Rice farmers' long-time dependence on subsidy programmes finally fails them

Economy May 06, 2014 00:00

By Petchanet Pratruangkrai
The N

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Financial hardships, uncertain future take hold as pledging comes to a halt

For almost seven months Wichai Manmuang, a farmer in Chai Nat, has been waiting for payment from the rice-pledging scheme. He has grown rice for almost 30 years, and for much of that time he has needed to join the government’s price-subsidy projects.
But unlike in the past, this year Wichai has suffered from overdue payment. He is confused about what he should do, as he has to pay his own debts and invest for the upcoming harvest season. But he has no money for new investment, and in any case is uncertain about what he will earn from his rice in the near future, since the interim government has no subsidy project.
The market price of rice has dropped gradually since the end of the pledging programme. Paddy white rice is quoted at Bt7,000 a tonne, while the pledging price was Bt15,000 a tonne.
Wichai said that although the pledging programme increased the price of rice two years ago, farmers have had to face higher costs of production, now almost double what they were three years ago.
“The costs of land rental, fertiliser and pesticide have increased a lot in the past few years. We are expecting some long-term solution to help boost farmers’ incomes – the cost of production should be frozen. Otherwise, although our incomes have risen, rising production cost mean our living standards will never improve,” he said.
According to the Bank for Agriculture and Agricultural Cooperatives, as of April 25, the government had issued pledging documents to about 1.91 million farmers, but only 778,065 had been paid in full under the project. The payments covered only about 5.86 million of the total 11.61 million tonnes of pledged paddy. Almost 1.2 million farmers have still not be paid, an arrears of more than Bt90 billion.
Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said that from now on farmers would get even less from selling their produce, as the market had acknowledged that the government needed to release more rice from its stockpiles to generate income.
“Farmers will be the ones who suffer the most from lower rice prices. Millers and exporters cannot help much, as the market has responded to the high government stockpiles, while the world market recognises that Thailand needs to sell rice urgently to get some return from the pledging project to fulfil its overdue payments,” he said.
And it is not only rice farmers who have been hurt by this short-term subsidy project, Chookiat claimed, but traders, the Thai rice industry, and the Kingdom as a whole.
Since setting a high pledging price in 2011, the government has spent more than Bt700 billion to subsidise the rice price in the market. With such a high price, Thailand has lost export competitiveness in the world market and is no longer the world’s largest rice exporter after being the champion for more than 20 years.
As of last year, Thailand fell behind India, whose rice prices became more competitive. India ranked as the world’s biggest rice supplier with 9.61 million tonnes of export volume, followed by Thailand at 6.78 million tonnes and 6.73 million tonnes by Vietnam.
Although exports have recovered because of the end of the pledging scheme and the high volume of rice stocks, Thailand is still being challenged by rivals as importing countries have become familiar with other countries’ rice grains. The quality of Thai rice has allegedly also dropped because many farmers have only paid attention to the volume of production to benefit from the pledging project, but have forgotten to maintain quality.
Chookiat claimed that the quality of Thai rice has dropped significantly in the past few years. With lower quality yet higher prices, many rice buyers have switched to other countries such as Vietnam, Myanmar and Cambodia.
According to a report by the rice traders’ association, Thailand’s rice-export volume was up by 33.65 per cent year on year in the quarter to 2.2 million tonnes. However, India was still the world’s top exporter in that period at 2.44 million tonnes. Thai rice export value in US dollar terms dropped 6.8 per cent to $1.03 billion in the quarter, while in baht terms it increased 0.5 per cent to Bt33.41 billion because of the weaker value of the Thai currency. 
As of early last month, the price of Thai rice had declined by 26.9 per cent from an average of $718 a tonne last year to $525 a tonne, and in baht terms dropped 21.1 per cent from Bt21,500 to Bt16,963 per tonne.
Chookiat claimed that the quality of Thai rice, in particular jasmine and white rice, had dropped seriously. Its cooking characteristics – smell, and appearance after cooking – are different from in the past.
“Foreign rice consumers have complained about rice quality after cooking because the government has not separated its stockpiles, so rice has been mixed and given little attention before shipping, causing poor rice quality when cooking,” he said.
And it is not only foreign consumers who have complained about rice quality, but Thais as well. One consumer complained to a street food vendor about the bad smell of the rice. The vendor said the rice had been purchased from the government’s low-price project.
Some consumers have been paying more attention to rice quality. They have shifted to higher-quality rice grains such as organic, including the rice-berry variety, which have not joined the pledging scheme.
_ Amid rising health consciousness, some Thai farmers have found solutions that avoid depending on government’s rice-subsidy projects. You can read about such alternative solutions in Part 2 of this series next Monday.