Thailand’s Military Government Stops Buying Rice Directly From Farmers

 

 

CHIANG RAI – Thailand’s military government is changing directions on its agriculture policy, saying it stop buying farm products directly from farmers as state purchases spur overproduction, distort the market and create stockpiles that are difficult to sell.

The government will now look at measures to support earnings, based on incomes plus the payment of an amount to ensure farmers are able to make a living, Minister of Agriculture and Cooperatives Petipong Puengbun Na Ayudhya said in an interview.

There will  also be incentives for growers to switch crops to curb oversupply, notably rice to sugar, said Petipong. The country is the 2nd-largest rice exporter and the biggest rubber shipper.

The military took  power in Southeast Asia’s 2nd-largest economy four months ago, toppling the administration of Yingluck Shinawatra, which spent about 900-B baht ($28-B) buying rice and rubber at above-market rates.

The rice-buying program, which was described by the Food & Agriculture Organization as unsustainable, spurred the buildup of record reserves. Petipong said that 1 of his long-term tasks is to restructure farm output, focusing on quality over quantity.

“We don’t want to use taxpayers’ money to disrupt the free, commercial system,” said Petipong, a 67-year-old former bureaucrat. “It’s easy to buy stockpiles but difficult to sell them at the right time and the right place. In the long run, this isn’t going to work.”

Benchmark Thai rice prices dropped in May to the lowest level since Y 2008 amid ample supplies, then rebounded 13% as the military administration restricted movement of reserves.

Rubber in Tokyo and Thailand extended losses Thursday to the lowest mark in more than 5 yrs.

Junta leader Prayuth Chan-Ocha, who now has the post of prime minister, say he was forced to take over to avoid clashes between supporters of Ms. Yingluck and opponents, who had accused her of corruption and buying the support of rural voters. Ms. Yingluck won a parliamentary majority in 2011 after pledging to buy rice directly from farmers to lift incomes.

Thailand will spend 40-B baht to boost rice farmers’ incomes with a 1-time payment of 1,000 baht per rai (1,600 sqm) of land to compensate them for low prices this year, Deputy Prime Minister Pridiyathorn Devakula said at a briefing Wednesday. The program is capped at 15 rai per farmer.

While agriculture accounts for about 8% of Thailand’s GDP, rural residents make up nearly 87% of Thailand’s 67-M population. PM Prayuth pledged to quicken state spending, promote investment and create jobs to drive growth. The Thai economy expanded 0.9% in Q-2, rebounding from a contraction in Q-1.

Rice production rose to a record under Ms. Yingluck’s administration as farmers were paid to produce the crop, which they sold to the state at guaranteed rates. Ending stockpiles more than 2X’d to 12.8-M tons between Ys 2011 and 2013, according to US Department of Agriculture (USDA) data.