Mar 6, 2009

Rice prices put farmers at a disadvantage

By The Nation
Published on March 4, 2009

Unless Thailand develops a national plan for sustainable agriculture, we will continue to lose out to our competitors The gathering of several-hundred cassava planters who sealed off the Commerce Ministry on Monday is a reflection of the weakness of the Thai agricultural sector. Thailand loves to pride itself on being one of the world's major exporters of agricultural produce. But a series of protests by Thai farmers shows that this might no longer be the case. Thai farmers are failing in world competition.

We have long been dependent on our geographical advantage, but our competitors have recently managed to overcome such disadvantages. At the same time, Thai farmers and the responsible agencies and officials remain complacent.

The latest series of protests shows that Thai farmers cannot stand on their own two feet. They have been slow in developing and improving yields per rai and the quality of their products. As a result, most Thai farmers have failed to improve their competitiveness while our competitors are progressing.

For instance, Thai rice farmers only managed to get good prices last year because the other main rice-producing countries, such as Vietnam and India, had to cope with natural disasters such as droughts and flooding. But when there are no natural disasters in other countries, Thai farmers are not able to compete with others in terms of price.

Last year was a good one for Thai farmers as the rice price on the world market rose to a record high, thanks to food security concerns. But this year the situation has changed abruptly. Thai rice fails miserably when compared to the same product from Vietnam. Thai rice is sold at an unrealistically high price due to price distortion at home.

The Thai Rice Exporters' Association said that in February, for instance, 5-per-cent rice was sold at US$585(Bt21,146) per tonne compared to the $400 at which Vietnamese traders sold their produce. The Commerce Ministry is trying to defend the 38-per-cent drop in Thai rice exports in January, blaming the decline on the world market situation. But the lower demand for Thai rice is a result of it being too expensive, as well as the increased availability of rice from other exporting countries.

Over the past few years, Thai farmers have not only been complacent and failed to improve their yields, they have not developed new strains of Thai rice.

Vietnamese farmers, however, have developed several new rice strains over the past few years. Their rice yield per hectare is also better than Thailand's.

Instead of focusing on how to improve production in a sustainable manner, Thai farmers tend to ask for short-term price support measures from the government whenever they face sluggish rice prices at home. Politicians see this as an opportunity to spend quick money to increase their popularity, even though some price support measures are bad decisions.

Rice is one example that demonstrates the country's failure to develop its farming sector. It is also a consequence of the country's lack of a national agenda for farm goods management to ensure sustainable development in the sector.

Therefore, over the past month, hundreds of desperate farmers have taken turns to protest and to ask for price support. The Thai government likes to boast how the country is a leading agricultural nation, but the planters who grow rubber, sugar cane and maize, in recent months, have rallied at the government's door to ask for more subsidies.

The government should invest more energy and resources in promoting agriculture, which has long proved to be a backbone of the country. But so far, governments have tended to introduce short-term measures, which at times hurt farmers because they distort the market prices. An example is the domestic rice price support programme, which caused Thai rice export prices to escalate and thus made Thai rice non-competitive overseas.

Some planters are also fed up with the short-term policy. Chanthaburi cassava grower Usa Pitaraphodhi was quoted as saying that cassava planters were suffering from unclear government policies regarding guaranteed prices. The market speculation over the policy direction on farm prices made prices fluctuate.

In addition to the problems discussed above, short-term government price intervention tends to lead to the smuggling of commodities from neighbouring countries. A large volume of cassava from Cambodia is said to be brought into the country because some middle-men want to benefit from the pledging scheme. Besides this, price intervention tends to invite corruption as the scheme normally involves a large sum in handouts.

Previous governments have floated the idea of a national agenda for farm producers. But an actual plan to achieve the goal has never materialised, thanks to the frequent changes in government and the immediate political problems they have to deal with.

But it's imperative for the government to think of a national agenda to develop Thai agriculture over the long term. The focus should be turned to improving crop strains and increasing yields per rai. If farmers succeed in doing so, they will have a good degree of immunity against fluctuating farm prices. Otherwise, it won't take long for the Thai agricultural sector to lose out further, even though it remains one of the most promising sectors of the economy. It's time for the government to focus on the national agenda for farm policy and turn it into an effective action plan

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