Thai rice policy to follow market forces
By Jon Fernquest |
Sunday's Bangkok Post ran an article on how the Commerce Ministry has decided to play along with market forces in its rice policy.
The government is no longer planning to set aside part of the rice stockpile to sell at cost well below market prices.
It will let markets and economics, usually quite hard to second-guess, do the work instead.
Industry experts believe that rice crops will provide enough this year for both domestic consumption and exports at reasonable prices.
The government will also not attempt to regulate rice export volumes by setting minimum export prices.
Here is the article in full:
Cost-price rice sale plan scrapped
Ministry decides to let market do its workBy Phusadee Arunmas
Sunday April 06, 2008
The Commerce Ministry yesterday decided against imposing measures to cushion soaring rice prices for both local consumers and rice exporters. The decision came at yesterday's meeting between Commerce Minister Mingkwan Sangsuwan, state officials and private operators to discuss the rice situation.
Mr Mingkwan said the meeting agreed that the state's 2.1-million-tonne rice stockpile should be kept as "safety stock" as rice production would be volatile due to the weather in the next six months.
Earlier, the government planned to set aside a portion of the 2.1-million-tonne rice stockpile to sell at cost price to ease the burden on consumers caused by soaring rice prices.
According to Mr Mingkwan, yields from the second rice crop, about 4.29 million tonnes, would ensure that there would be enough rice for domestic consumption.
"The meeting has agreed that this might lower the rice prices, so the government will not impose any measures and let the market mechanism do its work," he said.
He said the ministry would not issue measures to regulate rice export volumes either, despite calls by some exporters for minimum export prices to control export volumes.
According to Mr Mingkwan, the decision would be proposed to the National Rice Committee chaired by Prime Minister Samak Sundaravej for consideration.
Chookiat Ophaswongse, president of the Rice Exporters Association, said yesterday the association agreed that no intervention was needed.
"If rice export volume remains high in the second half of the year we should then consider managing the exports," he said,
He was confident the country would have a sufficient supply of rice for both domestic consumption and exports.
Somroek Tangpiroonthum, president of the Thai Rice Packers Association, said there would be no shortage of rice packs for retail sale. He blamed modern trade retailers for an absence of rice on their shelves. Some modern trade retailers ran out of rice because they did not place new orders and refused to adjust the price despite higher costs.
Pramote Vanichanont, honorary president of the Thai Rice Mills Association, called on the ministry to use existing laws to prevent hoarding of rice.
He said seeking cooperation from parties concerned was not enough as operators tended to hoard rice stocks for speculative purposes.
Sompong Kitireanglarp, president of rice exporter Ponglarp, said the government should have imposed minimum prices. "I am giving up. If the prices continue to rise, I will stop exporting rice. In a situation like this it is hard to do business," he said.
Mr Sompong said he could not fulfill foreign orders. He agreed to export white rice of the 5% type at US$300 but the price went up to over US$700.
(Source: Bangkok Post, general news, 06-04-08, page 3, Phusadee Arunmas, temp-link)
Vocabulary:
follow market forces, play along with market forces, let market do its work, let the market mechanism do its work - let prices be determined by supply and demand
set aside X to Y (verb) - use X to do Y (See glossary)
stockpile - store large quantities for future use (See glossary)
sell at cost (verb) - sell rice at the cost of producing it
a cost-price rice sale (noun) - selling rice at the cost of producing it
second guess - try to guess in advance what will happen
regulate - control
regulate rice export volumes - control the amount of rice exported
scrapped - when the government makes laws
imposing measures - when the government makes laws
cushion soaring rice prices - make life easier for people after a very large increase in rice prices
a safety stock - rice kept for emergencies (for example, the next rice crop is very low, so the rice supply needs to be supplemented)
volatile - the tendency to change suddenly and unexpectedly (See glossary)
a burden - a responsibility that causes difficulty, worry, and hard work
ease the burden - decrease the difficulties of a responsibility, reduce the impact
domestic consumption - products sold for use inside the country
issue measures - when the government makes laws
minimum export prices to control export volumes - only high priced rice is exported, rice below this price must remain in the country for domestic consumption
National Rice Committee - the government committee that makes national rice policy led by the Prime Minister
Rice Exporters Association - the industry association of Thai companies that export rice
Thai Rice Packers Association - the industry association of Thai companies that process and put rice in packages for sale in stores
Thai Rice Mills Association - the industry association of Thai companies that mill harvested rice before it is stored in warehouses or packaged for consumption
committee chaired by Y - Y is the leader of the committee
modern trade retailers - large retail chains like Lotus, Carrefour, and Big C
an honorary president - a title or position given for achievements in the past (usually a position of prestige and honour rather than performing an actual function)
hoard - secretly storing large quantities of scarce things (See glossary)
speculative - buying and selling for profit (See glossary for meaning #1 and meaning #2)
hoard rice stocks for speculative purposes - store large quantities of rice hoping to make a profit on it after prices increase a lot
imposed minimum prices - make a law that forces sellers to charge a minimum price
could not fulfill foreign orders - made an agreement in the past to provide rice in the future at prices which are now impossible for the company (technically, the company could have protected itself from these price changes by using futures contracts (hedging), assuming relevant futures contracts were available)
