Government returns to rice trade

Will active government buying, storing, selling rice, using it as collateral for state bank loans, avoid the corruption of the past?

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AGRICULTURE: PT polishes rice support plan, State intervention in futures market is key by Wichit Chantanusornsiri

The Pheu Thai Party will leverage the agricultural futures market and government stockpiles to help push rice prices higher in line with the party's campaign promises.

Pheu Thai will push for the small Agricultural Futures Exchange of Thailand to be merged with the much larger Stock Exchange of Thailand to improve liquidity in the futures market.

The party is pushing an ambitious plan to more than double market prices to 15,000 baht per tonne for rice paddy and 20,000 baht per tonne for hom mali rice. It also vowed before the July 3 election to scrap the Democrat Party's price insurance programme in favour of a return to a mortgage scheme where farmers pledge their crops as collateral against loans from state banks

One Pheu Thai executive said the state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) and the Marketing Organisation for Farmers would be the main instruments to help manage rice supplies.

Rice mills and exporters will be able to bring their orders to sell into a new futures market for rice, minimising the potential financial risks for the two state agencies in serving as an intermediary in the market.

Pheu Thai will also push for the merger of the Agricultural Futures Exchange of Thailand, the country's main agricultural derivatives market, with the much larger Stock Exchange of Thailand to improve liquidity in the futures market.

The party's crop management strategy hinges on the government serving as a main buyer in the rice market. When market prices are low, the government will purchase rice directly to build up official stockpiles and remove supply from the market, thereby influencing prices

"This strategy also is a way of building up the country's food security. If the country lacks rice, where would we buy it from, considering that Thailand already is the largest exporter in the world?" the Pheu Thai executive said.

As a result, building up a stockpile of 4-5 million tonnes is critical for our food security. And once we build up these stocks, rice in the spot and forward markets will rise as well.

Under the Democrat-led government of Abhisit Vejjajiva, authorities moved away from being direct players in the commodities market in favour of a price insurance scheme under which farmers are compensated for any gap between market prices and fixed benchmark prices. Officials insist that price insurance is superior to the previous mortgage schemes in terms of market efficiency, while it minimises costs for the government in terms of logistics and storage

Pheu Thai insists that its plans, which will tie in bank credit to specially issued, interest-free credit cards usable by farmers to purchase farm inputs such as seed, fertiliser and chemicals, will ultimately prove superior in terms of raising farm income.

At the same time, domestic consumers will be shielded from higher rice prices, as the Marketing Organisation for Farmers will sell rice directly in the retail market at, say, 120 baht per 5kg bag, cheaper than existing prices of 140 to 150 baht per package.

The reason why retail prices are high even as wholesale prices have fallen is because the mills are taking an unreasonable margin. It's the middlemen who are pushing wholesale rice prices down while inflating retail prices for consumers," the Pheu Thai official said.

He said the Revenue Department would also play a role in investigating financial records of rice mills looking to hoard rice in anticipation of benefiting from higher market prices once the new government begins its intervention programme.

The BAAC is already gearing up to play a major role in implementing Pheu Thai's rural development programmes.

In addition to the rice mortgage programme, the BAAC is also expected to lead implementation of Pheu Thai's promises to inject 1 million baht in additional funds for village funds and a new debt suspension programme for small-scale farmers.

Prakit Chawengnirun, an executive vice-president of the bank, said if in an extreme case the bank was forced to mortgage the entire first rice crop, which averages 23 million tonnes per year, it would cost about 345 billion baht.

He said the new government, if intent on bringing back the crop mortgage programme, should consider the lessons of the past and ways of safeguarding against fraud and corruption.

As it stands, the BAAC has some 160 billion baht in outstanding debt held over from past crop mortgage programmes.

Bank debt in the past soared if the mortgage price was set artificially higher than actual market prices, which gave farmers an incentive to transfer rice to the BAAC to cover their loans rather than sell the rice themselves in the market and clear their debt by paying cash.

(Source: Bangkok Post, AGRICULTURE, PT polishes rice support plan, State intervention in futures market is key, 20/07/2011, Wichit Chantanusornsiri, link) 

Agricultural Commodities Market Vocabulary

support - help, by giving money, for example สนับสนุน
rice support -

futures - futures contract, a contract to buy something in the future, a contract that is traded on a public exchange, so the price reflects current expectations about the value of the underlying asset (See Economist Glossary on derivatives) การซื้อขายล่วงหน้า
futures market - a market in which furtures contracts are bought and sold
agricultural futures market - a market in which the future delivery of agricultural crops are bought and sold (can be used to hedge and provide some protection and insurance against future price changes)

stockpiles - large amounts of something stored for future use กองสินค้าในโกดัง

intervention - becoming involved in a situation or activity you are not usually involved with and trying to change it การแทรกแซง
intervention in futures markets - when the government buys and sells in the futures market to influence prices

is key - is important คนสำคัญ

leverage - 1. use one thing as a tool to achieve a goal; 2. a small force producing great results (See glossary)

in line with - agreeing, following
campaign - a planned series of activities designed to persuade voters to vote for a particular candidate or political party การรณรงค์หาสียง

Agricultural Futures Exchange of Thailand
improve - to make better ทำให้ดีขึ้น
liquidity in a market - the ease that something (an asset) can be sold in a market (turning the asset into cash and freeing up the money to be used for other things)


ambitious - difficult and needing a lot of effort to succeed, goals are very high and difficult to achieve (perhaps even too high to be achieved) ทะเยอทยาน
ambitious plan - a plan with goals that are difficult to achieve

paddy - rice after it has been harvested from the field ข้าวเปลือก

vowed - promised
election - the process of choosing a person or a group of person for a position, especially by voting elect (v) electoral (adj) synonym: the polls การเลือกตั้ง
scrap - to get rid of; to stop using or accepting เลิก, ทิ้ง

insurance - a system that pays money to help people harmed by bad event การประกันภัย

favour- to give an advantage to someone or something ช่วยเหลือ
in favour of Y - favouring Y, choosing Y instead of others, over others

scheme - a plan that is developed by a government or large organisation in order to provide a particular service for people แผนการ โครงการ

pledge - to promise สัญญา
collateral - property or some other valuable asset that you promise to give to a lender if you cannot pay back money that you borrowed ทรัพย์สินผูกพันตนเพื่อเอาไว้หักชำระหนี้หากไม่ชำระหนี้นั้น(See glossary)

instruments - tools (things that can be used to help a project achieve its goals)
executive - the highest level managers in a company
potential - possible ความเป็นไปได้

potential financial risks - bad things that might happen leading to the loss of money
intermediary in the market - steps in and buys and sells replacing others (presumably to make a smoothly functioning and "liquid" market)

merger - the process of combining two or more companies or organisations to form a bigger one การรวมบริษัท การรวมเข้าด้วยกัน

derivatives - assets that "derive" their value from some underlying asset, and therefore can be used to protect (hedge) against changes in these asset prices, options and futures contracts are examples of derivatives, derivatives tend to make balance sheets less transparent and easy to understand; อนุภัณฑ์ futures, options, swaps, etc (a financial asset that "derives" it value from other financial assets such as stocks, bonds, commodities, interest rates, exchange rates, and stock price indices; See Economist Glossary and Wikipedia)  assets that are built on top of other assets, "derived" from other assets (their value changes with the value of the underlying asset)

strategy - a plan to achieve a goal over a longer period of time (longer than a "tactic")
X hinges on Y - X depends on Y

purchase - buy  
official - approved by the government or some authority ที่เป็นทางการ
build up official stockpiles - increase the amount of rice the government has and is storing for future sale

remove - to take something away เอาออกจาก
remove supply from market - reduce the amount of a good being offered for sale on a market (making the good more expensive, raising the price of the good)

security - the activity of making safe or protecting from harm
food security - policy to make sure a whole country never runs out of affordable food for its citizens

critical - extremely important because a future situation will be affected by it สำคัญยิ่ง

stockpile - store large amounts of something for future use คลังสินค้า; จำนวนสินค้าที่เก็บตุนไว้เป็นจำนวนมาก
stocks - amounts stored for future use

spot market - the market for buying and selling commodities and receiving delivery  now
forward market - the market for buying and selling commodities and receiving delivery  in the future 

authorities - government officials, he people with power, the government เจ้าหน้าที่ ผู้มีอำนาจของรัฐ  

players - an important company, person, or country in an industry ผู้ค้าคนสำคัญ หรือผู้ค้ารายใหญ่
moved away from being direct players - did not buy, sell, own and store rice itself  (which has provided opportunities for corruption in the past)

commodities - a good bought in large quantities, with each unit the same, like rice or oil (with every unit the same, every kilo of rice is the same, for example) สินค้าที่ซื้อเป็นจำนวนมากๆ

compensated - paid for something you did or some damage that was caused to you
gap - a large difference ช่องว่าง

benchmark - a standard for comparison, a standard that other things can be compared to

insist - to keep saying very firmly that something is true ยืนกราน ยืนยัน
superior - better
in terms of - measured by

efficiency - waste little time, energy and resources in doing a task (minimize time, energy and resources in performing a task) (See glossary) การทำงานอย่างมีประสิทธิภาพ คุ้มค่าเวลาและใช้พลังงานหรือต้นทุนในการผลิตน้อย เพื่อให้ได้ผลผลิตมาก

minimizes - makes as low as possible

logistics - transporting, tracking, and storing goods in a warehouse between factory and store (See Wikipedia) การขนส่งและจัดจำหน่ายสินค้า

storage - the putting and keeping of things in a special place for use in the future การเก็บ

bank - a raised area of land along the side of a river ริมฝั่งแม่น้ำ
credit - money that you owe someone (a bill that grows until you pay it off at the end of the month, for example)
bank credit - loans from banks เครดิต เงินกู้

issued - made available ออกใหม่
interest - payments made for the use of another's money for a period of time
specially issued, interest-free credit cards - special credit cards created for this government program (which the holder does not have to pay interest on)

fertiliser - food for plants, chemicals to make plants grow faster ปุ๋ย (See Wikipedia)

ultimately - finally, after a series of things have happened ท้ายที่สุด, ตอนสุดท้าย, ในที่สุด
income - money that people receive from work or some other source, used for household consumption and savings

domestic - within the country ภายในประเทศ
consumers - people who buy things (individuals and families)

shielded from higher rice prices

retail - to sell directly to the public for their own use ขายปลีก
reason - an explanation of an event, why an event happened เหตุ ; เหตุผล ; สาเหตุ
wholesale - relating to the business of selling large quantities of goods, especially to people who are going to sell them in a shop ขายส่ง

margin - profit margin, the difference between money coming in to a business (revenue) and money going out (expenses), usually as a percentage of revenue, for example
mills are taking an unreasonable margin - the factories that process rice and turn it into a product that can be sold in stores (rice mills) are taking a larger percentage of profit than usual

middlemen - people between the factory and producer and the consumer or customer พ่อค้าคนกลาง companies that buy and sell goods (often in bulk) between the factory and the final consumer

role - the position or purpose that someone or something has in a situation, organisation, society or relationship บทบาท

X plays a role in Y - X is part of the activity or process Y
play a major role in - X is an important part of the activity or process Y

records - pieces of information describing something written down or stored on a computer บันทึุก
financial records - information about how money was used and made in a company or organisation

hoard - a large amount of something that someone has saved and hidden สิ่งที่เก็บสะสม
in anticipation of Y - do something because you expect Y to happen in the future

gearing up to - getting ready to
implementing - turning a plan into a functioning system นำมาใช้จริง
rural - in the countryside (farms, forests), not the city ชนบท บ้านนอก
development - the gradual growth and formation of something

expected - believe will happen คาดว่า (จะเกิดขึ้น)
implementation - execution of a plan, making sure that something that is planned actually gets done (See glossary) นำ (แผนการ) มาบังคับใช้

inject - put into, to introduce something new that is necessary or helpful to a situation or process ฉีด
funds - money needed or available to spend on something เงินทุน

debt - an amount of money that you owe หนี้
suspension - stopping for a period of time (temporarily)
debt suspension - arrangement in which people don't have to make payments on their the money they owe for a period of time (to help them with their financial problems)

scale - size (relative size)
extreme - much more severe or serious than usual ที่ร้ายแรงมาก, ที่รุนแรงที่สุด ที่สุดโต่ง
extreme case - the most severe or serious example of what might happen in the future

intent on Y - really want Y to happen
fraud - the crime of cheating, lieing to, or deceiving people for personal gain (See Wikipedia) การโกง การตุ้มตุ๋น การฉ้อโกง การหลอกลวง เล่ห์เพทุบาย
corruption - (See Wikipedia on bribery, corporate corruption, and political corruption)

outstanding - still exists
outstanding debt - money that was borrowed and still not paid back yet (still  owed to people)

actual - real; existing in fact จริง
incentive - something that makes you want to do something or work harder, because you know that you will benefit by doing this สิ่งกระตุ้น
transfer - to move someone or something from one place, vehicle, person or group to another ย้าย
transfer - to official arrange for someone else to be the owner of something โอน
cash - money in the form of notes or coins เงินสด