Large-scale commercial rice farming
and foreign investors
a threat to Thai rice farming?
By Jon Fernquest |
Recent interest in Thai rice farming by Middle East investors prompted an immediate outcry by activists.
After the dust settled a bit, Bangkok Post reporter Parista Yuthamanop probed a little deeper into the issue of large-scale commercialised rice farming, and the result is a long article full of insights in this week's Bangkok Post.
Here is the article in full:
AGRICULTURE
Debating the future of rice in Thailand
PARISTA YUTHAMANOPMonday June 02, 2008
The surge in rice prices has led to a common assumption that Thailand's low-wage farmers are enjoying a financial windfall that may eventually lead to a sustainable shift upwards in their standard of living.
Not all of them.
Certainly not Wallop Ampanthong, a 47-year-old farmer who shot himself dead last month after learning that his rice fields and investment had been destroyed by pests.
In what seems like a paradox, billionaires from the oil-rich Middle East came here to tour paddy fields in Suphan Buri, apparently with a keen interest to invest in rice farming as if rice had become a commodity as precious as oil.
Whether or not foreign investment in rice farming is plausible, the attention of oil-rich businessmen has drawn extensive debate and fears that highly capitalised farmers could crowd out small-scale ones who already struggle to survive with uncertain weather, profiteering middlemen and mounting debt.
Chermsak Pinthong, an expert on rural development and a political activist, said the public should first ask whether large-scale farms actually have a competitive advantage over smaller-scale ones, before jumping to the conclusion that this will have negative consequences.
"Is it true that large-scale farms operate at a lower cost and can create better yields? Large-scale farms in the United States have high production costs and still depend on government subsidies," Mr Chermsak said.
Fears that promoting large-scale farming could create a monopoly in the country's rice production, similar to what has happened with the poultry and egg sector, stems from a key misunderstanding, he said. Poultry is driven by technology, not land scale.
"We need to ask what kind of technology large-scale farmers have, whether they are foreign or local. Are their seedlings better than those used by smaller farmers?" he said.
"One clear benefit of large-scale rice farming might be the ability to level the land for irrigation. We could miss an opportunity to gain the know-how if we reject the idea right away. If we want to protect small farmers, then encourage their cooperation."
But Witoon Lianchamroon, director for Biothai foundation, a non-governmental organisation focusing on bio-piracy and small-scale farmers, completely disagreed with the idea of welcoming foreign investors into local rice production on the grounds that it would impact resource allocation and spread toxic technology.
"Entrepreneurs might force farmers who rent their land to use expensive technology that can produce low yields like hybrid seedlings, GMOs [genetically modified organisms] or high amounts of chemicals," he said.
"In 1996, chemicals found in US rice increased tenfold, while yields hardly improved. I don't see any benefits from know-how transfer."
Viroj Na Ranong, an economist with Thailand Development Research Institute, said the strain on available resources should not be a problem because the country's relatively low birth rate - now below the replacement rate of two children per family - meant fewer demands on land resources in the future.
The decline in land ownership by farmers and the trend towards greater use of machinery and hired labour has already happened.
"I don't think land scarcity is a big issue today. Thailand has produced more rice even with a smaller number of farmers. Many rice farmers gradually left their profession because the returns from rice farming were not worth it," he said.
"A lot of farmers work on the side as taxi drivers in Bangkok when it's not rice-farming season, and return only when harvest time arrives. It allows them to earn more. There is also a tendency for farmers to quit and earn money from something else."
Rice farming won't necessarily remain a preferred occupation in Thailand, considering evidence that rice farmers in the Northeast rank among the country's lowest income group.
"I don't think we need to preserve rice farming for Thais. While we tell the rural community to take pride in growing the best-quality rice, it appears that the country's poorest households are located in toong kula rong hai," Dr Viroj said, referring to a vast area spanning five northeastern provinces that focus on jasmine rice plantation.
"There is just a brief period in a year that is suitable for planting jasmine rice. That cannot keep everybody fully employed," he said. "Farmers in the central region can grow rice up to three times a year, and they are better off even when producing a lower-quality grain.
"Not all farmers can subsist on sidelines like weaving or wickerwork so many migrate to work elsewhere. This naturally leads to the increasing trend of mechanisation and rented farms, which is, again, more cost-effective in the level irrigated land on the central plains, where farmers with significant land holdings are better off, even when they have to pay the rent themselves."
The public should have an open mind about large-scale farming as it could be an inevitable trend in rice farming.
"We should think of the development of large-scale rice farms and mechanisation as a form of evolution. It is similar to a trend that many mom-and-pop grocery owners shifted to operate 7-Eleven franchises. In this case, farmers may make their own decision which way they want to go," he said.
Dr Viroj disagreed that Thai rice farming, mostly rain-fed, had much room to improve yields significantly. Paddy yields in the irrigated central plains do not have much lower yields than those in developed countries.
The low average yield in Thailand reflects the reality that 80% of paddy fields are rain-fed. Investment in more dams is not a viable solution, since doing so tends to divert water from one place to another rather than providing additional water to more land.
To improve yields would require new and more expensive technology such as hybrid seeds. While organic fertiliser is useful to improve soil conditions, it has too few nutrients and organic fertiliser alone can be more expensive and less cost effective than mixing it with chemical fertiliser.
Rice farmers, to a large degree, will still need to use chemical fertiliser which means that their costs will only increase with the soaring oil price, Dr Viroj said.
"Although the rice price is currently high, the input costs also increase substantially. Rice farming has become a business where higher returns are associated with higher risks. This is why we are going to see rice farming moving toward bigger and more professional farms in the future."
Somporn Isvilanonda, a member of the Rice Department and an economist with Kasetsart University's Department of Agriculture and Resource Economics, said governments should focus on improving technology in rice farming rather than promoting foreign investment in the sector. It could derive funds from the sale of rice in its inventory which has swollen lately because of the high-price guarantee.
"I disagree with the government promoting foreign investment in local rice farming. Rice, in Thailand, has a broader context beyond business. If rice farming in Thai society is crowded out, social values will change," he said.
Mr Somporn also warned that the government's move to guarantee paddy prices of 14,000 baht per tonne, compared with 6,500 baht in 2004/2005, could potentially lead to additional government financial burdens to offset loss to state-owned banks who lend to the programme.
This is because an expected fall in rice market price caused by an inventory release by Japan and US in the near future could lead farmers to default on their loans.
"This, rather than a discussion on whether we want to promote foreign investment, is the immediate problem. Foreign investors have a lot of money, but they may not be able to begin right away," he said.
(Source: Bangkok Post, op-ed section, 02-06-08, PARISTA YUTHAMANOP, page 11, temp-link)
Vocabulary:
prompted - caused
after the dust settled - after an event has finished (people have stopped acting so you can describe it)
probed - ask questions to discover facts about something
large-scale - happening over a very wide area, involving many people and resources
commercialised - ran as a profit making business (that can fail and go bankrupt)
large-scale commercialised rice farming -
insights - accurate and deep understanding of a situation
outcry - a public reaction of strong disapproval and anger
activists - people who work in campaigns for social change (See Wikipedia)
an assumption - a fact accepted as true without proof
a common assumption - many people believe this (without questioning)
enjoying a financial windfall - receive large unexpected profits or amounts of money (See glossary)
standard of living - the level of comfort and wealth that someone has in their everyday life
a paradox - when two facts seem to contradict each other
plausible - likely to be true
debate -a formal discussion on an issue in the form of a contest, the argument of each of the two sides of the issue are presented, and then judges declare a winner (See Wikipedia)
drawn extensive debate - has caused many people to debate the issue
crowd out - push out, fills up (takes up all available space and resources so that others cannot exist)
middlemen - buyers and sellers of goods between the factory and the final consumer (wholesalers, exporters, processors, packagers, retailers)
mounting debt - debt increasing (without ever going down)
a conclusion - a decision made after careful study and consideration of all the facts (also means "the end")
jumping to the conclusion - making a decision before carefully considering all the facts
a monopoly - when a company has the power to control the price the price of a good it produces because there are no other companies producing that good (no close subsitutes), examples of natural monopolies are utilities (electricity, water, gas) (See The Economist glossary)
stems from - comes from, is caused by (See glossary)
grounds - reasons
on the grounds that - because of the reason that
resources - the material and money that an organisation needs for its operations
allocation - the act of sharing something among several people (See glossary)
impact resource allocation - have an effect on who gets what resources and how much
GMOs [genetically modified organisms] - organisms that have had their DNA altered through genetic engineering. GM foods were first put on the market in the early 1990s. The most common modified foods are derived from plants: soybean, corn, canola, and cotton seed oil...Controversies surrounding GM foods and crops commonly focus on human and environmental safety, labeling and consumer choice, intellectual property rights, ethics, food security, poverty reduction, and environmental conservation." (See Wikipedia on genetically modified food)
increased tenfold - increased to a level 10 times as much (for example, from 8 to 80)
know-how - knowledge of how to do something
know-how transfer - giving or sharing with other people, knowledge of how to do something
a strain - a force that may damage and break something
a strain on available resources - some activity that threatens to use up all resources
scarcity - when there is not enough of a resource (See glossary)
land scarcity - when there is not enough land
work on the side as taxi drivers - drive a taxi to earn money, in addition to your full-time work
preferred occupation - the work that you would like to do
vast area spanning five northeastern provinces -
farmers with significant land holdings - farmers that own a lot of land
better off - richer
an open mind - willing to consider the ideas of other people
a viable solution - a solution that may work
divert water from one place to another - change the direction of the water, so that it is moving to another place
hybrid - a plant or animal bred from two different species or kinds of plant or animal
hybrid seeds - seeds that are combinations of different kinds (strains) of plants
nutrients - substances that help plants and animals grow (See Wikipedia)
fertiliser - food for plants, minerals or natural materials given to plants to help them grow (See Wikipedia)
organic fertilisers - fertilizers such as manure, worm castings, peat, seaweed, sewage, and guano (See Wikipedia)
chemical, mineral, inorganic fertilisers - chemicals such as sodium nitrate, phosphate, and limestone given to plants to help them grow (See Wikipedia)
to a large degree - is true for most
has a broader context beyond business - this issue should not just be considered from the viewpoint of the business person
