What is really happening in Thailand's rice sector?
Economist Somporn Isvilanonda of Kasetsart University lays the record
straight
By Jon Fernquest Yesterday's business section in the Bangkok Post featured a concise summary of the rice price support situation in Thailand as it currently stands.
The article is based on an interview with Kasetsart University economics professor Somporn Isvilanonda.
Here is the article in full:
Taxpayers hurt too, warns KU economist
PARISTA YUTHAMANOPMonday November 17, 2008
The government will lose tax money and ruin the domestic rice market if its guarantee prices for rice continue to be much higher than market rates, according to Somporn Isvilanonda, an economics professor at Kasetsart University.
The guarantee should be equal to the market price or slightly above it, says Prof Somporn.
The Somchai Wongsawat government has endorsed the guarantee price to farmers for main-crop paddy at 12,000 baht per tonne. But it has not yet decided whether to continue its mortgage scheme for second-crop paddy.
The previous government under Samak Sundaravej offered 14,000 baht a tonne earlier this year when world rice prices were soaring. Now its successor faces huge losses as rice prices have fallen 50% since April.
The government's rice inventories have swollen to four million tonnes as farmers defaulted on contracts. Officials have failed to unload the stocks because few buyers are willing to offer prices anywhere near what it would take to cover the government's costs.
The previous government had an opportunity to profit from its rice inventories if it sold the rice when the world market price topped $900 per tonne, compared to $590 currently, Prof Somporn said.
More headaches are in store if authorities continue to buy up second-crop paddy. The mortgage scheme that began this month called for purchases of eight million tonnes of paddy, which could create 4.5 million tonnes of white rice when milled.
A state stockpile of nine million tonnes would exceed one-third of the country's annual output and seriously distort the market, the economist said. In addition, it would destroy past efforts to create local reference prices, as farmers would prefer to mortgage crops at higher prices.
Market intervention can be an effective short-term measure when prices are highly volatile. But the guarantee should equal the market price or be only slightly above it, Prof Somporn said.
Farmers in well-irrigated areas are expected to profit by 2,000 baht a tonne from the existing mortgage scheme, given 8,000 baht in costs and the 2,000 baht that mills deduct for drying, he said.
(Source: Bangkok Post, 17-11-08, Taxpayers hurt too, warns KU economist, PARISTA YUTHAMANOP, link)
Vocabulary:
rice price supports - the government system of buying rice from farmers at or above the market price, to protect farmers from low prices at harvest time การพยุงราคาข้าว
lay the record straight - explain the true situation เปิดเผยตัวเลขจริง
guarantee prices - prices that the government guarantees to farmers ประกันราคา
paddy - rice ข้าวเปลือก
a mortgage scheme - the government programme of buying part of the rice crop at a guaranteed price at or above the market price การจำนองข้าวเปลือก
a successor - the person in a position after you leave the position ผู้ที่จะมาดำรงตำแหน่งต่อ
swollen inventories - very large amounts stored (too much) เก็บสินค้าไว้เป็นจำนวนมากเกินไป
unload the stocks - sell the large amounts you are storing นำสินค้าในโกดังออกมาขาย
cover costs - the money is enough to pay the costs of doing it เพื่อให้คุ้มต้นทุน
a state stockpile - a large amount of rice stored by the government ปริมาณข้าวเปลือกที่รัฐบาลมีไว้ในคลัง
distort the market - buy, sell, or set prices so that are not determined by supply and demand anymore ทำการซื้อขายสินค้าหรือกำหนดราคาเพื่อป้องกันไม่ให้ราคาถูกกำหนดด้วยอุปสงค์อุปทานมากไป
local reference prices - the prices used locally to calculate the prices of other goods ราคาซื้อขายในท้องตลาด
mortgage crops - the rice grown to be sold in the government "mortgage scheme" ข้าวในโครงการจำนองข้างเปลือก
market intervention - when the government buys, sells, or controls prices in a market การแทรกแซงกลไกตลาดโดยรัฐบาล
volatile - value moving up and down by large amounts unexpectedly การแกว่งขึ้น-ลงของราคาอย่างมาก
