The Politics of Rice in Thailand Springs Eternal

BANGKOK – 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.

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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.

“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 subsidy-related 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.

A woman walks checks a rice stockpile kept in a warehouse in Si Prachan district of Suphan Buri. The warehouse was inspected by caretaker Deputy Commerce Minister Yanyong Puangraj 12 February 2014. Bangkok Post photo/Thiti Wannamontha

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 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 noncompetitive. 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 modern 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 with 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.”

By Peter Janssen
Asia Times