Business practices behind debts of poor Thai farmers
By Jon Fernquest |
Monday's Bangkok Post featured an article that explained one common way that poor Thai farmers get mired in debt.
Farmers are being bailed out of their debt problems by the government. (Read a recent Bangkok Post article on this new government programme).
Some might question a universal bail out of every farmer with debt problems because such a programme seems to reward exactly those who have failed to pay back their loans.
This might provide an incentive in the future for more farmers not to pay back their loans in anticipation of help from the government.
Debt problems may just be the symptom of an underlying disease of deficient business practices.
For example, if farmers could actually store their rice themselves, they could wait for the best price, instead of middlemen gaining from rice price increases. (Read recent Bangkok Post article about a rice miller who sold government rice to China for hefty profits)
Contract farming may provide much needed farming supplies to poor farmers in exchange for a fixed price at harvest time.
But these contracts may be exploitative, charging high interest rates for supplies. Further study on industry practices may be needed.
Here is the article in full:
Poor farmers not benefitting from the soaring price of rice
Loans from traders keep growers in debtSUNTHORN PONGPAO
Monday April 07, 2008
AYUTTHAYA : Poor rice farmers do not feel that the soaring export prices will leave them any better off as they cannot sell their grain at these figures and must still seek loans to plant, tend and harvest their crops. Staporn Kitamnuaypong, who sells fertiliser in Sena district, said poor farmers are forced to make deals with traders.
Some firms will lend crucial "production factors" such as rice, seeds, fertiliser and tractor fuel without the farmer paying any money up front.
But when the crop is ready for harvest it must be sold to those traders at prices agreed upon in the contract.
This practice, known as tok khiew or green harvest, has been widespread for more than a decade, he said.
Mr Staporn said he had never tried to take advantage of farmers in this way.
He usually reached a deal to lend them the production factors they need first.
When their crops are harvested the farmers sell their grain where they wish. They repay him from the profits and he charges no interest, he said.
Wichian Phuanglamchiak, of the Thai Farmers Association, said tok khiew is most common in northeastern provinces as such as Mukdahan, Buri Ram and Chaiyaphum.
Farmers could accept the price agreed upon in contracts reached with traders as these prices are usually regulated by market mechanisms.
However, some traders also charged loan interest, Mr Wichian said.
Farmers bound by these contracts could find themselves in deep trouble if their crops were damaged or ruined by natural disasters such as drought, floods or pests.
These crops were the only source of income and without them they had no money to pay off their debts. All too often they lost their land to the lender, Mr Wichian said.
"The government must come up with urgent measures to bail farmers out of their debts," he said.
A proposal by Commerce Minister Mingkwan Sangsuwan that farmers store grain and sell when prices rise was difficult to put into practice.
Many farmers did not have storage facilities and some had already made loan arrangements with traders.
Others had to rush to sell their crops immediately just to get enough money to subsist and invest in the next round of planting, he said.
(Source: Bangkok Post, general news section, page 3, SUNTHORN PONGPAO, 07-04-08, temp-link)
Vocabulary:
Debt Vocabulary:
in debt - must pay money to someone you borrowed from, owe money to someone
mired in debt - have so much debt that you cannot pay it off (like getting stuck in mud)
pay off their debts - paying back borrowed money
bail out - help someone who is having financial problems
bail farmers out of their debts - help farmers pay back the money they owe
General Vocabulary:
a practice - something that people do regularly
business practices - common ways of doing business
industry practices - common ways of doing business in an industry
universal - applies to every case
a symptom of a disease - a sign of a disease that a doctor can detect
deficient - inadequate, not good enough for the goal you are trying to achieve
middlemen - companies that buy from producers and sells to stores or customers
hefty - very large
contract farming - when a company makes an arrangement with a farmer to grow crops for the company
exploitative - unfair, gains unfairly from the work of others
an incentive - a reward for behaving the way that someone wants you to behave
do X in anticipation of Y - do X because you believe that Y will happen
leave them better off - their situation improved ("after" better than "before")
do not feel that X will leave them any better off - believe that X will not improve their situation
figures - statistics
production factors - the resources used to produce goods and services, including labour, capital (machines, factory, facilities, equipment), and raw materials (iron, plastic, rice, etc) (See Wikipedia on factors of production)
pay up front - pay money before receiving what you pay for
without the farmer paying any money up front - farmer receives goods first, then pays later
take advantage of - use someone's personal weakness for personal gain
Thai Farmers Association - an NGO organisation that promotes the rights of all Thai farmers
price agreed upon in contracts - the price written in a contract that the farmer signed in order to get the loan
prices regulated by market mechanisms - prices are determined when supply equals demand in a market
natural disasters - when some event in nature causes harm to large numbers of humans, events include earthquakes, volcanic eruptions, tsunamis, floods, storms, droughts, fires, epidemics, and insect infestations, meteors from outer space (See Wikipedia)
drought - a long period of months or even years, when there is not enough rainfall and the water supply is not enough for everyday life and agriculture, usually this only occurs during the dry season when there is little rain and wells run dry (See Wikipedia)
pests - insects, insect populations can suddenly increase and destroy crops (See Wikipedia on 1915 Locust Plague in Palestines and locusts in history and literature)
subsist - just able to obtain enough money and food to stay alive (not a happy way to live)
one round - one series of related events, among many in a larger series of several rounds (a round of negotiations, a round of golf, a round in a boxing match)
next round - the next series of related events (the vowed to reach an agreement in the next round of negotiations)
