Rice farmers seek 40% profit margin

[digibum]

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.

I wish I had a link but I remember reading an article 2 or 3 years back that said that 80% of all farmable land in Thailand is directly or indirectly controlled by 20 families. While there are plenty of farmers who own a few rai of land here and there, the vast majority of farm land is owned by a very small number of people.

They basically control the profits of the farmers. If the price of rice goes up, they charge more to rent their land. This is why the cycle of poverty is inescapable.

Several years back, around 2008, there was a huge rice shortage. Many Asian countries, rightly, feared protests in the streets due to the fact that this staple food was becoming too expensive due to the worldwide shortage. I remember the huge laugh I got when some Thai minister proclaimed that Thailand would become the middle east of rice. He fantasized about how Thailand would become like Saudi Arabia except with rice. They would control the markets and Thailand would become insanely wealthy due to their ability to produce rice and the huge demand driving up prices.

I'm guessing this idiot failed Econ 101 because every country that relied on rice as a staple food ramped up production and prices came crashing down a year later.

But the biggest shocker was how almost none of the rice farmers were benefitting from the rise of the price of rice. They had already agreed to sell their harvest at a set price before the shortage and when the next harvest came around, prices had dropped due to less demand.

All of the usual suspects made out very well. But the guy doing the backbreaking work of growing and harvesting the rice saw little if any extra income.

The way it works in Thailand is that when the prices run up, the middlemen buyers hold the farmers to their price and the land owners jack up the rental prices. They squeeze out all of the profits and leave the farmers with scraps.

Is it any huge surprise farming is a restricted business by the Thai government? Do you really think some company like Monsanto is going to put up with this robbery? Those at the top don't want more farming efficiency. They want to keep collecting the lion's share of the profits off the hard work of the vast majority. The less efficient Thai farmers are the more they benefit because they don't just make their money on the front end (leasing land) but on the back end too by acting as the broker for the deals.

The current state in Thailand is no accident. Thailand is, mainly, an exporting country. The vast majority of the money that fuels the Thai economy comes from Thailand selling stuff to other countries. Cheap labor and inexpensive products are how Thailand survives. A prosperous lower class drives up labor costs which drives up product costs.

The chief exports of Thailand are agricultural and a few rich and powerful people control that market via owning most of the land. If Toyota or Honda or Western Digital want to set up factories here and exploit the cheap labor market, they have to cut in Thais 51-49.

[ikke]

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.

Right, and only the laziness of Thai is responsible for the difference, the Vietnamese work a lot harder, so teach them to work as a real farmer at least 12 hour/day, and they will make money on there farming..

[ExpatOilWorker]

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

They could also take an education, study hard, get a job, work hard and gain a lot of experience.

Sorry, I am getting off topic here, better just to send little Noi, Ning or Nut to Bangkok.

[Thai at Heart]

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.

I wish I had a link but I remember reading an article 2 or 3 years back that said that 80% of all farmable land in Thailand is directly or indirectly controlled by 20 families. While there are plenty of farmers who own a few rai of land here and there, the vast majority of farm land is owned by a very small number of people.

They basically control the profits of the farmers. If the price of rice goes up, they charge more to rent their land. This is why the cycle of poverty is inescapable.

Several years back, around 2008, there was a huge rice shortage. Many Asian countries, rightly, feared protests in the streets due to the fact that this staple food was becoming too expensive due to the worldwide shortage. I remember the huge laugh I got when some Thai minister proclaimed that Thailand would become the middle east of rice. He fantasized about how Thailand would become like Saudi Arabia except with rice. They would control the markets and Thailand would become insanely wealthy due to their ability to produce rice and the huge demand driving up prices.

I'm guessing this idiot failed Econ 101 because every country that relied on rice as a staple food ramped up production and prices came crashing down a year later.

But the biggest shocker was how almost none of the rice farmers were benefitting from the rise of the price of rice. They had already agreed to sell their harvest at a set price before the shortage and when the next harvest came around, prices had dropped due to less demand.

All of the usual suspects made out very well. But the guy doing the backbreaking work of growing and harvesting the rice saw little if any extra income.

The way it works in Thailand is that when the prices run up, the middlemen buyers hold the farmers to their price and the land owners jack up the rental prices. They squeeze out all of the profits and leave the farmers with scraps.

Is it any huge surprise farming is a restricted business by the Thai government? Do you really think some company like Monsanto is going to put up with this robbery? Those at the top don't want more farming efficiency. They want to keep collecting the lion's share of the profits off the hard work of the vast majority. The less efficient Thai farmers are the more they benefit because they don't just make their money on the front end (leasing land) but on the back end too by acting as the broker for the deals.

The current state in Thailand is no accident. Thailand is, mainly, an exporting country. The vast majority of the money that fuels the Thai economy comes from Thailand selling stuff to other countries. Cheap labor and inexpensive products are how Thailand survives. A prosperous lower class drives up labor costs which drives up product costs.

The chief exports of Thailand are agricultural and a few rich and powerful people control that market via owning most of the land. If Toyota or Honda or Western Digital want to set up factories here and exploit the cheap labor market, they have to cut in Thais 51-49.

The only way to get better prices for the farmers is to allow more access for buyers. By putting the buying power completely in the hands of the Thai rice guys, it is screwing them.

The market needs a combination of Thai, foreign and government buyers all competing with market visibility.

[Thai at Heart]

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.

I wish I had a link but I remember reading an article 2 or 3 years back that said that 80% of all farmable land in Thailand is directly or indirectly controlled by 20 families. While there are plenty of farmers who own a few rai of land here and there, the vast majority of farm land is owned by a very small number of people.

They basically control the profits of the farmers. If the price of rice goes up, they charge more to rent their land. This is why the cycle of poverty is inescapable.

Several years back, around 2008, there was a huge rice shortage. Many Asian countries, rightly, feared protests in the streets due to the fact that this staple food was becoming too expensive due to the worldwide shortage. I remember the huge laugh I got when some Thai minister proclaimed that Thailand would become the middle east of rice. He fantasized about how Thailand would become like Saudi Arabia except with rice. They would control the markets and Thailand would become insanely wealthy due to their ability to produce rice and the huge demand driving up prices.

I'm guessing this idiot failed Econ 101 because every country that relied on rice as a staple food ramped up production and prices came crashing down a year later.

But the biggest shocker was how almost none of the rice farmers were benefitting from the rise of the price of rice. They had already agreed to sell their harvest at a set price before the shortage and when the next harvest came around, prices had dropped due to less demand.

All of the usual suspects made out very well. But the guy doing the backbreaking work of growing and harvesting the rice saw little if any extra income.

The way it works in Thailand is that when the prices run up, the middlemen buyers hold the farmers to their price and the land owners jack up the rental prices. They squeeze out all of the profits and leave the farmers with scraps.

Is it any huge surprise farming is a restricted business by the Thai government? Do you really think some company like Monsanto is going to put up with this robbery? Those at the top don't want more farming efficiency. They want to keep collecting the lion's share of the profits off the hard work of the vast majority. The less efficient Thai farmers are the more they benefit because they don't just make their money on the front end (leasing land) but on the back end too by acting as the broker for the deals.

The current state in Thailand is no accident. Thailand is, mainly, an exporting country. The vast majority of the money that fuels the Thai economy comes from Thailand selling stuff to other countries. Cheap labor and inexpensive products are how Thailand survives. A prosperous lower class drives up labor costs which drives up product costs.

The chief exports of Thailand are agricultural and a few rich and powerful people control that market via owning most of the land. If Toyota or Honda or Western Digital want to set up factories here and exploit the cheap labor market, they have to cut in Thais 51-49.

The only way to get better prices for the farmers is to allow more access for buyers. By putting the buying power completely in the hands of the Thai rice guys, it is screwing them.

The market needs a combination of Thai, foreign and government buyers all competing with market visibility.

[belg]

survive ? change to crops that do not cost that much in dangerous chemicals, fertilizers, pesticides, herbicides...

if the crop does cost you more than you can sell = time to go work in the factory

[Trouble]

And the difference in the rice pledging scheme (buying rice at inflated prices) and the proposals made is what? One way or another the government is stepping in to artificially price the rice which somewhere along the line would seem to cost the taxpayers money.

[Oryx816]

If this ever came to fruition, airline execs could quit and manage rice farms instead, since they regularly complain about their thin margins.

[wolfmanjack]

They need education to improve yield so they are competitive with the rest of the rice growing countries. Thailand's yield is around 2.6tons per hectare compared to over 6 in Vietnam. Even Cambodia, still recovering from 4 decades of war produces 2.8tons.

Also the vultures who upped the prices for land rental and chemicals could do with some reeducation from the Junta along with loan sharks.

And as someone else pointed out, laziness is another big problem. Rice farming is all about short bursts of work, they have plenty of time to 'work' to earn more money rather than spend thier time lounging around in hammocks all day drinking Lao Khao.

Stopping these morons from pissing their money up the wall on smart phones they cannot afford is going to be harder though.

For me it is hard to have sympathy with many of these people as they bring much of their poverty on themselves. When i visit my wife's village most of the men are drunk 24-7 it seems and are always on the look out for a free drink. Having slept on the streets on a few occasions due to a lack of money I know what it is like to struggle each day to eat, buying luxury items like smart phones and ipads is just not an option, if I can't afford to eat properly then I certainly am not going to piss it up the wall on drink like far too many Thai men.

I agree that education is the key but not to become better at farming but to bring more high paying jobs to Thailand and move Thailand from an almost entirely export-based economy to one that is more balanced.

Everything in Thailand is based off of the premise of massive inefficiency so that everyone has a job. Every store, restaurant, farm, business, government office, etc has about 2x - 3x the number of people required working because labor is so cheap.

Longterm, this isn't sustainable. In fact, we're already seeing the cracks right now. You have a mostly uneducated populace who can't escape the vicious cycle of poverty.

Thailand needs weened off this backdoor welfare system. Bring large corporations to take over major farming and increase the yield per hectare to 6 tons. Force the farmers to find new jobs. Develop new, better paying, industries and train people for those jobs.

It's going to be painful but so is letting a wound fester and then having to have it amputated. Thailand has enjoyed a period of artificially deserved prosperity. Being the only country in the region most western countries could stomach doing business with, they enjoyed a lot more success than had Vietnam and Laos not been communist, Burma not have been ruled by a junta, and had Cambodia not have had an entire generation of educated people decimated.

Instead of investing their good fortune, educating the people, and preparing Thailand for the 21st century, a very few became massively wealthy and have come to see Thai dominance in the region as an entitlement.

Thailand's problems are not going to be solved by steering the car a little to the left or to the right. Thailand needs to make a u-turn and get off the road it's headed down because it's a dead end street.

Thailand needs to create it's own domestic consumption and quit relying on exports. That doesn't mean giving loose credit to people to buy cars. Creating domestic consumption involves raising the living standard of more of the Thai population so they have money to spend.

It means encouraging more foreign investment by ditching restrictive ownership rules. It means allowing foreigners to buy land and develop it for factories, tourism, etc. It means finding niche industries and incentivizing people to go into those fields (i.e an example would be medical tourism but this needs to expand into many, many more areas). It means having a stable political environment and companies feel that the rule of law is fair. It means having a large base of English speaking people who can easily adopt to different working cultures.

I know, it's a dream. People scoff at my suggestions. But, really, it is the only way out for Thailand. ASEAN is going to kick in soon, Vietnam is waking up, Burma is waking up, Cambodia is waking up, Malaysia and Indonesia are hungry. Thailand still has the advantage but it's slipping fast.

Also . . .

I don't blame the poor people for squandering their money on booze or iPhones. That's what poor people with no upward mobility everywhere in the world do. Having an iPhone or an iPad gives them a slight escape from the fact that they are poor, meaningless, cogs in Thai society. It lets them fantasize that they are like the rich and powerful. It allows them to look down on those below them that can't afford one.

It's also why Thais, as well as most poor people, have a lottery mindset. Nobody hopes to make 20% more in salary by getting a better job because 20% of crap wages is still crap. They want to win 100,000,000 baht and live the good life. They think luck is more important than hard work because no matter how hard they work, they're still on the bottom rung of Thai society (socially and economically).

Everything in Thailand is based off of the premise of massive inefficiency so that everyone has a job. Every store, restaurant, farm, business, government office, etc has about 2x - 3x the number of people required working because labor is so cheap.

Let me set you straight on this. I owned a business here for 12 years and during that time i knew many others both thai and westerner that owned businesses. i can guarantee you that none of us hired 2 or 3 x's the number of people because labor was cheap. We hired extra workers because that was the only way we could expect the actual number we needed to get the job done to show up for work most of the time. no one lowers their profit margin by hiring extra workers unless it is absolutely necessary.

[wolfmanjack]

"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.

If you and your wife grew pineapple and were successful everyone in the village would soon start copying you.

I am now turning my rice fields into hydroponic farms a little at a time. I may even try some aquaponics in the future but i suspect it would take too many fish to fulfill all the nutrient requirements for all the plants.