Umm, we have a problem
Thai government involvement in their rice market was predicted to be ill-conceived; the surprise lies in the fact that it has taken so long to become apparent.
On the face of it, guaranteeing farmers a base price for their produce, always seems to be working for farmers. With rice growing in Thailand traditionally dominated by smallholders, it's them who stood to profit. But the higher prices guaranteed by the government may not have always trickled down.
However the plan to guarantee the prices hinged on the ability to market the produce. Governments are known to be poor market players and the fact that they created a near-monopoly is certain to contain its' hiccups.
Now, the rice pledging scheme is regarded as a disaster, according a report run by the Bangkok newspaper the Nation (July 26, 2012):
'Rice industry, already lost the title of world's top exporter to India, is heading for disaster in the next few years due to a lack of proper strategic management of the rice-pledging scheme and the country's exports, the Thai Rice Exporters Association said yesterday'.
Why? Because of the high stock position the government has as well as with the drop in export value, further pledging would only be possible if the government would start to destroy the current stock. Exporting has become infeasible; the gap left by the Thai government willing to wait for higher prices has been taken by many other nations who will be less willing to let the Thai steal their newly gained markets.
'The industry is approaching a deadlock situation, as the government and millers would be unable to shoulder the high volume of rice in the stockpiles if the pledging continued. The Kingdom would lack the financial resources if taxpayers had to shoulder rice-price subsidisation on a never-ending basis, he said.Vichai [honorary president of the Thai Rice Exporters Association] said the excessively high price of Thai rice had forced some exporters out of business, while millers would also have to pull out if unable to sell to exporters and being faced with overstocking because of their having to handle government stocks'.
Surprisingly the Bangkok Post turned up to the same press conference and seems to come to a milder view, failing to produce any of the quotes above; their summation:
'Thailand's rice industry will collapse unless the government takes more constructive actions by releasing rice from its huge stockpiles, chief of a local rice exporters association warned'.
Less political is their editorial from the same day which accuses the Commerce Ministry of
'lack of transparency and perceived penchant for secrecy'.
It adds wide-scale corruption, now that wasn't expected. Their call for action:
'What is puzzling and incomprehensible is why the ministry is still holding up the rice stocks and not steadily releasing them from the warehouses through open bidding in a transparent manner. In this way, the price would not be suppressed too much and the loss not so prohibitive'.
And today the Bangkok Post surprises it's readers with some old news:
'Thailand is set to lose its status as the world's top rice exporter to India, ending nearly 50 years in the top spot, says the US Department of Agriculture'.
The report dates are July 12. But then again there's really nothing to report on. You not no 1? Live with it, nobody really cares.
Despite this the government is brimming with confidence:
'In a separate press briefing, Yanyong Phuangrach, the commerce permanent secretary, voiced confidence that full-year rice exports will reach 9.5 million tonnes."Of this, 3 million tonnes will be government-to-government (G-to-G) contracts," he said.The total includes contracts with Indonesia (1.5 million tonnes), Iraq (660,000 tonnes), Ivory Coast (240,000 tonnes) and various other African countries (2-3 million tonnes) plus 1.5 million tonnes on the premium rice market.So far, the ministry has yet to export any rice under the G-to-G deals...."The pledging programme is aimed at raising rice prices, and the government has achieved that goal," he said. "We do not mind carrying losses."'.
We shall see. It also adds this mystery:
'Niphon Poapongsakorn, president of the Thailand Development Research Institute, questioned the sources of locally sold and exported rice.Thailand produces 30 million tonnes of paddy, but 17-18 million tonnes are in the state's stock, he said.His suspicion is the pledged and exported rice may have come from Cambodia and Vietnam'.
More markets
Meanwhile in Cambodia, the government is facing it's own struggles in seeking markets. Phnom Penh Post (July 18,2012)
'“We have no interest in the Philippines market any more as their government has issued a new policy that by 2013 the country should be able meet its own supply requirements for milled rice and may even export some starting next year. We do not need to rely on the Philippines — there are other markets”, he [Cham Prasidh, the Minister of Commerce for Cambodia] said during a meeting at the National Assembly yesterday'.
One ploy is to dust off the idea to counterbalance OPEC with a rice-exporting association of exporting countries (Phnom Penh Post 19 July 2012)
'“The five countries [Cambodia, Laos, Thailand, Vietnam and Burma] will be the world’s food supplier – what we could call the food basket of the world,” said Minister of Commerce Cham Prasidh. “We would be able to supply the whole world. We would not increase prices but try to find a way to facilitate trade with [other countries].”Hun Sen has theorised that the rice-exporting power of such a bloc could become a bargaining chip in negotiations with OPEC, according to the minister'.
Theory and practice, hmmm.
Well it didn't work 5 years ago and nobody believes in it now, so not much to expect. Anyway there is no mention of where this current interest is coming from.
But guess what? It's Bangkok that needs the cooperation. This is just another way of trying to maintain current prices (Bangkok Post 12 July 2012).
'The hope is cooperation will help to raise prices and attract farmers' offspring in the region to the career'.
Hope and prayers.
By the way, how did Laos get involved?
Locally, the Phnom Penh Post (17 July 2012) reports on a local mill to be established with Indian backing:
'Long Grain Co Ltd announced the deal last week for a $20 million investment in a new rice mill in the Oddong district, about 40 kilometres from Phnom Penh'.
Hybrids and trade
An interesting article from Pakistan which seeks to explain that the drop in rice export value is attributed to the growth in coverage under hybrid rice.
'The export of rice in terms of volume has declined by 9.1 percent during 2011-12 over the previous years largely because of promotion of hybrid rice by the private sector instead of Basmati rice....An official of Ministry for Food Security and Research on condition of anonymity attributed the decline in rice export to the promotion of hybrid rice in the country....He said farmers preferred growing hybrid rice due to its high yield and if the government failed to arrest this trend, the production of local Basmati, pride of the country, could dwindle considerably and the country's rice exports could be seriously affected. Hybrid rice is neither a valuable product in the international nor in the domestic market'.
Other crops
Not only is rice facing downwards market conditions combined with cross-border difficulties, so does cassava, as reported by the Phnom Penh Post (23 July 2012)
'The decease is a result of that previous year’s yield fetching a low price and farmers having no place to store cassava after harvesting, resulting in damage to the produce and a lower quality yield which traders showed no interest in, he said.In April a shipment of 1,600 tonnes of cassava was blocked at the border to Thailand but was eventually let through once the traders had been granted expediated licenses for the sale of cassava.Other difficulties have plagued Cambodian cassava growers, such as Thailand requesting Cambodia to curb its exports to the neighbouring kingdom in an effort to maintain Thailand's own high prices'.
Rubber seems to be less affected with dropping prices, as the export volume of Cambodian rubber has increased (PPP, July 26, 2012):
'The Ministry of Commerce’s statistics show rubber exports increased 1,106 tonnes from 21,511 tonnes to 22,617 tonnes in the first half of the year, though the value decreased 28 per cent year-on-year from US$102.2 millions last year to $73.5 million for the first half of this year'.
