Agriculture price guarantees not very sustainable, warns academic

[webfact]

Agriculture price guarantees not very sustainable, warns academic

By Somluck Srimalee
The Nation

 

 

Though the government plans to spend Bt150 billion on agriculture price guarantees, this measure will not improve the quality of products or boost farmers’ quality of life, an academic warned.

 

“The price guarantee cannot be applied to all products because they all take different times to produce, like rice takes three to four months, but rubber can take a long time to be converted to products. This government price-guarantee policy will not provide a long-term solution,” Assoc Professor Dr Nipon Poapongsakorn, an academic at Thailand Development Research Institute Foundation (TDRI), said recently.

 

He also said that the scheme will be difficult to control, as different areas have different market prices for different products. For instance, rice in the Central region goes at a different price compared to the North, which means rice farmers in different areas will get different amounts. The price of other agricultural products such as rubber, cassava, maize and palm oil also vary greatly. 

 

“This policy, which was started when the Democrat Party was in power, has already faced problems, such as farmers splitting their land up among family members to become eligible for the subsidy. This is difficult to investigate,” he said. 

 

Nipon also said that this policy cannot improve the quality of agricultural products, making the scheme unsustainable in the long term. 

 

 

“If the government wants to improve farmers’ quality of life in the long term, it has to invest on improving the quality of products and create value-added options for agricultural products,” he said. 

 

He added that the Bt150-billion budget will not be enough if the government wants to cover all agricultural products grown in the country’s 60-million rai (9.6 million hectares) of agricultural land. 

 

“Price guarantees cannot boost agricultural prooduction price either, because it has to follow market trends. If the government wants to boost production price, it should use the mortgaging method, though I don’t think this government will do that. The mortgaging system also has faults,” he said. 

 

Charoen Laothammatas, president of the Thai Rice Exporters Association, agreed that the price-guarantee system was a short-term measure to ensure farmers have a stable income, but in the long term the association wants to improve the quality of seeds and help farmers produce better quality crops as well as expand their markets overseas. 

 

Thailand currently exports 300,000 tonnes of rice annually to Japan and an average of 800,000 tonnes to Iraq and Iran. It also has a government-to-government contract with China to ship up to 2 million tonnes of rice there. This year, 1.7 million tonnes have already been delivered, and the remainder will be shipped later in the year. 

 

Charoen said rice production worldwide for 2018-2019 dropped by 760,000 tonnes or about 0.15 per cent from 2017-2018. The global export market has also dropped 4.9 per cent between January and August, when Thailand shipped 5.27 million tonnes, down 22.4 per cent compared to the same period last year. The value of exports during the first eight months of this year was Bt88 billion, down nearly 17.1 per cent, he said, adding that Thailand ranked second, behind India, in rice exports for the first eight months. 

 

Early August, Commerce Minister Jurin Laksanavisit announced a policy to provide price guarantees for rubber, rice, cassava, palm oil and maize.

 

However, he did not reveal the amount earmarked, saying it depends on the final price agreed upon by related parties. 

 

Later in the month, more than Bt40 billion was allocated to guarantee the price for three of the five products. 

 

Of the Bt40 billion, Bt2.1 billion has been allocated to guarantee the price of rice at between Bt10,000 and Bt15,000 per tonne depending on the type. For instance, rice with 15 per cent moisture will be priced at Bt10,000 per tonne with a guarantee of no more than 30 tonnes per household. Glutinous rice has a guaranteed price of Bt12,000 per tonne for no more than 16 tonnes per household, while jasmine rice is guaranteed at Bt15,000 per tonne for no more than 14 tonnes per household. Fragrant rice will be guaranteed at Bt14,000 per tonne for up to 16 tonnes per household, while Pathum Thani fragrant rice can be sold at no more than Bt11,000 per tonne with households limited to 25 tonnes. 

 

The government has also earmarked Bt16 billion for rubber with a price guarantee of Bt60 per kilogramme, and 18-per-cent palm oil has been guaranteed at Bt4 per kilo.

 

Price guarantees for maize and cassava will be confirmed at a later date. 

 

Jurin agreed that price guarantee was a short-term policy, and that the government is planning on longer term measures to improve the quality of products and develop new sustainable markets.

 

Source: https://www.nationthailand.com/news/30375207

 

-- © Copyright The Nation Thailand 2019-08-23

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[yellowboat]

And here I spent so much time in economics classes learning about market forces only to learn they do not apply to Thai and other governments. 

[Srikcir]

A fairly honest and astute article.

However,

4 hours ago, webfact said:

the government is planning on longer term measures to improve the quality of products and develop new sustainable markets.

Given the current government is essentially the previous government that had five years with absolute political power to plan for longer term measures to assure economic sustainability, I don't have any hopes that it now as a coalition facing significant political parliament opposition will have the will to find workable solutions.

The current government will continue to fall into its own trap of short term measures that even it has labeled as "gifts" during the previous Prayut regime. Not designed so much as an evolution towards electorate economic sustainability and social equality, but to the continued status quo of holding the Thai electorate hostage to an undemocratic system of governance.

[DrTuner]

Need to give something for the farmers to do or they'll take their kubota's and head to BKK. Profitability doesn't come into the equation.

[onesie]

Isn’t this the same as the scheme Yingluck tried?

[Bob12345]

30 minutes ago, onesie said:

Isn’t this the same as the scheme Yingluck tried?

No, the result for the farmers is similar (a guaranteed price for their products) but this method is less costly for the government and therefore a relatively better plan. 

 

 

Edit: relatively better as in cheaper, not as in "good" or "smart" which depends on your preferences.

[Cadbury]

4 hours ago, yellowboat said:

And here I spent so much time in economics classes learning about market forces only to learn they do not apply to Thai and other governments. 

The whole country is run an ad hoc basis. Nothing is ever planned. Everything happens with knee jerk precision and initiated by people who haven't got a clue what the're doing.

[RichardColeman]

 

8 hours ago, webfact said:

and that the government is planning on longer term measures

i am pretty positive this will involve giving farmers more loans

[jerojero]

Exactly! Oh, how the memory easily fades of what happened coup 5 years ago, and PM's hipocracy now. Sad.

Isn’t this the same as the scheme Yingluck tried?

[MartiniMan]

5 hours ago, yellowboat said:

And here I spent so much time in economics classes learning about market forces only to learn they do not apply to Thai and other governments. 

Yes!!! Exactly!!!!

I am sat here thinking ok now how are you going to rig a futures market? A WORLD market? What on earth?

OPEC has been trying to fix oil for eons and look at how volatile that is - on the most important commodity in the world that is used for all business as the blood line literally of commerce

Do they know how ridiculous they sound or are they really so naive in economical knowledge they believe futures can be fixed and that harvests can be ensured - drought? pest damage? Crop loss? Or just a bad harvest - it cannot be prevented that is why we sell on a futures contract

Lets learn economics - send them all to wallstreet to study for a year. MTG! Make Thailand Great

[yellowboat]

On 8/23/2019 at 9:34 AM, Srikcir said:

A fairly honest and astute article.

However,

Given the current government is essentially the previous government that had five years with absolute political power to plan for longer term measures to assure economic sustainability, I don't have any hopes that it now as a coalition facing significant political parliament opposition will have the will to find workable solutions.

The current government will continue to fall into its own trap of short term measures that even it has labeled as "gifts" during the previous Prayut regime. Not designed so much as an evolution towards electorate economic sustainability and social equality, but to the continued status quo of holding the Thai electorate hostage to an undemocratic system of governance.

Too true.

 

The expectations for cha cha and goons to do any good for the country is low from my discussions with both city and countryside Thais.  The current military government has and will continue to compete with the average Thai or continue to get in their way.  They want rocket scientists from an educational system that does little to promote hard work and learning.  The military likes having the population under their thumb, and until that changes, no hope or economic health enjoyed during the Shinawatra years will be seen again.