailand needs to preserve its agricultural heritage.

Bill.. but the moment agriculture stops.. prices rise and it gets profitable again.. just like in any business. But I do agree its an important business.. but so is healthcare and even there we curb prices.

I also do think that small farmers should be helped (at least at first I don't like permanent help... they need to be helped in a way that they either stop farming.. or get better and more profitable with it) in the end they should be able to do it without help. That should be the goal. Larger farmers.. no need for help they are rich enough and can fail just like any other company.

I just feel real strongly against the financing of farmers by the upcoming middle class. I wonder how many farmers even pay income tax. The really rich could contribute but they are not a large group and if property tax or wealth tax is done it should only be for people with 10 million plus of wealth and not below. Can't burden the middle class any more already. Because of the lack of wealth taxes they are already the ones paying for most of it while having the least to say.

For me it is real wrong that the ones paying the most into the system are the ones with the least to say while those that don't pay get the biggest say.

[Bluespunk]

"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."

No, no, no, no, no

[AnotherOneAmerican]

Set up free rice mills across the country.

Allow the farmers free access.

Let the farmers sell their product direct to the public in markets and at roadsides.

That would give them 10,000-14,000bht/tonne.

[Basil B]

Unfortunately you can only get for it what someone will pay for it.

If you want a good ROI then Diversify, find a cash crop that pays a good return with little market competition.

[AnotherOneAmerican]

Unfortunately you can only get for it what someone will pay for it.

If you want a good ROI then Diversify, find a cash crop that pays a good return with little market competition.

Good cash crop?

Rice sells in the markets for 30+bht/kilo, that's a good cash crop.

But if you don't sell to the local mill, at the price they offer, your farm burns down in the night.

Same game with tobacco, they make you an offer you can't refuse.

Not sure about how other crops work only tried, tobacco and rice.

[Stradavarius37]

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.

2014-02-14 15.42.45.jpg

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

Lmao - you don't need machinery to do many things. The reason to use machinery is to do things faster, more efficiently, and with greater result.

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[Johpa]

No use in talking about "margins" as most people have no idea what you are really talking about. Even here we have no idea if we are talking net or gross margins. In addition, different markets can have very different margins, retail vs wholesale for example. Then there is the complicating factor that in Thailand many of the rice farmers rent padi and give 50% of the harvest to the landlord as rent payment in kind. Others borrow seed and fertilizer on a similar basis. And where I have a home up in the rural north, most people keep a good percentage of the harvest for themselves and their family and only sell the surplus harvest beyond their expected annual needs for cash. But my guess is that we are not even talking about the actual farmers but about the lowest level consolidators running the local small milling operations.

[diehard60]

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 guess you do not know Thais. They could never do this as one would end up steeling it or all of it.

[diehard60]

"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."

This is nice, but it is no where near enough to cover the cost of 15 Rai of land. It costs my family about 50,000 per year. People to plant, harvest, fertilizers, water, and maybe even more. I know I have been here for over 23 years now and it never has made a profit. Some years they break even and most they loose. But we do have our own rice to eat.

[Strangebrew]

Look maybe fish farming might be better option for rice farmers

[retell]

Look maybe fish farming might be better option for rice farmers

Nah they tried that in our village , too much trouble to fix em in the ground heads up , after a few hour most died anyway

[watso63]

" 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.....

Ever heard of the European Common Agriculture Policy?

[Balance]

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 may be wrong, but my understanding is that the two times farmers tried to start true cooperatives, the leaders were found dead.

[watso63]

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.

Read this. Gives a good insight about fertilizer.

http://www.bbc.com/news/27731291

[watso63]

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.

When they're not eating, drinking and sleeping they might also be cutting eucalyptus to sell, fishing for food, making clothes on their sewing machines, gathering vegetation from the countryside to eat, building, raising livestock, hunting rats, frogs, birds and insects or disappearing for a few weeks to go working somewhere else.

Beats the humdrum 9 to 5 and being a slave to consumerism in my book.(but the latest generation of Thais are already hooked and don't want to farm, so we will soon see what happens).

[Balance]

"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."

This is nice, but it is no where near enough to cover the cost of 15 Rai of land. It costs my family about 50,000 per year. People to plant, harvest, fertilizers, water, and maybe even more. I know I have been here for over 23 years now and it never has made a profit. Some years they break even and most they loose. But we do have our own rice to eat.

There is way too much confusion and lack of details in all of these rise discussions.

My wife has 30 rai as part of her family's larger holding. Last year we invested Tb70,000 to prepare, plant, harvest and transport the 16 ton harvest of Jasmine rice. So, the investment was Tb 2,333 per rai, or given a yield of 16 tons, you get a total production cost of Tb4,666 per ton. This is a higher cost that most farmer should have to pay because we do do not live there and so have to hire workers.

Access to water is a major issue. My wife's sister grows melons also, but only two rai because the the lack of water and the very high labor requirement. The idea proposed by the Junta of of implementing small scale water retention ponds would be a good start. Education is needed for the proper use of chemical inputs and long term to change to organic production techniques.

Diversification of crops is also critically important for several reasons. His Majesty the King's Royal Agricultural Research facilities have done much good research on growing not just rice, but many cash crops in different parts of Thailand. I wonder though how much of the good information makes it way to the farmer. Where my wife's land is, there is not enough water retention to grow two crops per year. I had read an article about growing Pineapple and the fact that it is less labor intensive and also requires much less water. The wife responded, "Paw, you have to understand, people grow rice for very long time and they not know about other things. They cannot change what they do."

If the infrastructure and knowledge are provided to allow farmers to make more money, then they can do it if they want. If they want to lay around in the hammocks instead, it is their choice. The bottom line is that farming, if done correctly could create a much larger middle class in Thailand.

[fab4]

Read this. Gives a good insight about fertilizer.

http://www.bbc.com/news/27731291

So does this site

https://www.facebook.com/PDRCThailand

[Chao Lao Beach]

What is the real market price for this stuff now?

[robblok]

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.

When they're not eating, drinking and sleeping they might also be cutting eucalyptus to sell, fishing for food, making clothes on their sewing machines, gathering vegetation from the countryside to eat, building, raising livestock, hunting rats, frogs, birds and insects or disappearing for a few weeks to go working somewhere else.

Beats the humdrum 9 to 5 and being a slave to consumerism in my book.(but the latest generation of Thais are already hooked and don't want to farm, so we will soon see what happens).

Sure but they want expensive gadgets too.. why does the taxpayer have to pay for their "nice" living. They need to make a choice not want it all and let others pay for it.

[watso63]

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.

When they're not eating, drinking and sleeping they might also be cutting eucalyptus to sell, fishing for food, making clothes on their sewing machines, gathering vegetation from the countryside to eat, building, raising livestock, hunting rats, frogs, birds and insects or disappearing for a few weeks to go working somewhere else.

Beats the humdrum 9 to 5 and being a slave to consumerism in my book.(but the latest generation of Thais are already hooked and don't want to farm, so we will soon see what happens).

Sure but they want expensive gadgets too.. why does the taxpayer have to pay for their "nice" living. They need to make a choice not want it all and let others pay for it.

Agreed. What I think might happen is that because the younger generation don't want to farm. The wealthier land owners will buy up the small plots of land grow their land bank, increase efficiency and yield. The young can go off, work in a call centre and Thailand will become a clone of crappy western society. It will take another 20ish years in my guesstimation.

As for taxpayers money. Farming is subsidised in many places, European Agriculture Policy etc.

[klikster]

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.

They want the easy way.. they don't want to change. There have been many Royal projects helping farmers getting better income. However many are to stubborn to try those that have tried have better income.

Its ok to give farmers some assistance but in the end if they can't produce the product at competitive prices why should the taxpayer foot the bill. First help them change.. but just throwing money at it and letting them do it the old way is crazy. Its a sure way to keep them dependent to whatever political party pays the most.

I am totally against the middle class paying for the refusal of farmers changing their ways or even finding other jobs. If you can (after you have been helped and told how to change) be competitive.. others should not pay for it.

"They want the easy way."

".. refusal of farmers changing their ways or even finding other jobs."

We are near the end of building a house in U. Muang, Khon Kaen.

Electrician, first class work! 50 plus downlights, multiple outlets on every wall. Every room wired with LAN and TV cables. System grounded at 3 different points.

Mason, walls straight as a Mohawk arrow. Tile work it truly first class. All counters in baths and kitchen built with toe-kick.

Trim carpender, crown molding -- sanded and stained then re-sanded and re-stained every piece of wood. Miters are virtually perfect. Really difficult to find the joins.Wood is smooth as silk.

All three have a couple of things in common.

1 - They are skilled professionals.

2 - They are all rice farmers who had to take a couple of weeks off after the first rains to plant their rice.

I guess they are taking the easy way.

[robblok]

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.

When they're not eating, drinking and sleeping they might also be cutting eucalyptus to sell, fishing for food, making clothes on their sewing machines, gathering vegetation from the countryside to eat, building, raising livestock, hunting rats, frogs, birds and insects or disappearing for a few weeks to go working somewhere else.

Beats the humdrum 9 to 5 and being a slave to consumerism in my book.(but the latest generation of Thais are already hooked and don't want to farm, so we will soon see what happens).

Sure but they want expensive gadgets too.. why does the taxpayer have to pay for their "nice" living. They need to make a choice not want it all and let others pay for it.

Agreed. What I think might happen is that because the younger generation don't want to farm. The wealthier land owners will buy up the small plots of land grow their land bank, increase efficiency and yield. The young can go off, work in a call centre and Thailand will become a clone of crappy western society. It will take another 20ish years in my guesstimation.

As for taxpayers money. Farming is subsidised in many places, European Agriculture Policy etc.

Sure, but I don't agree with that either. I also don't agree with a welfare state.

[watso63]

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.

When they're not eating, drinking and sleeping they might also be cutting eucalyptus to sell, fishing for food, making clothes on their sewing machines, gathering vegetation from the countryside to eat, building, raising livestock, hunting rats, frogs, birds and insects or disappearing for a few weeks to go working somewhere else.

Beats the humdrum 9 to 5 and being a slave to consumerism in my book.(but the latest generation of Thais are already hooked and don't want to farm, so we will soon see what happens).

Sure but they want expensive gadgets too.. why does the taxpayer have to pay for their "nice" living. They need to make a choice not want it all and let others pay for it.

Agreed. What I think might happen is that because the younger generation don't want to farm. The wealthier land owners will buy up the small plots of land grow their land bank, increase efficiency and yield. The young can go off, work in a call centre and Thailand will become a clone of crappy western society. It will take another 20ish years in my guesstimation.

As for taxpayers money. Farming is subsidised in many places, European Agriculture Policy etc.

Sure, but I don't agree with that either. I also don't agree with a welfare state.

All civilised countries should have a safety net for citizens falling on hard times or for the genuinely sick and disabled, but able bodied persons of working age should not get something for nothing and should have to work for benefit. But to compete fairly on a level playing field is impossible because of a lack of open and accountable free trade agreements between nation states. Either the western developed countries would have to come down to 3rd world levels which of course they won't or third world countries have to rise up to western levels, which they can't afford and outside investment would stop dead in its tracks.

Just a small point. Farm vehicles and machinery in the UK are under certain laws allowed to use "red diesel" which is significantly cheaper than normal yellow diesel due to tax and duty savings. Why not help the Thai farmer like this? Yeah, I know they would all be selling it like crazy and filling up their pick ups etc, but that is an enforcement issue by customs and excise to control.

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[Thai at Heart]

Everything in thailand is an enforcement issue.

Fraud happens everywhere, but things like red diesel are impossible to enforce in Thailand.

[watso63]

Everything in thailand is an enforcement issue.

Fraud happens everywhere, but things like red diesel are impossible to enforce in Thailand.

But something has to be done, because if rice cannot be grown for its cost price and loans are cut off at source to the farmer then only those with savings or other investment can grow it. Poor people will be priced out and starve, less supply will push up the price and cheaper imports will have to feed the nation. Oh dear, what a mess.

Happened to the once massive coal industry in the UK.

[Thai at Heart]

Everything in thailand is an enforcement issue.

Fraud happens everywhere, but things like red diesel are impossible to enforce in Thailand.

But something has to be done, because if rice cannot be grown for its cost price and loans are cut off at source to the farmer then only those with savings or other investment can grow it. Poor people will be priced out and starve, less supply will push up the price and cheaper imports will have to feed the nation. Oh dear, what a mess.

Happened to the once massive coal industry in the UK.

The reality is, they should cut out producing so much low quality rice for commercial purposes. If people want to grow it to eat, do so. I don't see any other medium term way out of it.