Cost of rubber production and income for rubber farmers vs rice farmersBy Bangkok Pundit Sep 09, 2013 3:20PM UTC
One issue on whether subsidies and aid provided to rubber farmers is sufficient does depend on the cost of production for rubber and income/profits earned by rubber farmers. The focus of this post will be quite narrow as want to link to in subsequent posts on this issue, but will also try to briefly compare with rice farmers
The government recently put out some figures
NOTES: Blue = rubber; green = rice. English language text has been added by BP
BP: Figures below do differ from the above, but many of the figures that BP will be citing are not necessarily from 2013 (it is actually quite difficult to find up-to-date information).
On number of households. Presentation from 2010 from Knowledge Network Institute of Thailand:
From July 2013 report from Knowledge Network Institute of Thailand:
1. Rice in Thailand Agriculture
* Share of Paddy land 47% of agr. Land (23.8 million ha).
* Two third of agr. hh are rice farm hh. with ave. farm size of 3.5 ha/hh.
* 27% (10 million) of total labor force participating in rice production.
TDRI in August 2013:
Of them, about 4.8 million households (18 million people) are rice farmers.
Meanwhile, according to a TDRI study,2.59 million of the poorest rice farming households do not produce enough rice to join the scheme.
From the Rubber Association from July 2012, they state “1 million families or more than 6 million people across the country”.
BP: Regardless the number of rice households is significantly higher.
Now, below on production cost, income after expenses/profit
In 2008, a report published by the Thai Department of Agriculture which concluded that the average cost of production per kilogram was 50.57 Baht with labor being 60.45% of the cost of production.
Khao Sod quotes the Secretary General Office of Agricultural Economics in 2013 as stating that the production cost for rubber was 64.19 baht per kilogram.
Khao Sod spoke to some people with knowledge in the industry who stated that the rubber organization [BP: More on this in the next post, but it is partially industry-subsidized from a tax on exports] provides money of thousands to 10,000 per rai and that when done with rubber taping that the wood from the trees can be sold.
A further report from 2009 entitled “</The Study of Production Function and Cost –Benefit Heava Brasilionsis [rubber tree] Farming in Surat Thani” by Anuman Chanthawong of Suratthani Rajabhat University which surveyed 399 farmers (divided into 3 equal groups of less than 10 rai; 10-20 rai; more than 20 rai) in Surat Thani province. It found that over the complete 25 year life cycle, farmers of up to 20 rai earned 1,499,000 Baht per rai whereas those over have over 20 rai earned 1,542,200 per rai. After expenses the return was 309,290 Baht [per rai] for those with less than 10 rai; 309,368 Baht [per rai] for those with 10-20 rai; 322,432 baht [per rai] for those with more than 20 rai. The rate of return for less than 10 rai was 23.83 %, areas between 10 – 20 rais was 23.84%, and areas more than 20 rai upwards was 24.00%
On July 3, 2013, the farmers council of Rayong stated that for a 20 rai farm in Rayong that the cost of production was 79.37 Baht a kilogram.
Below are some screenshots from a recent report from the Bank of Thailand:
BP: Note these are costs and price received in the Northeast only… As you can see there is a reasonable gap between cost and the prices that farmers get, but the cost of production is rising.
NOTE: English language text has been added by BP
BP: Production costs have been going up for a while, but have skyrocketed in the last 2 years. On the increase in prices over the last few years, there is an obvious reason. In 2008, it was estimated that labor costs made up 60% of the product cost. During the 2011 election, Pheu Thai Party promised to increase the daily minimum wage to 300 Baht a day and that this would mean there would be a single rate across the country. At that time, the minimum wage was between 159 to 221 Baht – with the amount being higher in urban provinces and lower in rural provinces. As of January 1, 2013, the minimum wage has increased to 300 Baht a day. To give you an example of how much this has increased specifically. In Surat Thani, where we have recent protests as of January 1, 2011 the minimum daily wage was 172 Baht this increased to 240 Baht as of April 1, 2012 and then to 300 Baht as of January 1, 2013. Hence, it should not be surprising for the large increase in the production cost over the last few years….
Nevertheless, income per rai has been reasonably high in comparison with other agricultural goods. It may not be as high as 17,000 baht per rai, but a few at Panthip put it at 12,000-13,000 Baht per month (when the price is at 80 Baht per kg) although this would reduce by 40% if someone is hired to do all the tapping work.
For rice, Srisompun and Isvilanonda from Knowledge Network Institute of Thailand in a paper last year:
As for the cost of rice production, in Suphan Buri Province, the irrigated SP1 village recorded an increase in production cost from 2,813.9 baht per rai in the wet season of 1987/88 crop year to 5,224.6 baht per rai in the 2007/08 crop year, or 85.67% increase.
The Nation in November 2012:
Based on what farmers told The Nation they get on average 12,000 Baht per tonne with costs of 6,000-8,000 baht per tonne
Wichian Phuanglamjiak, a deputy head of the Thai Rice Growers’ Association, said the estimate of per-rai farming cost was higher at Bt7,000 to Bt9,000, while the post-deduction rate for a similar policy initiated, but no longer in use, by the Democrat-led government would earn farmers Bt7,500 while the rate designated by the current government would earn them Bt12,000, however, with a delay in payment. He did not elaborate.
The Nation in August 2013:
The Rice Department targets a reduction in production costs from the current average of Bt8,371 a tonne to about Bt6,490 a tonne.
Below is a screenshot from a recent reportfrom the Bank of Thailand:
NOTE: English language text has been added by BP
BP: Only thing BP is not sure about is whether the above production cost figures are for all types of rice or just standard rice (i.e jasmine rice sells for significantly more and well it also has a higher production cost). Nevertheless, if you look at the number of kgs per rai that farmers get, it is not even 1 tonne. Hence, you can see why the monthly or yearly income can be quite low for rice farmers. Remembering that farmers sell by tonne whereas rubber farmers sell by kg…
The above is a bit of a mess, but that is because all of the sources vary. Nevertheless, from an overall review of the literature it is quite clear that rice farmers have been earning less than rubber farmers for a while. With the low prices rubber farmers are facing some difficulties, but historically they have done quite well. Having said that, BP is skeptical whether rubber farmers are currently earning 17,000 Baht per rai as government figures state (they may have done so last year or in 2011 when prices were much higher).
In addition, it should be pointed out that a major reason for the increased production cost is the government increase on the minimum wage. BP doesn’t think the government will suddenly reverse the minimum wage increase so on this ground alone, the government will feel pressured – together with the fact because of the high subsidies it provides to rice farmers – to pacify as many of the farmers they can.