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Published on November 12, 2007

Experts in the agricultural sector have challenged the next government to abolish or reduce price subsidies on crops. They say it should instead channel the funds to research and development to increase yields and added value, as Thailand needs to maximise the use of its limited plantation areas.

Driven by high oil prices, many crops are turned into biofuels and this would increase the prices of these and other crops that are intended to feed people.

To ensure availability, some experts support the introduction of biotechnology or GMOs (genetically modified organisms) and comprehensive R&D from plantation to processing.

At a Krungthep Turakij seminar last week on agricultural policies, they also said that with the rampant corruption, subsidies would only make bad politicians richer.

"If subsidies are distorting market mechanisms, they should be virtually abolished. Subsidies could be needed for other reasons, but on a case-by-case basis. As long as there is no insurance against bad weather conditions, farmers still need some protection," said Pornsilp Pacharintanakul, secretary-general of the Board of Trade.

Uthai Sonluksub, president of the Natural Rubber Council of Thailand and chairman of the Federation of Rubber Farmers Association of Thailand, agreed that the subsidies should be scrapped.

He urged the government to have farmers registered so that it knows what they are growing and where. If some farmers suffer some misfortune, it would know the appropriate value of compensation. The money should be spent on research, he said.

In Malaysia, despite smaller plantation areas, rubber output has remained intact due to new technology that involves hormone injection and changes in the rubber-tapping period.

Sermsak Kuansongtum, assistant manager of Chiyaporn Rice, suggested that if the government does not want to hurt rice farmers' feelings, it should resort to other means of subsidies rather than guaranteed prices.

He suggested that rice mills issue receipts to farmers, with the government stepping in to pay for the price difference if the amount farmers receive is lower than the average in the harvest season. Rice mills would also get receipts from exporters and receive subsidies for the gap between local and export prices.

Another suggestion was for rice mills to stock paddy rice - not polished rice - to preserve quality. While rice mills have complained of having insufficient room for paddy rice, he said exporters still had plenty of space.

"We have suggested many of these options to several governments, but they have gone nowhere," he added.

He also said R&D was necessary in order to increase yields. While China's yield is 1,000 kilograms per rai, in Northeast Thailand it is only 400kg and in the central region it is 600-700kg.

"I step into a rice research centre and I don't know what colour the building is because it is so old. It is allocated slightly over Bt100 million each year, and that's tiny compared to the total export value."

Chen Wongboonsin, president of the Thai Tapioca Trade Association, said price intervention did not address the problems at their roots.

The government should first know where the markets for tapioca are before calculating the production cost and eventually the price. However, the government starts with fixing the price, he said.

On Friday, the Commerce Ministry announced the price-pledging programme for cassava at Bt1.70 per kilo.

Chen said such intervention was unnecessary with growing demand for cassava for biofuel production. As 24 of 45 registered ethanol plants are using cassava as raw material, this should require a total of 14 million tonnes of cassava annually.

"The subsidies, which are about Bt2 billion a year, should be used to educate the farmers or find alternatives to increase yields. The price approach should end. The government should educate them to raise yields and reduce the logistics costs," he said.

Bank for Agriculture and Agricultural Cooperatives senior executive vice president Ennoo Suesuwan urged the government to focus more on processing agricultural crops.

He said while primary processing should be left to villagers, finished products for local consumption could be manufactured by small business operators, probably in partnership with villagers. Meanwhile, large companies focus on products for the world.

"Subsidies are an alternative for farmers, but for many governments, blanket subsidies are used as a way to win votes. Subsidies must be used to guarantee that farmers do not shoulder losses, and should not used to guarantee their income," Ennoo said.

For example, if the rice-pledging price is high, all farmers will enrol in the programme - resulting in rice flooding the mills' warehouses. Stored for a long time, the quality drops, leading to low prices and higher costs for the government.

Pornsilp also hoped the new government would be brave enough to change the administration model. In a world dictated by trade, the ministries of science, environment, education, agriculture, commerce and finance should be the priorities when it comes to budget allocation, not interior or defence. This would ensure more R&D financing.

In favour of GMOs, he said the government could first limit the studies to non-food crops or those that could be converted to biofuels like corn, cassava and sugar cane.

"GMOs would increase the yields and ensure that farmers would not use food-plantation areas to produce alternative-fuel crops," he said.

However, Sermsak expressed concern about Thailand's moves towards GMOs, saying that rice importers are sensitive on this issue.

He is afraid that if importing countries learn of the widespread existence of GMOs in the Kingdom - even though in other crops - they could cancel purchase deals.

"There should be a thorough study on the advantages and disadvantages before we embark on this," he said.

Pornsilp also suggested the new government be more concerned about the relationship between feed, food and fuel, due to the growing demand for fuel crops. In the next 10 years, he foresees an increase in prices for all crops, which requires better controls on inflation.

He also urged the next government to streamline food safety standards and set standards that are ahead of others.

"As long as we are following others' standards, we can only be an original-equipment manufacturer, but if we have our own standards, we can set our own prices and that will help farmers. This could be achieved only when we have strong consumer groups who demand higher standards for food for local consumption.

"The standards for food products for local consumption and export markets must be the same. The private sector's help in increasing farmers' knowledge is also necessary. Under the rules of origin, if one farmer gets caught using prohibited chemicals, we all get caught," he said.

Achara Deboonme,

Achara Pongvutitham

The Nation