Thai rice pledging, moisture content, and corruptionBy Bangkok Pundit Jun 23, 2013 10:00AM UTC
Veera in the Bangkok Post:
The government, especially commerce officials, should have known that farmers would never get the promised pledging prices, and that the differential between the prices set for pawned crops and the money that ended up in the farmers’ hands would go into the pockets of others involved in the scheme. Farmers complain the 15% moisture content rule has been widely abused by millers to lower the price paid.
The Bangkok Post:
Rice costs more than 8,000 baht per tonne to produce and the 12,000 baht pledging price can be reduced by up to 15% to account for moisture content in the rice, he explained. Farmers could receive just 9,000 to 9,500 baht per tonne after deductions for excessive moisture, Mr Prasit [Boonchoey, chairman of the Thai Farmers Association] said.
Samien Hongtoh, chairman of the central region’s farmers’ network, said he is waiting for information on new rules about moisture content. If the government sets a price of 12,000 baht and then subtracts fees for the 15% moisture content, farmers will never accept the price, because they would end up getting only 8,000-9,000 baht a tonne. Moisture content is currently relevant to price in the government’s purchase programme.
Mr Samien said if the moisture content level is set at 25%, it would be acceptable, because farmers would wind up with more than 10,000 baht from pledging the rice.
BP: What is annoying about this is that there is plenty of information online explaining about moisture content. Here is an explanation from an academic paper (PDF):
After harvesting, the moisture content of rice paddy is as high as 19%-26 % (wet basis) and even higher during the rainy season. Rice paddy is usually dried to reduce moisture content to 14% or lower for a safe storage before a milling process. However, if the moisture content in paddy is too low, the grains are so fragile when being milled. This can lead to higher fraction of broken kernels. Keeping the rice paddy at acceptable moisture content can prolong storage time and prevent mould growth.
From a Belgium agricultural Web site (PDF):
Moisture content has a marked influence on all aspects of paddy and rice quality and it is essential that paddy be milled at the proper moisture content to obtain the highest head rice yield. Paddy is at its optimum milling potential at moisture content of 14% wet weight basis. Grains with high moisture content are too soft to withstand hulling pressure which results in grain breakage and possibly pulverization of the grain. Grain that is too dry becomes brittle and has greater breakage. Moisture content and temperature during the drying process is also critical as it determines whether small fissures and/or full cracks are introduced into the grain structure.
The Thai Agricultural Standard from 2008 also sets out (PDF):
2.2 Dry paddy rice means paddy rice with the moisture of less than 15% for trade rice.
Surachai Sungzikaw of the Bureau of Weights and Measures, Thailand explained (PDF) in a presentation in 2009:
The measurement of moisture in paddy rice is critical because the amount of moisture in grain affects its harvest yield, weight, safe storage, milling yield, and quality.
Paddy rice is bought and sold based on weight.
• When a buyer purchases paddy, he measures the moisture content to determine if it is higher than the limits (15%) for safe storage.
• The buyers charge the sellers (farmers) for drying cost and the reduction in weight
– The charge by reduction in weight based on moisture for paddy is 15 kg per metric ton for each 1% moisture over a set moisture limit of 15%
– If the paddy received is 17% moisture and its weight is 5 metric tons, the weight value would be reduced by (2*15 kg *5) or 150 kg.
The Bangkok Post from 2012:
To receive the full 15,000 baht/tonne, the paddy must not hold more than 15% moisture content. If the moisture measuring device is rigged to show higher moisture content, the weight of paddy is deducted at 15kg per tonne for every 1% moisture level over the 15% limit. For example, if the moisture content is 16%, one tonne of paddy is calculated to weigh 985kg. If the moisture content is 17%, one tonne of paddy is calculated to weigh only 970kg. Instead of receiving 15,000 baht, 450 baht will be deducted if the moisture content is 17%.
As if this is not enough, the pledged paddy must not have more than 2% foreign elements. If more, money is also deducted. All in all, farmers usually receive 12,000-12,500 baht for one pledged tonne of paddy, not the full 15,000 baht, notes Dr Anant.
The Bangkok Post from March 2011 (ie under the Democrats’ scheme)
They say while they believe the insurance programme benefits farmers, authorities should base prices on paddy with moisture content of 20-30% instead of the standard 15% and help them cut costs.
Farmers from Phitsanulok, Lop Buri, Roi Et and Yasothon outlined their views to Prime Minister Abhisit Vejjajiva in a videoconference held yesterday.
The current benchmark paddy prices under the insurance programme are based on 15% moisture content. They are 11,500 baht per tonne for Pathum Thani I, 11,000 baht for regular paddy, and 10,000 baht for glutinous paddy.
Normally, farmers sell their paddy to rice millers immediately after the harvest. Selling prices range from 6,500 to 7,300 baht per tonne while costs are around 6,000 baht.
Under the price insurance scheme, payments are based on the difference between insured prices and benchmark prices, regardless of market prices when farmers sell their crop.
Yanyong Phuangrach, the permanent secretary of the Commerce Ministry said 15% moisture content was the standard for setting benchmark prices. Each increase of 1% in moisture adds 15 kilogrammes to the weight of a tonne of paddy.
BP: Also, not all farmers receive a lower price. The University of the Thai Chamber of Commerce conducted a survey of farmers on the rice pledging scheme and other issues for farmers in July 2012. Below is the question:
Q6: Was the price received for pledged milled rice that you really received actually in accordance with the declared price? (ราคารับจานาข้าวเปลือกที่ท่านได้รับจริงเป็นไปตามที่รัฐบาล ประกาศหรือไม่ เพราะเหตุใด ) (July poll)
-Same as declared, 32.8%
-Lower than declared, 67.2% (48.8% moisture more than specified, 26.8% the quality of the rice was not in accordance with the rules, 23.1% price cut, 1.3% sold at mills that haven’t entered the program)
BP: No doubt some farmers are able to dry their rice and remove foreign elements and hence can receive the full price. Most don’t and hence don’t received the full price.
So previously the price under the income guarantee scheme of the Democrats, the regular paddy price was 11,000 Baht, but the price received could be for many was from 6,500 to 7,300 Baht per tonne (because of moisture content and foreign elements in the rice?). When the pledging price was 15,000 Baht then the price received for many was around 12,000 Baht. On the proposed reduction to 12,000 Baht,* this will reduce further the price received for many to below 10,000 (above two different people are quoted as saying the price received will be is 8,000-9,000 Baht or 9,000-9,500 Baht).
So actually regardless of what kind of scheme is in place OR whether there is any scheme in place, moisture content of 15% or less is the standard. Remember a higher moisture content makes the rice weigh more and it has to be dried to lower than 15% in order than it can be stored properly. Hence, because farmers get less than the actual pledging price is not necessarily cheating or corruption – although one would be naïve to think some millers are not cheating farmers - because most farmers have always got lower than the market price because of the higher moisture content and other foreign elements in the rice. So you when you note talk of others capturing the benefits from the pledging scheme and farmers receiving a lower price than the pledging scheme, this is not necessarily because of the scheme as such, but because of the nature of how Thai farmers harvest rice. If there was no scheme in place, they will still receive less than full price.
*Will blog later on the reduction, but it may end up being up to 13,500 Baht.