Business as usual for the govt as Thai rice loses business
April 26, 2012 00:00
By Suthichai Yoon
The bad news from out there from the foot soldiers in the battlefield is that we are losing the fight and the commanders in the war room had better change the strategy.
The word from the commanders has come back: “No change in strategy. You may lose in the battlefield but we will negotiate with the commanders on the other side.”
Do you think, in the end, the country can win the war? Do you think the “commanders on the other side” will negotiate with “commanders on this side” if they already have the upper hand?
That is what is happening in the rice export war. Exporters have been filing reports that confirm that things are going very badly. Thailand is losing its long-held traditional position as the world’s leading rice exporter.
First, India is back in the market in full force. It has renewed permits for private exporters to double rice exports from two to four million tonnes.
Second, Vietnam and India have cut their prices down in a move that has sparked fierce competition – so much so that Thai rice is at least US$100 per tonne more expensive – at $515-$525 per tonne.
Kobsuk Iamsuri, president of the Thai Rice Exporters Association, has raised the red flag, screaming for the government to urgently consider a policy shift in the rice subsidy policy, or else the “crisis” could get worse. And, she warns, Thailand stands to lose out in a long-drawn-out battle that will have far-reaching implications beyond what politicians can contemplate at the moment.
The value of Thailand’s rice exports has so far dropped by about 50 per cent compared to the same period last year. According to Kobsuk, the main reason for this major decline is India’s return to the market – and new competition from Burma and Cambodia, while “old rivals” such as Vietnam, and even the United States, have more or less doubled their exports of rice of various kinds.
Vietnam, for one, has mounted an aggressive strategy by cutting its rice price to the world’s lowest, while India isn’t taking this competition sitting down either. Things might get so competitive that rice could be offered at as low as $300 per tonne. That could drive Thailand into a corner.
The rice exporters’ chief spokesperson insists that the world market hasn’t responded positively to the Thai government’s highly-publicised policy of using its rice-subsidy scheme to jack up global rice prices to the $700-$800-per-tonne range. Instead, the real prices are between $400-$500.
“Therefore, I am afraid the rice policy isn’t working, both in its aim to push up prices and protect Thai exporters and farmers,” she declared, adding that India and Vietnam have snatched away the parboiled rice market from Thailand, while Vietnam has beaten Thailand in the high-end market for hommali fragrant rice. Hong Kong and China, two of Thailand’s major buyers in this category, have recently gone to Vietnam instead.
Kobsuk predicts that Thailand’s total rice exports this year may shrink to 6.5 million tonnes, down from last year 10.5 million tonnes. It’s going to be a record low.
But those words – confirmed by most other major rice exporters – haven’t triggered any alarm bells within the government so far.
Commerce Minister Boonsong Teriyapirbom, asked to comment on these highly negative reports, didn’t show any sign of concern. He said the government won’t change its policy to accept paddy from farmers at Bt15,000 per tonne.
Why, in the face of all this bad news from the front line, does he refuse to consider a review of the policy?
“Because it’s the government’s policy,” he says.
How is he going to tackle the issue?
The minister repeated what the government’s leaders have said from the outset: “We will sell our rice through government-to-government (G-to-G) deals.”
How that can be a solution remains a mystery. Would any foreign government buy Thai rice from the Thai government at a price higher than the market quotations? If the Thai government wants to sell to another government at a “competitive” price, that would mean yet another subsidy out of the Thai taxpayers’ pocket.
How that can be called a “solution” is anybody’s guess.