What do Thai farmers think of rice pledging – Part 2By Bangkok Pundit Feb 18, 2014 10:30AM UTC
2. Rice production, expenses, and income
2A. Has your production level increased compared with previous year?
-Increased a lot, 1.3%
-Decreased a lot, 2.2%
BP: Depending on how you define it as a blessing or a curse, this shows part of the problem for the government. Quite rationally as farmers are getting more money, they are producing more rice, but greater production means greater cost and also more rice for the government to sell. It becomes a problem that just increases. This is not a problem inherent just to rice pledging, but any scheme where a subsidy is provided. The result will be greater production – assuming things on the world market remain the same – and lower prices requiring a greater subsidy. Hence, there is some importance in making sure that any subsidy scheme is limited in only subsidising an xx amount of rice per household. Will get into more detail later, but this also ensures that a greater proportion of the subsidy goes to those on lower incomes (assuming that those on lower incomes grow less rice).
2B. How many harvests a year?
BP: Relevance to the above is, if only one harvest which would normally be during October-February/main harvest then there is no need to try to provide compensation during the off-season, but as you see we are talking almost half who have more than one harvest. It is not a small minority.
2C. Are you in an irrigated area?
BP: BP is unsure on the feasibility and costs of further irrigating vs the reduced costs for farmers of further irrigation so won’t comment too much, but it does seem a worthwhile long-term plan.
2D. What percentage of your rice is planted in what harvest/season?
-Main harvest, 64.3%
-Out-of-season harvest, 35.7%
BP: Connected with 2B. Main harvest is still key.
2E Have you had a drought problem before?
2EA. Main harvest
2EB. Out-of-season harvest
BP: For both, this is when have you had a drought problem which could refer to just once 20 years ago so not that conclusive.
BP: See commentary below
2G. Farming this year
BP: The % is which household produced what quantity and it is not the amount pledged; just grown. BP will point out now that for the main harvest the rice pledging price is 15,000 Baht a tonne and a maximum of 350,000 Baht per household, whereas for the out-of-season harvest, the price is 13,000 Baht a tonne and a maximum of 300,000 Baht per household. These limits for the main harvest are for the just past harvest (before this survey). In BP’s view these were a little too late, but still necessary. As rice pledging was not helping to raise the world price, there was no point to subsidise farmers beyond a certain pledging volume point. See also 2H and other comments below.
NOTE: By way of contrast under the Democrat’s income guarantee scheme, the “guaranteed quantity of rice per household of the income guarantee scheme of the year 2010/2011 in the second round was; 25 tons for Pathum Thani 1 paddy rice, 25 tons for unhusked rice and 25 tons for unhusked glutinous rice” in 2010, but this was later increased to 30 tonnes in 2011 after protests although farmers wanted 40 tonnes.
2H. How much money/income do you receive from pledging each harvest?
BP: The market price for rice has been around 8,000-10,000 Baht over the last few years so this money received is not all subsidy, it includes actual rice, but it is also noticeable that for the main harvest over 85% get less than 240,000. It shows as mentioned above, why limits should have been placed earlier on – and certainly after the first year – on the maximum amount received per household.
BP is not saying that these limits would significantly decrease the losses, it is more of an equality issue and why should farmers who earn higher-than-average household incomes continue to be subsidised beyond that level.
2I. How much extra money do you receive compared with before the pledging?
BP: Technically, this is not just the subsidy, but it can also include monies received because of the higher prices and the fact that farmers are harvesting more rice and so the profits they get from that. Nevertheless, the reality is that because of pledging, the average rice farming household gets an average of 115,000 Baht per year. Yes, there are some who earned a lot of money, but we are talking about 15% and even then they don’t skew the numbers up that much.
Yes, farmers are unhappy about not getting paid. They were also unhappy with the Democrats in 2011 although that got little coverage. TANN in 2011 on farmer protests:
Following yesterday’s National Rice Policy Board meeting which was presided over by Prime Minister Abhisit Vejjajiva, the government has decided to raise the reference price and rice quantity for the farmer income guarantee scheme for three types of rice, namely white rice which is now at 11,000 baht per ton, Pathum Thani rice which was readjusted to 11,500 baht per ton and sticky rice at 10,000 baht per ton.
Meanwhile, the guaranteed quota has gone up from 25 tons to 30 tons per household. The decision has sparked dissatisfaction among rice farmers across the country.
Farmers in the North have gathered in front of Naresuan University in Phitsanulok province while Ayutthaya farmers are staging their protests in front of the provincial hall.
The farmers are demanding the government increase the reference price from 10,000 to 14,000 baht, raise the quota from 25 to 40 tons per household and ensure that the price of paddy with 30-percent moisture be raised to a minimum of 10,000 baht per ton.
Although many farmers strongly disagree with the National Rice Policy Board’s decision, a large number have dispersed with the plan to send representatives from different provinces to discuss the issue with the panel.
Protest leaders said farmers will stage a rally again if the rice panel does not respond. Nonetheless, there are still a number of disgruntled farmers at rally sites in Ayutthaya
BP: So Puea Thai essentially gave the farmers slightly more than what they wanted. This is a key point. Most farmers were unhappy with what the Democrats were offering and wanted what Puea Thai was offering. Now, BP doesn’t doubt that Puea Thai will have lost support, but there is still no counter-offer from the opposition on what their policy is. Remember in 2011, Puea Thai did provide a counter-offer. It would be very difficult for the Democrats that are demonising the scheme to continue it, but BP isn’t sure that offering 11,000 Baht a tonne (or 12,000 Baht a tonne which was the policy during the 2011 election) will be enough. Those who are disgruntled farmers – and not Democrats – are more likely to go for third parties unless the Democrats offer a generous alternative.
BP still views that a change is needed. As blogged in October:
If anything the current implementation shows is that the government should steer clear of trading and like Pridiyathorn says just leave it to private rice trading firms. A direct subsidy scheme will still cost a lot. Pridiyathorn talks about 2,500 Baht per tonne which BP is sure that farmers won’t go far given they receive far more than under rice pledging. However, at around 4,000-4,500 Baht a tonne, it would make selling the change to farmers much easier. Even then with a direct subsidy of 4,000-4,500 Baht a tonne at the time rice is sold and set a maximum of how many tonnes per household per year (say 15-25 tonnes per household per year) then if you have around 20 million tonnes** you are talking about 80-90 billion Baht a year. Remember the Democrat’s rice income guarantee scheme cost 67 billion baht in its final year (see also USDA report for the costs). There will be also be some costs for administering the scheme, but there will be such costs for any scheme.
With a direct subsidy, the government can let the private sector deal with the rest so this avoids this all of the messy complications and uncertain cost of the current scheme. Even now, the costs of the pledging scheme are still unclear. It will also avoid misleading articles to the “cost” because now the cost will be clearer as there is no need to deduct costs for money made from selling rice as well as storage and all other various costs. A direct subsidy won’t stop many farmers being screwed, but the rice pledging scheme hasn’t done this either.
One reason for pledging is that farmers know the amount of money they will receive, but the reality is that farmers don’t know how much they will receive under the pledging scheme. Under the pledging scheme, the moisture content of rice must be lower than 15% to get the 15,000 Baht pledging price, but most farmers do not pledge rice that has a moisture content of less than 15% so they don’t get the 15,000 Baht and instead get a lower figure depending on the moisture content or quality of the rice. If necessary, the direct subsidy could be adjusted by harvest to provide certainty.
BP: Would adjust slightly for political optics purposes and say a maximum of 100,000 Baht per household in a direct subsidy. Either a maximum of 4,000 Baht a tonne* and maximum of 25 tonnes per household. This would likely put the cost just over 100 Billion Baht a year, but not that much more with 21,000,000-22,000,000 tonnes pledged in recent years. One of the benefits of a direct subsidy is that there are fewer moving parts than rice pledging. There aren’t so many hoops to jump through as with the current scheme especially with the government under attack from all corners. Something cleaner and easier to manage is needed.
NOTE: More to come. The question order and numbers for question, e.g 1A, is per BP’s order.
*If the market prices hits a certain level, this could be reduced….