Unravelling

We could easily fill this blog with 100+ references to what now looks like the end of free handouts for Thai rice farmers. But I won't.

What I will do is try to recap:

Thai politics are thwart with vote-buying. Very often dressed up neatly, launched as a so-called policy, the objective is to hand out cash, with the confidence vote required in return. With most of Thailand's farmers dependent on rice (to a varying degree), a guarantee price was set up, above and beyond what could be expected. The government became the buyer and was only waiting for the international price to follow suit so that the government could off-load it's stores and even make a profit. A win-win situation.

Not. Besides inefficiencies in the process (where did the international rice trader go?) and the stimulation of graft, the rice pledging scheme has run into problems because the price will go down. And will head further south once (or if?) the silo's will be emptied.

In the end all we can say is that rice growing in Thailand was stimulated. Additionally, internationally, prices of rice stabilised, so many consuming countries will be sending a new greetings cards later on this year to Thailand.

But governments shouldn't intervene in commercial processes. And certainly not governments who have no idea what they are doing, who are susceptible to short-term gains and function in an environment where taking say a 10% share of whatever passes along is commonplace.

The beginning of the end?

And things were going hunky-dory. Yeah, there were a couple of blips, a lot of blah blah (opposition jealousy, soothsayers predicting a worse future), but in general things were going well. Farmers (and voters) happy, what more could a government wish for?

And then in steps the international financial community. The same guys that failed to see the current global economical mess, suspected that Thailand might be less well-off (financially) than they thought themselves; the government was only buying / buying and nothing was being sold. And rice is perishable. 

The response: liars! Bangkok Post (June 6):

'The agency [Moody's] noted the losses could exceed 200 billion baht for 2011-12, more than double the Finance Ministry's forecast of 70-100 billion baht. Mr Niwatthamrong [PM's Office Minister], however, said this estimate was exaggerated. He said the 200-billion-baht figure was most likely the amount of money the government spent to purchase rice from farmers rather than the loss incurred'.

The Thai government then goes into overdrive to point out that losses are nowhere as great as that (source). In fact (Nation, June 8) the scheme is still on-going so only when completed will we [Thai tax-payers?] know what the exact cost was.

For more info on the Moody's vs Thai government visit Asian Correspondents background articles pt 1 and pt 2 (!).

But just in case Moody's are correct let's start lowering the intervention price. Or the prelude to political suicide.  Now your supporters are totally cranky.

Bangkok Post (June 10) reports on the possibility of lowering the price by a third, a move by the government, oddly supported by the Thai Farmers Association (TFA):

'Earlier, Prasit Booncheuy, the [TFA] association's president, said a price of 10,000 baht per tonne, down from 15,000 baht a tonne, was acceptable. "Most farmers are willing to accept the lower price. Even though the government offers 15,000-20,000 baht per tonne, the farmers don't get paid fully anyway because of corruption," he said'. 

And we now know that the main reason why the price needs to go down. It's not because of the failure of the system. No, it's the Thai baht's strength (Bangkok Post, June 13).

Lost losses But after testing the waters (are you crazy?), the price will only drop marginally (10-20%) according to reports on June 16 (Nation, Bangkok Post). But nowhere in line with world market prices. Both sources en-passant let readers know:

'The loss of 136 billion baht was based on all expenses in the rice-pledging scheme in its first year _ the 2011/2012 crop year _ including management costs, interest and the estimated value of remaining'.

And more know-how gained:

'Boonsong [Commerce Minister] had earlier said government-pledged rice seeds sold in 5-kg bags at major superstores were safe to eat [or not?] despite being treated with pesticides after the safety time limit. The chemicals are safe after 48 hours for the first type, and 57 days for the second type, and eating this rice after the safety period is not hazardous to health, he said'.

But this has translated into more stringent checks on incoming rice imports in the US (Nation, June 28): 

'The US FDA has ordered every port such as in New York and Chicago to confine Thai rice for random inspection. If the agency finds Thai rice with problems such as contamination, fungus, mold, or over-fumigation five times, the importer would be ordered to refuse Thai rice from exporters.

The source said that such stringent inspection has created concern among American importers as well as Thai rice exporters. Importers could easily turn to order rice from other rice export countries such as Vietnam and Cambodia'.

The article continues to see the flaws in the government intervention:

'Meanwhile, the Commerce Ministry's special taskforce, with cooperation from the Crime Suppression Division, acting against corruption and misconduct in the public sphere, undertook inspection of 2,000 warehouses nationwide and found rice missing from the government's stocks in many provinces'.

Paying the price

Farmers though will suffer from lower prices. The higher prices have meant that land rental values have gone up, eating into the potential profits of farmers (Nation, June 11). The same applies to other inputs. The Nation (June 27) continues:

'Cash return reduced from over Bt3,300 per tonne to Bt360 a tonne, according to BioThai estimates'.

With lower prices on offer these fixed costs won't get cheaper suddenly. So (poorer) farmers will stand to loose substantially. Hence the start of a season of discontent (Bangkok Post, June 19, June 21, Nation June 21, Bangkok Post, June 26, Nation June 26, Nation June 28). The Bangkok Post (June 23) adds:

'Meanwhile, a Bangkok Poll conducted on June 18-20 by the Research Centre at Bangkok University, suggests the prime minister's popularity has plunged. The survey of 1,234 respondents showed the premier's approval rating is now 40.4%, down from 51.2% in November'.

Then comes false securities. Thai government will raise the price once global prices will pick up (Bangkok Post, June 25). Which is unlikely, especially with enormous Thai stocks hovering above the market.

Making hay

My apologies for the above, the intention was to keep it short ...

In the meantime Cambodia is (in absolute terms) slowly making gains in the international market. The Cambodian Daily (June 10) reports on rice exports doubling. Reasoning:

'European countries figure prominently on the list thanks to the European Union’s Everything But Arms trade scheme, which allows Cambodia to export—as the name implies—everything but weapons to member states both duty and quota free.

President of the Federation of Cambodian Rice Exporters Kim Savuth attributed the growing exports to better quality of the product'.

Surprising news (Nation, June 19), Vietnam is to stockpile it's rice produce. Nowhere near Thai dimensions, but still, why try to outsmart the market and lose a wager? 

While Thailand's exports dip, those of Vietnam continue their ascendency (VNS, June 5). And oryzae.com notes (June 28)  that it's own index is nearing a 2 year low, with little or no hope for higher prices. 

Finally

Research on hybrid rice in South Asia concludes that adoption rates are higher with richer farmers but once poorer farmers adopted hybrid rice, the percentage of on-farm consumption was higher for poorer farmers. Which seems logical (source).

Fancy

China a compass nation? Well, read this (China Post, Mar. 8): 

'China has delayed the introduction of genetically modified rice and corn as it tries to head off public fears, leading government scientists said on Thursday.'

Caving in to public demand? Fancy that. Oh, do note this is a Taiwanese publication ...

Rice pledge price

Will the pledge price drop? Bangkok Post (Feb. 28): 

'The Ministry of Commerce will propose to the National Rice Policy Committee that the pledging price of non-glutinous unmilled rice be lowered, permanent secretary Watcharee Wimuktayon said.

The rice panel, chaired by Commerce Minister Boonsong Teriyapirom, is scheduled to meet on Friday, March 1.

Mrs Watcharee said her ministry will propose three price levels for non-glutinous paddy to the committee for consideration - the same 15,000 baht per tonne, 14,000 baht and 13,000 baht per tonne'. 

So the ministry is so wise they can't even come up with 1 recommendation? More government logic: 

'If the pledging price of the paddy is lowered, rice exporters would be able to export more and foreign exchange revenue would rise and the rice industry would expand, while farmers would not be affected, she said'. 

If the pledge price drops, farmers will not be affected? 

On the same proposal the Nation clarifies: 

'Vatchari [same as Watcharee above] said farmers should be able to accept the price change because the government will continue to support them and help with reducing the costs of production.
Although the price pledging is the result of the government's policy, it could be adjusted if it will create a better outcome for the rice industry, Vatchari said. Farmers should not suffer from lower incomes as most have relieved themselves of debts during the past two years of high prices, she added'. 

No proof though ...

The response of farmers: predictable? Bangkok Post (Mar. 1): 

'The Commerce Ministry's proposal to slash the rice pledging price has infuriated paddy farmers, who are threatening to hold a mass rally if it goes ahead.

Kittisak Ratanawaraha, head of a network of rice growers in 17 northern provinces, said any move by the government to go back on its promise to pay 15,000 baht for each tonne of pledged rice would be completely unacceptable'.

It also notes

'Mr Kittisak said farmers rarely receive the full 15,000-baht rate under the present rice pledging scheme, because moisture and contamination are often cited as excuses to cut the price.

Even with the best rice, farmers are often paid only up to 11,000 baht a tonne.

The government has delayed payments for four months, forcing farmers to depend on loan sharks who charge interest rates of 20% a month.

He said if the government cut the pledging price to 13,000 baht a tonne, farmers could end up being paid only 8,000-9,000 baht a tonne.

The Phichit farmer said the pledging scheme was ripe for abuse and does not really benefit farmers.

"If the government wants to really help farmers, it should freeze the prices of fertilisers and farm chemicals, cut interest rates for us and end the delays in payments for pledged rice," Mr Kittisak said'.  

Pandora´s box, once opened it will never ever close .... 

The article garners nearly 50 comments!

Anyway the Nation (Mar 1) reports that even the notion that prices might drop has been ... dropped:

'Commerce Minister Boonsong Teriyapirom yesterday said the NRPC [National Rice Policy Committee] would not convene today, as earlier announced by the ministry's permanent secretary Vatchari Vimooktayon.

...

Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said that to keep its promises to farmers, the government might maintain the pledging price. But because of fiscal constraints, it may put a lid on the amount each farmer can get from the programme.
"Officers involved with the scheme admitted that the pledging scheme had created many problems, including excessive budgets, limited warehousing space, and a drop in export volume," he said'. 

Inevitable?

But the pledge system continues. Bangkok Post (Mar 11) reports 

'The pledging price for the 2012-2013 second crop of off-season rice will remain unchanged, Internal Trade Department director-general Wiboonlaksana Ruamraksa says'. 

Aha. Farmers win? Or the cleptocrats?

On the side

The Nation continues (Mar. 6)  with summing up the costs: 

'The government's rice-pledging scheme is taking a toll on Thailand's tightly squeezed budget, as some of the funds from fiscal years 2014-16 might be required to offset the Bt100-billion [US$3 billion!] loss'.

Sell-off on the cards? 

'The government will have to sell off its rice stockpile amassed under the rice pledging scheme at market prices, PM's Office Minister Nawatthamrong Boonsongpaisan admitted on Thursday.
...  
Jac Luyendijk, chief executive officer at Swiss Agri Trading SA, which handles 600,000 tonnes of rice annually, said the price outlook in the long run is bleak. "We have to keep in mind that with these increasing rice stocks in Thailand, the problem will become bigger and bigger," Mr Luyendijk said. "Once Thailand unloads its stockpile we will look to very depressed rice prices for years to come." "Thailand will have to get rid of the surplus in the next few months to be able to continue the programme and purchase rice again," said Samarendu Mohanty, a senior economist at the International Rice Research Institute, a group based in the Philippines. "Thailand cannot continue to hold these stocks for a long time due to quality issues and also the space."' 

The optimists view of the road ahead, as reported by the Bangkok Post (Mar. 7).

Extending the rice pledging scheme is bad news (nothing new there ...)? At least according to the Nation (Mar. 14): 

'The government's insistence on maintaining the rice-pledging price at Bt15,000 per tonne for another year will not only continue to dampen Thailand's export competitiveness and the rice-trading industry, but also lead to higher budgetary losses and a gloomy future for rice-farming development'.

'The government's rice pledging scheme appears to have created a new worry for consumers. Besides concerns over whether the government can manage its huge rice stockpile to prevent any severe impact on the country's budget, many people now wonder if is it safe to eat rice that has been kept in warehouses for years'. 

Well, such articles (Bangkok Post, Mar. 18) are undercutting the Thai governments ability to off-load on the local market, let alone as exports ...

More opposition as noted in the Bangkok Post (Mar. 19): 

'The government's costly rice pledging programme is again under fire, this time riling Virabongsa Ramangkura.

"I disagree with the government's plan to use taxpayers' money to subsidise the state's rice pledging scheme in the off-season harvest," said Mr Virabongsa, chairman of the Strategic Committee for Reconstruction and Future Development.

"The government had better shift its focus to promote high-value crops such as Hom Mali rice, organic rice, energy crops and fast-growing plants such as eucalyptus and the neem tree (Sadao). These will generate more benefits."'

There are some limitations set to the pledging. According to the Bangkok Post (Mar. 20), 18 varieties will be excluded. These short duration varieties are considered poor quality and thus fail to meet new quality requirements. do note that this is a proposal ...

 
ASEAN wide

Neighbours of Thailand are becoming ripe for harvesting? CPF thinks so (Nation, Mar. 4) and is investing in Lao and Cambodia: 

'CP Laos and CP Cambodia are investing a combined Bt250 million to set up a new silo for maize in Cambodia and a new feed-meal plant in Laos to strengthen CPF's integrated agricultural-industrial business ...'.

Focus:

'Sakol [Sakol Cheewakoset, president of CP Laos and CP Cambodia] said the plant in Pailin province would ensure the company's distribution in western Cambodia, an important area for agricultural production. Having a plant there will reduce logistics costs. Initially, capacity is set at 10,000 tonnes per month.
The company is also considering investing in aquaculture in Cambodia in the near future.
"CP's business in Cambodia is doing well, as food business still has great opportunity. Our five-year business plan aims to double our total sales every year," Sakol said'.

Meanwhile in Burma, a sign of the rosy future? The Nation (Mar. 19) reports that Burmese rice is heading towards Japan for the first time.

 

Rice and more

Meanwhile Cambodia is experiencing a positive return on it's exports.  Phnom Penh Post (PPP, Mar. 5) reports:

'Cambodia milled rice exports reached 49,815 tonnes in the first two months of this year, an increase of 106 per cent from the same period last year. Jasmine rice was the biggest part of the exports, followed by long grain white rice, data from the Secretariat of the One Window service for rice exports showed'.

Exports for all agricultural products to Malaysia looking up according to the PPP (Mar. 4): 

'Cambodia’s exports of agricultural products to Malaysia rose sharply last year compared to a year earlier, according to a press release from the Malaysian embassy to Cambodia, with milled rice and crude rubber accounting for most of the total'.

The PPP (Mar. 3) cites a report by Cambodia Development Resource Institute (CDRI) which looks into the sales of fertilizer. Amongst it's finds: 

'Lim Chheng Lay, vice-chairman of Lim Bun Heng Trading Co, a fertiliser importer and distribution company, estimates 40 per cent of fertiliser currently on the market is fake. ...

CDRI conducted a small survey of 35 farmers in Takeo province and estimates that 10 per cent of farmers had bought fake fertilisers, causing yield losses worth between $285 and $350.

CDRI’s preliminary findings also question the government’s licensing conditions, suggesting that it constrains market potential and encourages “large scale” illegal fertiliser smuggling from Vietnam.

After many attempts to make contact, the Ministry of Agriculture, Forestry and Fisheries would not comment on the issue'. 

All involved want the government to take action as if the government is able to, willing and most preferred party to intervene. How about companies taking action? Or farmers identifying fake fertilizer traders?

Millers need cash. So the Asian Development Bank responds with the Climate Resilient Rice Commercialization Sector Development program. Newsworthy? PPP (Mar. 11): 

'The Ministry of Commerce and bank officials announced yesterday that they will hold a meeting next month aimed at better facilitating rice millers’ access to credit'. 

So not newsworthy.

New markets? Green Trade is betting on Libya, so reports the PPP (Mar. 14). They cite company officials sounding very upbeat. Note:

'Last August, Green Trade signed a deal with Indonesia’s state-owned DULOG to supply 100,000 tonnes of milled rice per year. However, the rice was never exported'.

The PPP (Mar. 13) notes that returns from rubber are dropping even though prices are going up (seasonally) year-on-year the prices are down. 

'In 2012, Cambodia exported 54,000 tonnes of dried rubber, up 16.6 per cent from 46,700 tonnes in 2011.
The total value of 2012 exports, however, dropped 21.2 per cent to $158 million from $201 million in 2011, according to figures from the Ministry of Commerce'.

An article in the PPP (Mar. 20) notes how the government would like to diversify it's exports by promoting exports of agricultural produce. Seems more wishful thinking than a sound strategy.

Something missing from Cambodia? Not in the national news but Radio Australia (Mar. 19) mentions that large-scale rice cultivation should be halted: 

'Environmental scientists are calling for a stop to commercial rice farms being granted huge swathes of land in Cambodia, as one way to protect tropical flooded grasslands and the species that depend on them'. 

It follows on the heels of a Bangkok Post (Mar. 18) report on the subject: 

'Scientists from England's University of East Anglia said big companies have swept into the region, blocked off local communities, and set up commercial rice farms.

"The loss of this entire ecosystem from Southeast Asia is imminent," they said bluntly.

Researchers around the Tonle Sap great lake in northwestern Cambodia called the loss "catastrophic". The area is a wildlife centre of biodiversity and, equally, "a vital fishing, grazing, and traditional rice farming resource for around 1.1 million people," the researchers said'.

Rice prices
Do note that Vietnamese prices are dropping in real terms as well as in comparison to Thai rice prices, according to recent price overview from the FAO:

Prices are set to drop though. Bloomberg (Mar. 5) reports global plantings up to a record high with demand flat or even dropping.

Odd

Odd going-ons in Vietnam. According to Saigon GP Daily (Mar. 19) hybrid rice is illegally being cultivated in Tien Giang. The charactter of the offence: 

'Since Man [Nguyen Duc Man, director general of Pioneer Hi-Bred Vietnam Co. Ltd] is growing hybrid rice on a non-appointed area and without a legal license from the government, the Tien Giang Department of Agriculture and Rural Development is now checking his documents and will hold a meeting with local authorities to resolve this issue'. 

Sometimes one can exaggerate the dangers. The article also mentions: 

'In related news, residents of Tan Loi Hamlet in Tan Tien Commune in Tri Ton District of An Giang Province, discovered suspicious looking strangers trying to lease 12 hectares of land to grow hybrid rice. Had they not been found out and reported to local authorities, these strangers would have organized an informal discussion to introduce growing techniques for this hybrid variety to farmers'.

Following on the succes of it's hybrid rice seeds, Longping Agriculture wants to expand (Chinadailyusa, Mar. 14) to become a global leader. It's next step: 

'Wu [Wu Yueshi, chairman of the board of Yuan Longping High-tech Agriculture] said that in its first step to achieve the company's goal, it has submitted a proposal to the current session of CPPCC National Committee to build an "International Rice City" in Changsha of Hunan province, under the leadership of agrarian scientist Yuan Longping, honored as the father of hybrid rice.

"If the proposal is approved, the city will serve as an international production base of hybrid rice to further secure the national grain supply and meet the world's food demand," said Wu, who is also a member of the CPPCC National Committee'.