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August 31, 2012

Rice Payment Scheme Threatens Thailand's Status as World's Top Exporter

by Daniel Schearf

NONTHABHURI, Thailand — Thailand is risking its status as the world's biggest rice exporter because of a controversial government purchasing policy to boost farmers' incomes.  Rice industry insiders say the costly program is inefficient and money would be better spent on long-term investment.

Thailand's rice stocks are full but the rice keeps coming.  The government's rice-buying policy guarantees farmers better than market prices for all the rice they can sell, but it is costing the country billions of dollars.

Rice farmer Ampai Boonrod says she used to make about $7,000 for her crop, but this year the government will pay her close to $9,000.

"The policy is good because the rice mill used to give less money than with the policy," said Boonrod.
 
While the boost in income is good for farmers, rice mill manager Premtip Bunyaprateeprat says the policy is not good for business.
 
"Our income has not increased," said Premtip.  "The rice is kept in warehouses for some time when it is better to sell directly to rice buyers like in Bangkok."

To reduce its losses, the government is waiting for export prices to rise.  But as global rice prices stay relatively stable, Thailand is losing its status as the world's biggest exporter.
 
Thai Rice Exporters Association President Korbsook Iamsuri says exports so far are down 45 percent compared to last year's record high.

"This year we found ourselves at the number three already because of two factors," noted Korbsook. "That is, first of all, our own rice intervention policy that put ourselves out of the market altogether in terms of pricing.  And, second of all, India came back to the market and start dumping their stock at very low price, making Vietnam and whoever else trying to match their prices."

Korbsook says farmers are also selling lower-quality, fast-growing rice to try to cash in quickly, risking Thailand's reputation for high quality.
 
Thai Farmers' Association President Prasit Boonchuey says what farmers really need are better irrigation, access to capital, insurance, and crop research.

"We would like to see sustainable development and stability for farmers so they can have the good things in life and good welfare," said Prasit.  "When you have stability, no rice pledging policy or huge budget is needed."
 
Food and Agriculture Organization (FAO) spokesman Hiroyuki Konuma says by year's end Thailand could regain its number one title, but the drop in exports has spurred competition from Thailand's neighbors.

"Yeah, I think it's very encouraging," said Konuma.  "Like Myanmar, [we have] been putting [forward] strong policy to increase rice exports, Cambodia [has] as well [and so has] Laos…"
 
The Thai government wants to form a rice cartel with other Southeast Asian exporting nations to ensure increasing prices.  Thai rice exporters would prefer the government stop intervening in the market before they all get burned.