Measures need to be taken to ensure farmers, not just millers and traders, benefit from rising prices
Published on April 1, 2008
The government should consider urgent measures to stabilise the price of rice on the domestic market instead of unintentionally pushing the domestic price to an unusually high unmanageable level with unwise policy moves. Otherwise, it will create a domino effect going from the farming sector to exports. Worrisome signs have already begun to show, with some exporters reportedly considering halting rice exports, while others have announced that they would default on their export shipments pending a more stable price.
Thailand faced skyrocketing rice prices over the weekend after Commerce Minister Mingkwan Sangsuwan sent the wrong signal to the rice market by saying that the price of rice should increase from the current Bt15,000 per tonne to Bt30,000 in the next few months.
The announcement sparked speculation on the market, as rice millers and traders reportedly stocked up on rice in anticipation of a future price increase.
Mingkwan again used the wrong policy to help farmers benefit from the rising price of rice. His intentions may have been good, as he naively told farmers not to rush and sell their rice now. Mingkwan instead asked them to wait a few months, so they can fetch a better price.
In reality though, the farmers are unable to stockpile the rice.
Most of them don't have barns where they can store the rice and would be forced to sell it to millers and traders. Yields from the second rice crop, which is entering the market, comes from farmers in the central and upper northern region of Thailand. Most of them don't have rice barns.
In short, rice-millers and traders are expected to reap windfalls from the skyrocketing price of rice because they are equipped with better facilities to keep the rice.
Farmers would remain in the same situation.
Besides, the ministry recently announced that it would try to please domestic consumers by offering locals cheap rice. The intention again is good but the way it intends to implement the programme has many flaws.
First of all, the ministry chose to allow rice-millers to bid on rice from government stockpiles to repackage and sell. But the government told bidders the cost of their white rice stock was between Bt6,000 to Bt7,000, giving the edge to rice-millers and traders during the bidding process.
This year, the ministry announced an end to the programme guaranteeing a minimum price for rice by reasoning that farmers should be able to fetch a better price for their crops. But the farmers are unlikely to benefit from the move if they lack essential facilities such as rice barns.
In fact, Thailand should have a sufficient supply of rice for both domestic consumption and exports. But anticipation over a further increase in the price of rice has encouraged some rice-traders and millers to hoard their stockpiles.
This is despite the fact that severe weather across Asia has damaged production elsewhere, in places like China and
Vietnam where unusually cold temperatures were recorded.
Bangladesh also endured a devastating cyclone, while Australia suffered a prolonged drought, harming rice production in both countries.
Thai farmers should thus stand a good chance to benefit from the rising demand for rice if only the government provides them with the right support such as financial help to build rice barns that would enable farmers to stock the rice.
The government should adjust the unnecessary obstacles that prevent farmers from producing rice at a competitive price, such as the high tariffs on imported fertiliser products, rather than implementing panicky policies that would not benefit farmers.
Moreover, the government should stop distorting the market through price speculation. A high increase in the price of rice might look sexy politically, but in practice it would have negative repercussions. Besides, the government should think of ways to help improve production quality now, as the agricultural sector is set to become very attractive in the years to come.
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Published on April 1, 2008
The government should consider urgent measures to stabilise the price of rice on the domestic market instead of unintentionally pushing the domestic price to an unusually high unmanageable level with unwise policy moves. Otherwise, it will create a domino effect going from the farming sector to exports. Worrisome signs have already begun to show, with some exporters reportedly considering halting rice exports, while others have announced that they would default on their export shipments pending a more stable price.
Thailand faced skyrocketing rice prices over the weekend after Commerce Minister Mingkwan Sangsuwan sent the wrong signal to the rice market by saying that the price of rice should increase from the current Bt15,000 per tonne to Bt30,000 in the next few months.
The announcement sparked speculation on the market, as rice millers and traders reportedly stocked up on rice in anticipation of a future price increase.
Mingkwan again used the wrong policy to help farmers benefit from the rising price of rice. His intentions may have been good, as he naively told farmers not to rush and sell their rice now. Mingkwan instead asked them to wait a few months, so they can fetch a better price.
In reality though, the farmers are unable to stockpile the rice.
Most of them don't have barns where they can store the rice and would be forced to sell it to millers and traders. Yields from the second rice crop, which is entering the market, comes from farmers in the central and upper northern region of Thailand. Most of them don't have rice barns.
In short, rice-millers and traders are expected to reap windfalls from the skyrocketing price of rice because they are equipped with better facilities to keep the rice.
Farmers would remain in the same situation.
Besides, the ministry recently announced that it would try to please domestic consumers by offering locals cheap rice. The intention again is good but the way it intends to implement the programme has many flaws.
First of all, the ministry chose to allow rice-millers to bid on rice from government stockpiles to repackage and sell. But the government told bidders the cost of their white rice stock was between Bt6,000 to Bt7,000, giving the edge to rice-millers and traders during the bidding process.
This year, the ministry announced an end to the programme guaranteeing a minimum price for rice by reasoning that farmers should be able to fetch a better price for their crops. But the farmers are unlikely to benefit from the move if they lack essential facilities such as rice barns.
In fact, Thailand should have a sufficient supply of rice for both domestic consumption and exports. But anticipation over a further increase in the price of rice has encouraged some rice-traders and millers to hoard their stockpiles.
This is despite the fact that severe weather across Asia has damaged production elsewhere, in places like China and
Vietnam where unusually cold temperatures were recorded.
Bangladesh also endured a devastating cyclone, while Australia suffered a prolonged drought, harming rice production in both countries.
Thai farmers should thus stand a good chance to benefit from the rising demand for rice if only the government provides them with the right support such as financial help to build rice barns that would enable farmers to stock the rice.
The government should adjust the unnecessary obstacles that prevent farmers from producing rice at a competitive price, such as the high tariffs on imported fertiliser products, rather than implementing panicky policies that would not benefit farmers.
Moreover, the government should stop distorting the market through price speculation. A high increase in the price of rice might look sexy politically, but in practice it would have negative repercussions. Besides, the government should think of ways to help improve production quality now, as the agricultural sector is set to become very attractive in the years to come.
The Nation
Discuss
Add this link to...
Tell a friend
Bury
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