Grumpy Faces

What goes up, must ...

The previous entry on this blog came on what then seemed a defining moment in Thailand's rice-pledge system. Apparently the pressure had become too much for the sitting government and in spite of all their assurances to the positives of the the rice-pledging, it was thought to bring pledge prices in line with world market prices. Instead of the other way round.

Well as could be expected, farmers were livid: Happy hour to end? We think not! Farmers were to take to the streets. And in Thailand governments futures have been determined by street protests in the latter years. So a new move was needed.

So the expected move was to turn back the drop in rice-pledge price (Bangkok Post, June 30 / July  1, The Nation, July 1)!

However, now some question the governments credibility: this week you are compelled to act in manner a, the next you do the opposite (Bangkok Post, July 1).

And then in November we are to expect that the prices might drop again (Nation, July 3) ...

The same source (July 5) notes that meetings will take place on forehand though. But how will farmers opinions align itself with those of traders and the government wanting to have lower prices? 

One option (though not achievable) I believe would be to let the Thai currency go bankrupt, due to over-excessive government spending (not so difficult). This will result in lower exchange rates and higher inflation. If in the meantime the pledge price remains the same, ergo the problem will resolve itself, everybody will be back to pre-rice pledge times ....

Well if the price is not to move, more will be needed to be done to increase returns / stem losses.

The former: more efforts would be made to sell the pledge produce sooner; thus the pledge price becomes a de-facto export subsidy. The Thai government wishes to dump 4-5 million tonnes on the world market within 3 months (Bangkok Post , July 1); naturally this will mean lower world prices and higher losses ... 

Another part of the export strategy will be upgrading the exports of parboiled rice (Bangkok Post, July 7) a strategy through which Thailand will once again become the globe's leading exporter of rice. This would be the dumping part of the government scheme. Export markets for parboiled rice are mostly cash-strapped African nations. 

New ideas for rice pledging? Lower the price but maintain higher prices for farmers with smaller acreages. So reports the Nation (July 9). This might be cheaper in terms of subsidy, but higher costs for administration and higher rates of corruption .... Typical political thinking ...

Other ideas? Thanks to the Nation (July 4) we also note that:

'Countries such as Vietnam, India, Cambodia and Myanmar would also be encouraged to focus on sustainable rice selling in order to provide their farmers a steady income, he [Deputy Commerce Minister Yanyong Phuangrach] added'. 

Sustainable? Isn't that why the rice pledge programme is in trouble? Because it's not sustainable? Not well-thought out?

Or should we see the scheme in a different light? The Bangkok Post suddenly champions the rice pledge scheme (July 2): every country subsidizes their farmers, so why not Thai?

Corruption? Yeah corruption is everywhere in Thailand.

'Our farmers need our help. I think most people will agree with that. Let's have an honest discussion that puts things in perspective and come up with policies that can help make the lives of our farmers more bearable, so once again we can put a smile back on all those grumpy faces'.

Another option? The Nation (July 12) quotes UN's FAO organisation as noting that Thailand could become the no. 1 seller of rice exports once again (yeah?). That's if they lower their pledging price ... Think again.

The outlay for the rice-pledging scheme will increase; apparently there is a need for more storage capacity (Nation, July 16).

Deeper thought

Bangkok Post (July 23) cooked up opinion: rice plan was always a recipe for disaster?

'The biggest problem, however, is that even now, after so many bad turns, the government does not seem to realise that it has to be more proactive and make some major corrections to its rice-pledging scheme will not stumble into the same pitfalls as it has in the past few years. Having the prime minister eat freshly-cooked rice and proclaim that it is fragrant and delicious won't help'.

Not all is lost (financially?), according to Thai deputy commerce minister (Bangkok Post, July 19), it's a probability:

'The government is prepared to take a big loss as it struggles to offload record stockpiles of rice built up through the state-buying programme, with plans to call for bids on the ageing hoard of grain every two weeks.
"The sale will probably be at a loss as the government aims to increase domestic prices, not to make profits out of the program," Deputy Commerce Minister Yanyong Phuangrach told reporters'.

Bloomberg (July 19) suggest that yes, a loss may occur.

Overtime for Thai finance minister: rating's agency Moody's need not worry (Nation, July 17) he assures us. Thai government confidence (the Nation, July 13):

'The government is confident that the rice-pledging scheme will not negatively affect the country's fiscal position, and is continuing the programme as it helps to increase purchasing power and narrow the income gap, the finance minister said yesterday'.

The Nation (July 15) notes that despite what we might think farmers hardly gain from higher prices:

'Phuti Srisamutnak, president of the Thai Farmers Support Association, said farmers remained poor, despite the high pledging price. Humidity was the main factor that pressured the price, allowing farmers to earn much less than Bt15,000 per tonne. Usually, they get only Bt12,000 a tonne from millers, claiming the rice is of low quality.
"The cost of production has increased considerably in line with the high pledging price. After the government set the price at Bt15,000, the cost of production [including rentals, pesticide, fertiliser, labour, transport, tractor rentals, and fuel) also went up by Bt3,000 a tonne. The cost of production has been increased from Bt5,000 per tonne per rai to more than Bt8,000," he said'.

The Thai troubles with rice pledging even make Time World (July 12) An excerpt of the past 2 years of rice-pledging:

'In the meantime, her administration [Thai PM] has to bat away daily reports on the rice “scheme,” as the local papers call it. Stories hint at galloping costs and widespread corruption. The government has acknowledged the program has already cost [US] $4.4 billion in its first year. How much it will eventually cost depends on a factor outside of the government’s control, the global price of rice'. 

Side issues of rice pledge

• Quality control. 

With the Thai government unable to off-load rice as they await for the moment the market will cave in and the subsequent price rise (hint: they are in for a long wait) there are issues with what is now being sold: is it poor quality produce? Are there traces of fumigation?

Bangkok Post (July 1) reports on a small amount of chemical contamination.

Then come the rumours. To achieve a (to the eye) sell-able product, fumigation is required. Bangkok Post (July 11):

'Mr Suttipong [TV host] argued that he posted about the alleged contamination of some rice brands [amongst them CP brand Umbrella] with good intentions, because he is concerned about the health of consumers.

While he was composing the post on his iPhone, he accidentally hit the send button, despite the post being incomplete. He immediately deleted the post but it had already been shared by many people, he said.

He insisted that his comments had nothing to do with politics or the intention to discredit any brand of rice'.

TV host is now being sued for defamation.

The government also notes that the (CP) Umbrella brand of rice is safe for consumption (Bangkok Post, July 14).

Bangkok Post (July 16) sides with CP.  

The Nation (July 17) has some quality news:

'A consumer watchdog is calling on the government to inspect packaged rice after random tests found several samples to be tainted with high levels of methyl bromide, which is used to kill rice-eating bugs.
Meanwhile, three state agencies - the Agriculture Department, the Medical Sciences Department and the Food and Drug Administration (FDA) - said they found no contamination in tests they conducted earlier.
Saree Ongsomwang, secretary-general for the Foundation for Consumers, said her agency had teamed up with the Bio Thai Foundation to collect 46 random samples of packaged rice sold under 36 brands to test for chemical substances, including methyl bromide, organophosphate, carbamate compounds and fungicide.
All samples, collected between June 19 and 27 from supermarkets, retail shops and department stores, were tested at an independent laboratory.
Tests found that 12 of the 46 samples were free of contamination, but traces of methyl bromide were found in 34 samples, of which one sample was found to have exceeded the safe level with 67.4 milligram per kilogram of the chemical. As per the United Nations' Food and Agriculture Organisation (FAO) codex, levels of methyl bromide in food should not exceed 50mg per kg'.

The Bangkok Post (July 18), while commenting on TV host affair, hacks in on Facebook:

'And another concern on Facebook is clicking "Like" on your friends' messages and pictures. Before you click "Like", please consider if you should'.

And the Nation (July 18) now comes with the surprising info that state agencies concerned with food health issues are increasing their checks and becoming more strict. Too late?

Bangkok Post (July 20) notes that the Thai PM assures the rice the Thai buy in their local store is up to standard (with the 1 exception).

And it is time to shut up (concerning rice contamination) or else we will shoot ourselves in the foot (Nation, July 21).

Bangkok Post (July 26) notes that even after fumigation, rice is safe to consume.

Bangkok Post (July 24) pays a visit to a rice warehouse: sorry sight. And the expectations are that the government is useless in ensuring proper storage.

Thai Rice Packers are offering compensation if anyone dies after consuming contaminated rice (Nation, July 25).

•  Corruption

And the fire-brand sales of rice (see above) will of course happen transparently (Nation, July 1). 

Despite this assurance,  Anti-Corruption Thailand wants this to happen transparently (?) (Bangkok Post, July 5).

Concerning corruption, one part of the government is claiming that the pledge programme is rife with corruption (Bangkok Post, July 3). Then a day later (Bangkok Post) the PM wants proof (she doesn't believe her own government member?) despite this:

'However, she [the PM] admitted checks on rice stocks at 2,000 warehouses have found evidence of corruption at 27 of them'. 

The Nation (July 6) continues in the same frame:

'... each phase of the rice-pledging scheme process is susceptible to fraud, such as the inflated number of registered farmers, 3 million tonnes of incorrect rice stocks reported and the loss figure of Bt220 billion'.

Then the Bangkok Post (July 7) notices that the government official is actually an undercover agent for the opposition ... Or not? Note the 70 plus comments ...

• Illegal pledging. 

Twenty five tonnes of illegally imported rice from Myanmar are found (Bangkok Post, July 2). 

In Burma they are well aware of the rising amounts disappearing to Thailand (Asia Sentinel, July 9), but note that the illegal trade with China is much higher (est. 800,000 tonnes).

Reuters (July 14) also notes the rice smuggling trade which goes to Thailand whereas everybody would expect the reverse ...

'The International Grains Council in London estimated the equivalent of 750,000 tonnes of milled rice a year was coming into Thailand, senior economist Darren Cooper said. That would be about 900,000 tonnes of unmilled rice, or paddy.
"Clearly shipments (to Thailand) started going up since the intervention scheme started," Cooper said. "It is highly attractive for the neighboring countries to try and get as much rice across to Thailand as possible and supply into the scheme."'

• Theft

Bangkok Post (July 8) mentions that four millers will be charged with theft (actually embezzlement) of rice. No news on whether this has actually happened ...

Regional

Vietnam is much more tentative in it's government involvement in the market (Nation, July 3):

'On June 15, several businesses began to purchase rice for storage in the Mekong Delta under a government programme that aims to ensure farmers' income level.

The government has covered 100 per cent of interest rates on three-month loans to assist businesses to buy rice.

However, the large remaining stockpile of winter-spring rice, due to low exports over the last few months, is a challenge, as the eligible enterprises do not have enough warehouse space to store the forthcoming summer-autumn rice'.

Indonesia has been building up it's own stacks of rice, naturally to make it less susceptible to price swings. This is bad news for exporters ... (Reuters, July 25).

 

Cambodian affairs

An interview with a rice miller in the Phnom Penh Post (July 26). Same, same. Lack of capital to trade, some distrust in providence of product.

Four months after signing an agreement to sell rice to the Philippines, nothing has happened (PPP, July 25):

'Philippine Ambassador to Cambodia Noe Wong and Cambodian Minister of Commerce Cham Prasidh signed a deal in April for the Philippines National Food Authority to import rice through the Cambodian state-owned enterprise Green Trade.

Thon Virak, Green Trade’s director, said yesterday that the company is waiting to schedule a meeting because relevant partners are busy preparing for the election.

“We are still waiting for the delegation from the Philippines to come here for a detailed discussion,” Virak said. “We plan to send the invitation letter to them, but need to wait for Cambodia’s new government to form after the national election.”

Last year, a similar agreement between Cambodia and the Philippines was also planned but could not be finalised after Cambodia reportedly delayed a decision to lower prices to levels the Philippines was demanding'.

Same, same thus.

Though Cambodia's exports are on the up, they are increasingly worrying about the other Thai neighbour, Burma (PPP, July 10):

'Cambodia exported nearly 176,000 tonnes of rice in the first six months of the year, a 125 per cent increase from the same period in 2012, when about 78,000 tonnes left the country.

Most of that, or about 60 per cent, went to countries in the European Union, which grants Cambodia duty-free tariffs under its Everything But Arms agreement to provide opportunities for growth.

In June, however, the EU readmitted Myanmar to its trade preference scheme in response to wide-ranging political and economic reforms taking hold in the country since President Thein Sein took power in 2011'.

What seems odd is the following:

'Srey Chanthy, Acting Interim President of the Cambodian Economic Association, said that Myanmar, with its “large land cultivated area” and “plenty of rice surplus”, can be a big player. But the decades out of the game have taken their toll.

“It will take Myanmar years to be recognised in the market and improve their production standards,” he said.

Chanthy said that Myanmar will have to put in place a new institutional structure and a relevant legal framework with quality standards before it can meet market needs'.

The same could be said for Cambodia ...

Another export market, Brunei is to be focussed on (PPP, July 7):

'With its first shipment expected in November, the Baitong Rice Export Company and the Federation of Cambodian Rice Millers Association will send 3,000 tonnes of fragrant rice to Brunei, the smallest of the 10-member ASEAN states, with a population of a little more than 400,000'. 

Note the prices of over $1000 a tonne!

Not only are overall Cambodian rice exports up (doubled!), exports of organic rice are also double (Cambodia Daily, July 10):

'“In the first six months of this year we’ve exported about 200 tons of organic rice, which is about double last year’s figure,” said Cedac president Yang Saing Koma, adding that farmers aren’t producing enough to meet de­mand. “We hope that by next year, we’ll be exporting 1,500 tons annually.”' 

Hong Kong officials wants more direct Cambodian rice imports (PPP, July 2).

A little hybrid

Malaya Business Insight (July 9) has some new insights on hybrid seeds:

'Market forces and realities on the ground should allow farmers to choose hybrid rice or not.

“There should be no subsidy for hybrid rice,” said Susan R. Brena who heads the Seed Technology Division of the Philippine Rice Research Institute (PhilRice). 

“If you want agriculture to take off, let’s teach our farmers to pay for premium quality seeds,” she told Malaya Business Insight.

...

The plan is to increase the hectarage of hybrids by 72 percent to 284,400 hectares; last year it was 164,787 hectares – or just 3.5 percent of the country’s of 4,689,960 hectares. The hybrid rice hectarage will be expanded to 388,000 hectares next year'.

So despite private investment and goverment investment, hybrids still fail to take off on a larger scale?

Market-time

Prices are going down. Reuters (14 December 2011) quotes the FAO which rejoices the relief the price falls mean to the consumers. Both India and Vietnam are undercutting Thailand as their weaker currencies and huge stockpiles allow them to sell more for less. Both countries are also expecting better crops and are intent on easing their stockpilings. Thailand is feeling the pressure as even it's exporters are now buying up foreign crops to sell rather than supplying Thai rice. With the world economy in the doldrums, prices will not be likely to sustain themselves and an end in the boom times for rice farmers will end ...

• Adding to the woes of the Thai, despite the floods in Cambodia, rice production is also up in Cambodia. The Phnom Penh Post (9 December 2011) quotes the Khmer Minister of Agriculture claiming that this years crop will equal or surpass last years even though 10% of the crop had been inundated. Sounds too good to be true.

• The Global Post are highlighting rice's role as the most essential crop on our planet. On November 28 it had a feature on Thailand. It stresses how the thai governments objective is to give a fair return to it's farmers while highlighting that the policy has driven prices up but ultimately will lead to demise of the Thai rice exports / domination of the global rice trade.

  'But while shoring up appeal in upcountry Thailand, Yingluck may also be winning fans among Vietnamese rice exporters. Her scheme, according to US Department of Agriculture predictions, could cause Thai exports to drop by 20 percent next year — and potentially cede the world’s top exporter crown to Vietnam'.

• Amongst keeping tabs on hybrid rice corporations GRAIN heralds the rights of small farmers world-wide. For their consistence efforts GRAIN received the Right Livelihood Award, an alternative Nobel prize.

• Finally, Bangkok Post (19-12-2011) adds it's economics reader the following notes on rice futur with the quote

  'Rice strains that can better resist rising temperature, disease and floods are on the way ...'.

  Great! It then goes on how hybrids are the future and how good-hearted CP are in denoting their hybrid rices to 99 farmers, yea! CP

  '... called the scheme an opportunity for farmers to improve their crop management and place more emphasis on post-harvest work such as soil analysis and fertiliser preparation'.

  And not a case to promote it's business model at the expense of farmers independence.

Costs

A recent article in the Phnom Penh Post (31 march 2011) quotes a Cambodia 'official' of the Ministry of Economy and Finance describing that 350 $ million was needed to help reach the governments rice export target of 1 million ton in 2015. The maths part includes $150 million for investment and $200 million for financing.
Which doesn't seem like a lot. Based on current prices, financing alone would be a shortfall of $400 million of bridging the shortfall in rice export (800,000 ton).
Furthermore it highlighted the gap in knowledge, surely there are more intelligent ways to finance the financing? And in the end it's a revolving fund, you get your money back and most probably won't cost you much. If the government puts it's act together the cost of lending as well as the risk would drop and this way you would be able to compete better.
Surprisingly it also mentions that production is already outstripping demand by more than 3 million tonnes. Which is thus lost? Or exported?

Khmerweekly site is another website which copies freely from the to be paid press in Cambodia. This link gives an interview from the Phnom Penh Post, not really good, but just underlines the need for capital. The exporter would also like to see a tax waiver ...

KI Media (24 February 2011) refers to a VOA article on the 'dire' situation in Cambodia's rice seed sector. It stresses first that better seed can increase production according to the interviewed farmer by a ton per hectare. It the points out that Cambodia's productivity is lower than it's neighbours (not Thailand!) but fails to mention economic returns. Thailand knows that lower productivity often results in higher returns.
It then quotes the Cambodian Economic Institute which claims the seed sector is "backward" and "afraid to modernize". However in my experience, it seems the rice seed sector is on par with those of other developing nations not relying on hybrid rice seed.
It then seems to link this critique with the governments 49% share in the only company producing improved rice seed and assumes that this monopoly is the root cause.
It's not. With a few exceptions, rice seed is of little interest to seed companies globally and if the public sector would not be trying to produce seed there would be none at all.

Other recent articles are from the Thai press (BKK Post, 9 March 2011) where the local seed association is hoping to be able to import hybrid seeds which seems a tactic from the major producers of hybrid seeds to catch up with CP. To sell the deal to policy makers they compare the achievements of maize with the potential for rice. Poor comparison. Animal fodder versus human food.

Market News

Estimating the estimates
Despite all the talk about droughts and floods, Cambodia rice production will rise. So reports the Phnom Penh Post (7 December 2010). Previous government estimates put the production at 7.3 million tonnes, while new estimates put production at 7.99 million tonnes. Why not 8?

'Agriculture Minister Chan Sarun said yesterday the gain in production was due to good rice seeds, an increase in dry season farming, a greater amount of farmed land and better understanding of farming techniques'.

It does seem that in spite of all adversities, the price is still leading the way. That's how economics work.
Many might question the governments estimate, quite rightly. Being on the other side of making estimates in other countries I know they are just a wild guess, at best a hunch.
But intriguing to see that the FAO has re-jigged their estimates as well, from 5.9 to 7.3 million tonnes, nearly 25%! Clearly they must have better strategies at coming to the final numbers ...

Produce offspring
Well, the same FAO will be stimulating private companies in Cambodia to produce rice seed, so reports the Phnom Penh Post (November 14, 2010).

'It is hoped the project, funded by the European Union, will help private firms to provide “pure” rice seed, rather than hybrid types'.

Really? Because the track record of private companies marketing open-pollinated rice seed production globally is sketchy as opposed to hybrid seed. At least the money is disposed of.
Then there is the government itself which has released 10 rice varieties (Phnom Penh Post, 27 September 2010)

Competition in sight
Cambodia has seen a continuing momentum in trying to export it's own rice rather than handing it over to it's neighbours. CAAI reports on a push to penetrate the Philippine market, home of hybrid rice. Despite all Philippine's efforts in promoting rice production, rice production is dropping so it seems. Time to hand over the government subsidies to the farmers themselves rather than the input providers?

Following on, CAM-SIT blog quotes Cambodian Business Review (August 2010)

'Rice from Vietnam and Cambodia now control up to 60 percent of the market'.

It gives a good overview of how Cambodia's rice exports seem to be eating into Thailand's export. Oddly it also includes this quote:

'“The price is not only higher but the quality of the rice is also lower, in terms of fragrance, size of grains and general quality of the milling. Thus, as much as we want to buy Cambodian rice, our efforts are being hampered by unreasonable prices from Cambodian exporters, “the buyer said'.

So that raises the question why buy Cambodian price if both price and quality are adverse? Politics?

Indian investor Amira Group (actually Amira Food) believes Cambodia is the future of global rice production. Paying upwards of 30 million $ for investing in rice processing and 25,000 ha seems a cheap price which the investor hastily agrees to.

'He noted that despite Cambodia’s rice-heavy farming sector, he felt that it lacked structured growth – something Amira would like to provide leadership on'.

Which seems to contradict reality.

Media contacts
In Thailand the government is hoping to join the competition in providing hybrid rice to farmers, according to the Bangkok Post (16 August 2010). The article lacks little substance to the claim of superiority of hybrids over conventinal varieties.

'"We have successfully developed three or four hybrid rice varieties but we need more time to improve the varieties, such as to add genes that have resistance against planthoppers, and/or climate change,"'

Three or four?

'Thailand has done R&D for hybrid varieties for 30 years but public concern over the impact on rice quality, as well as the cost, have impeded the development, she [Orapin Watanesk, a rice R&D specialist with the department] explained.'

Oddly it also cites another government official who doesn't seem to be on the hybrid bandwagon:

'He [Sune Kasisareewong, director of the Rice Seed Bureau] said the improved seeds had strong properties, affordable prices, and more importantly, farmers can use the harvested production or paddy as strain for their next crop'.

As opposed to hybrid rice.
One of it's biggest possible rivals would be CP which has high aims according to The Nation (22 November 2010). It also reports:

'For instance, the launch of CP’s hybrid rice seed CP 304 has allowed farmers to enjoy an average yield of 1,000 kilograms per rai. Production costs are also reduced, and the seeds have a special feature " drought resistance'.

CP also claims:

'Hybrid seeds are more expensive than other popular types, which cost about Bt50 per kilogram and produce an average of 450-500 kilograms per rai. Farmers will be compensated for the higher price of hybrid seeds by their lucrative yield'.

That contradicts reality, as prices for hybrid varieties are lower. CP provides Bangkok Post (11 June 2010) with the economic details on the costs / income but wisely forgets the lower price simply saying the price of the produce whether hybrid variety or Jasmine rice is same, same. But different?

The other market player, Bayer, is having second thoughts. It's GM hybrid Liberty Link is resulting in quite a few headaches. It's quite enjoyable to read the Good News stories (courtesy of Bayer LibertyLink News Room) as opposed to the avalanche of court cases the company is losing in the USA and additional court cases being filed (source).
Significantly Bayer has suspended introduction of GM rice hybrids in Brazil according to foodfirst.org.

The Bad News
GRAIN has 2 significant reports, one mentioning how poor performing Vietnamese hybrids are, the other on how flood aid is being used in Pakistan to push hybrid (wheat) seed.