01/10/2018
2. Politics of rice spring eternal in Thailand
Military regime justified its coup on uprooting the previous government's boondoggle rice price scheme but four
years later it's not clear farmers are any better off.
In early September, Thailand’s military government auctioned off the last load of rice stockpiled from the populist
paddy-pledging scheme of coup-toppled Prime Minister Yingluck Shinawatra, a boondoggle policy that cost the
state billions of dollars in losses.
The profligate program, under which the government pledged to buy “every grain of rice” from Thai farmers at
fixed rates up to 40% above market prices was cited as one of the main reasons for the coup.
It was later used to bring criminal malfeasance charges against Yingluck, who fled Thailand in 2017 before being
convicted to join her elder brother ex-premier Thaksin in self-exile.
With a democracy-restoring general election looming in 2019, many now wonder what the military-installed
regime of Prime Minister Prayut Chan-ocha has done during its four years in power to tidy up the rice industry
and reform the agricultural sector more generally.
Attention has focused on Prayut’s promoted “Pracharat” scheme, a vague “people-oriented” policy which
encourages big business to cooperate with the government to boost incomes for the rural poor. The policy has
run simultaneous with the government’s bid to clean up the market mess left by Yingluck’s rice -pledging scheme,
making it difficult to determine how much the policy is forward rather than backward looking.3 / 7
“I think their main success has been in getting rid of the rice stockpile of 18.2 million tons,” said Nipon
Poapongsakorn, a rice industry expert at the Bangkok-based think tank, Thailand Development Research
Institute (TDRI), and a vocal critic of the paddy-pledging scheme. “It has freed up the market price.”
Now that the last of the stockpiled grain has been sold, a final estimate of how much it cost the state in subsidyrelated losses and warehouse rents can be calculated and should be announced soon, industry analysts say.
“I think the total loss will be around 600 billion baht (US$18.4 billion),” said Charoen Laothamatas, president of
the Thai Rice Exporters Association (TREA), a post he has held for the past five years.
The 100-year-old association has played a crucial role in getting rid of the stockpile, of which only 14 million tons
was deemed “edible” due to rot. Over the past four years, TREA members have exported about 10 million tons
of the stockpiled rice to new markets in Africa, including Cameroon, Mozambique and Zambia.
“We have been able to ship to these African countries about 2.3 million tons a year. That’s how we got rid of the
old stock, and some was also sold locally,” Charoen said.
Once the edible stock was sold off last year, rice prices began to return to normal on the world market. This
year, Thai Hom Mali (jasmine) rice has been selling for US$1,100 per ton, the highest price in decades, thanks
primarily to a poor crop in 2017.
TREA expects rice exports to top 11 million tons in 2018, earning more than US$5 billion. That will still fall short
of India’s exports, which toppled Thailand’s claim as the world’s top rice exporter in 2012 when Thai rice exports
fell to 6.9 million tons in the first year that Yingluck’s paddy pledging scheme took effect.
The policy badly eroded the kingdom’s market share abroad due to the artificially hiked prices at home. In the
lucrative rice market of Hong Kong, for instance, Thai jasmine’s market share dropped from 85% before the
paddy pledging scheme to only 48%. This year it will be back to 68%, with Vietnam claiming around 30% of the
market.
The higher price of Thai jasmine in 2012-2014 gave Vietnam an opening to push its own brand of jasmine in
Hong Kong, along with Cambodia, another competitor in the premium jasmine niche market.
“Of course, it was because of the pledging scheme but secondly, it is because of our failure to formulate long term polices for the rice industry,” Charoen said. “Specifically, we should be promoting new rice varieties for the
farmers to grow.”
This is basically the government’s task, as it controls seed distribution to rice farmers. The vast majority of the
20 million tons of milled rice produced annually in Thailand is hard white rice. Of the estimated 10 million tons
of rice exported each year, 2.5 million is jasmine, 2.5 million par-boiled and the remaining 5 million hard white
rice.
By contrast, of the 6.5 million tons now exported annually by Vietnam, 2 million tons is jasmine, 1.5 million is
glutinous and the remaining 3.5 is split between soft and hard white rice. Soft white rice, with lower amylose
content making it softer and stickier, is the preferred variety in the China’s growing market.
To diversify Thailand’s rice varieties, TREA has distributed soft variety seeds to farmers in three provinces this
year, with the promise to pay them 500 baht (US$15.30) above market prices. “But we are private sector, we
don’t have much money,” Charoen claimed.
Thai governments have plenty of money to spend on farmers, especially rice farmers who comprise about half
of Thailand’s 14.6 million agrarians and are therefore an important voting constituency. Successive governments
have offered some form of paddy-pledging or subsidized rice prices, varying only in the extent of money spent
and the amount of corruption involved.
In this respect, the Prayut government is no different. This year the government is paying every registered rice
farming family (there are about 3.5 million) 1,500 baht (US$45.90) for each rai (0.4 acres) of paddy land they
own, with a maximum set of 12 rai. Last year the limit was 10 rai. “At least this [policy] does not distort the
market,” Nipon noted.
Under the Yingluck scheme, the government bought paddy at fixed prices of 15,000 baht (US$459.30) per ton
for white rice, and 20,000 baht for a ton of jasmine, which ended up being about 40 -50% above the market price 4 / 7
by 2013. The policy favored big farms, as it was initially not limited to farm size, and provided no incentives for
farmers to grow good quality rice.
The result was 18.2 million tons of rice rotting away in warehouses across the kingdom and a political outcry
that contributed to Yingluck’s ouster. Even though the stockpile is now sold and gone, the structural problems
of Thailand’s rice industry remain, experts say.
Firstly, they say, too much land in Thailand is under rice cultivation, making Thai rice exports uncompetitive.
Secondly, Thai farmers need to add more value to their rice crops, by either switching to new varieties or
improving productivity.
The same experts say Prayut’s government has promoted a “big farm” model that encourages farmers to jointly
rent machinery to reduce their planting costs and improve productivity. In that direction, the government has
joined hands with some of Thailand’s giant agri-business conglomerates to launch pilot projects of “modern
farms” under its Pracharat scheme.
While the scheme has been widely criticized as a potentially perfidious bonding of government and capitalist
powers to pave the way for big business profits, there have been some grass roots successes. For example,
the Mitr Phol Group, Thailand’s largest sugar processor and exporter, launched in 2016 a mode rn cooperative
farm in the remote and poor northeastern Amnat Charoen province.
Mitr Phol provided harvesters and other modern technology to farmers and the pilot project expanded quickly
from covering 7,760 rai (3,068 acres) under sugarcane cultivation w ith 600 farmers in 2016 to 139,000 rai
(54,956 acres) and 7,200 farmers by year-end 2017.
“Currently, sugarcane in Amnat Charoen is yielding around 14 tons per rai, compared with the national average
of 10-11 tons, and the sugarcane farmers could earn around 5,000 baht (US$153.10) of profit per rai,” said
Paitoon Praphatharo, executive vice president of Mitr Phol’s sugarcane development and management.
But agriculture industry experts still wonder about the Pracharat scheme’s usefulness as a “one solution fits all”
for Thailand’s perennially poor farmers. “I don’t think it can be duplicated nationwide,” Nipon said. “In agriculture
you need diversity. Diversity is good
