Govt rice prices ignore global markets: Road to ruin?

Paying for rice far above world market prices, govt may be destroying Thailand's rice sector & handing leadership to India & Vietnam.

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AGRICULTURE

Pledging 'heavy burden'

TDRI: Rice scheme to incur B70bn losses
21/05/2012
Phusadee Arumnas & Chatrudee Theparat

Prolonged implementation of the government's rice mortgage scheme will only serve to hurt the economy to the tune of at least 70 billion baht, say academics.

Nipon Poapongsakorn, chairman of the Thailand Development Research Institute (TDRI), said extending the scheme for three or four years would result in severe economic damage and place a heavy burden on fiscal expenses.

This would put the country at risk of a crisis in the event of any sudden natural disasters, he said.

The TDRI estimates pledging of the main and second crops will cost the country 70-100 billion baht in export revenue. However, an additional 80-90 billion baht worth of damage is likely if the government holds onto the stocks so long that quality suffers. If the rice is stored longer than two years, then even more damage can be expected.

And this does not even take into account the effect on the overall rice industry from Thailand losing market share to other countries, said Dr Nipon.

"Too high a mortgage price will only end up helping farmers in Vietnam, India and Cambodia,'' he said.

The Yingluck Shinawatra administration has set the mortgage price at 15,000 baht a tonne for white paddy rice and 20,000 baht for Hom Mali.

Even if the government cancels the programme once the rice industry has shrunk, it will be difficult to for the industry to rebound.

"It could even be irrecoverable, as rice exporting itself would be put at risk. The government has implemented this programme because it has a hidden agenda to help certain rice mills and exporters without caring about the damage to agriculture as a whole,'' said Dr Nipon.

Somporn Isvilanonda of the Knowledge Network Institute of Thailand, estimates the government has already purchased 200 billion baht for the pledging scheme and may need up to 300 billion for both crops.

The rice programme kicked off last Oct 7. Seven months later, paddy stocks totalled 12.6 million tonnes including 8.5 million of white rice.

Of the total, 6.8 million tonnes was from the first crop and 5.8 million from the second crop. This excludes 2.5 million tonnes of white rice from the previous pledging scheme.

The Bank for Agriculture and Agricultural Cooperatives estimates a loss of 17 to 20.4 billion baht, as the purchase price of 15,000 baht a tonne for white rice is 2,500 to 3,000 baht above market prices.

Assoc Prof Somporn said the use of millers to store rice for the government has caused a surge in their numbers in the past 11 years, resulting in reduced bargaining power for farmers.

A survey showed 871 large millers in 2001 with average production of 69,445 tonnes an hour, rising to 1,148 millers with average production 180,073 tonnes an hour in 2008.

Expansion of the pledging scheme turned the government into a major buyer in the market, crippling the international competitiveness of the private sector, said Assoc Prof Somporn.

Kittiratt Na-Ranong, deputy prime minister and finance minister, has admitted the government may suffer a slight loss from the scheme.

But he said farmers are enjoying a better price, as the mortgage price for white paddy has increased to 15,000 baht a tonne from 10,000 baht before, while Hom Mali paddy is now 20,000 baht a tonne, up from 12,000 baht.

However, a government official said the Pheu Thai Party had thought the scheme would help to push up global rice prices significantly. But since that has not happened, any real benefit to farmers is questionable.

The Thai Rice Exporters Association said the global price for Thai grade-B 5% white rice is now US$624 a tonne, up by $70 from a month ago.

The Thai price is $170 above that of India and Vietnam.

The International Trade Department said the paddy price in the domestic market remains about 5,000 baht below the pledging price.

(Source: Bangkok Post, AGRICULTURE, Pledging 'heavy burden', TDRI: Rice scheme to incur B70bn losses, 21/05/2012, Phusadee Arumnas & Chatrudee Theparat, link)

Rice Industry Vocabulary

scheme - a plan that is developed by a government or large organisation in order to provide a particular service for people แผนการ โครงการ
rice mortgage scheme - the government program to make sure that farmers get a good price for their rice

pledging - Same as "rice pledging scheme"
rice pledging scheme - Same as "rice mortgage scheme"

burden - a difficult thing to do, a difficult responsibility
heavy burden - a very difficult thing to do, a very difficult responsibility
pledging 'heavy burden'

incur - having to pay an amount of money (examples: incur costs, incur expenses, incur liabilities, incur a debt, incur charges, incur a loss)
incur losses - lose money

TDRI: Rice scheme to incur B70bn losses

prolonged - for a long period of time (longer than it should be)
implementation - actually do or carry out a plan (See glossary) นำ (แผนการ) มาบังคับใช้
prolonged implementation

prolonged implementation of the government's rice mortgage scheme

to the tune of ... - costing (a large amount) ...
hurt the economy to the tune of at least 70 billion baht
academics - professors and lecturers at universities and colleges

Prolonged implementation of the government's rice mortgage scheme will only serve to hurt the economy to the tune of at least 70 billion baht, say academics.

severe - very serious and worrying ที่รุนแรง ที่น่าเป็นห่วง
severe economic damage

burden - a serious or difficult responsibility that you have to deal with ภาระ (See glossary)
heavy burden

fiscal - related to government spending; connected with the government budget, i.e., public money เกี่ยวกับงบประมาณ
fiscal expenses

place a heavy burden on fiscal expenses
would result in severe economic damage and place a heavy burden on fiscal expenses

Nipon Poapongsakorn, chairman of the Thailand Development Research Institute (TDRI), said extending the scheme for three or four years would result in severe economic damage and place a heavy burden on fiscal expenses.

risk - the possibility that something dangerous or unpleasant might happen ความเสี่ยง
put at risk

crisis - an urgent, difficult or dangerous situation วิกฤตการณ์ วิกฤต
put the country at risk of a crisis

natural - found in nature (not made in a factory by humans) ตามธรรมชาติ
natural disasters - things like earthquakes, storms, tidal waves, that come from nature out of control, that cause damage and kill people
sudden natural disasters

in the event of - if this event happens ...
in the event of any sudden natural disasters

This would put the country at risk of a crisis in the event of any sudden natural disasters, he said.

revenue - income from taxes or business activities รายได้
export revenue

stocks - large amounts stored for future use

hold onto - keep 
holds onto the stocks for a long time - keep large amounts of rice for a long time

expected - believe will happen คาดว่า (จะเกิดขึ้น)

estimates - guesses of what the size, value, amount, cost, etc. of something might be การประมาณค่า

The TDRI estimates pledging of the main and second crops will cost the country 70-100 billion baht in export revenue. However, an additional 80-90 billion baht worth of damage is likely if the government holds onto the stocks so long that quality suffers. If the rice is stored longer than two years, then even more damage can be expected.

take into account - use information or facts (in your analysis)
does not take into account - do not use information or facts in your analysis

share - to have or use something at the same time as someone else ใช้ร่วมกัน
market share - the percentage of customers and sales that a company has in a certain market (example: 34% market share in the automobile market)
lose market share - when a company loses customers and sales in a market

And this does not even take into account the effect on the overall rice industry from Thailand losing market share to other countries, said Dr Nipon  "Too high a mortgage price will only end up helping farmers in Vietnam, India and Cambodia,'' he said.

administration - one government that a country has for a period of time
the Yingluck Shinawatra administration

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

rebound - to rise again after falling (ค่าขนส่ง) เพิ่มขึ้นอีกครั้ง หลังจากมีการปรับลดราคาไป  การฟื้นตัวของเศรษฐกิจ
the industry rebounds - business in the industry gets better after a downturn
difficult to for the industry to rebound

The Yingluck Shinawatra administration has set the mortgage price at 15,000 baht a tonne for white paddy rice and 20,000 baht for Hom Mali. Even if the government cancels the programme once the rice industry has shrunk, it will be difficult to for the industry to rebound.

irrecoverable - cannot get it back again (after you lose it)

implemented - when a plan is put into action, actually doing the things in a plan
implemented programme

agenda - list of goals to achieve in the future
hidden agenda - goals wants to achieve (but he doesn't tell people about, so people do not know about these goals)

a hidden agenda to help certain rice mills and exporters without caring about the damage to agriculture as a whole

"It could even be irrecoverable, as rice exporting itself would be put at risk. The government has implemented this programme because it has a hidden agenda to help certain rice mills and exporters without caring about the damage to agriculture as a whole,'' said Dr Nipon. Somporn Isvilanonda of the Knowledge Network Institute of Thailand, estimates the government has already purchased 200 billion baht for the pledging scheme and may need up to 300 billion for both crops.

kicked off - started

purchase - buy 
purchase price - the price you buy something at

surge - a sudden increase in something การเพิ่มขึ้นอย่างรวดเร็ว
surge in number of mills

bargaining - try to get a better deal from someone (for example, a better price for something you want to buy)
bargaining power - the ability to get the prcie you want for what you are buying or selling
reduced bargaining power for farmers - farmers who can't sell their rice at the higher price they want to sell it at

The rice programme kicked off last Oct 7. Seven months later, paddy stocks totalled 12.6 million tonnes including 8.5 million of white rice. Of the total, 6.8 million tonnes was from the first crop and 5.8 million from the second crop. This excludes 2.5 million tonnes of white rice from the previous pledging scheme. The Bank for Agriculture and Agricultural Cooperatives estimates a loss of 17 to 20.4 billion baht, as the purchase price of 15,000 baht a tonne for white rice is 2,500 to 3,000 baht above market prices. Assoc Prof Somporn said the use of millers to store rice for the government has caused a surge in their numbers in the past 11 years, resulting in reduced bargaining power for farmers.

survey - gathering information about what people think about different subjects (public opionion) by asking large numbers of people questions and counting their answers, and then using statistics, graphs, and tables to present results (See Wikipedia) การสำรวจความเห็น

A survey showed 871 large millers in 2001 with average production of 69,445 tonnes an hour, rising to 1,148 millers with average production 180,073 tonnes an hour in 2008.

crippling - casuing severe damage (that prevents proper functioning) ที่ทำลายล้าง ที่รุนแรง ทำให้เป็นอัมพาต, ทำให้ขยับเขยื้อนไม่ได้
crippling the competitiveness of

international - ระหว่างประเทศ between countries
competitiveness - how well a business can do compared to other firms (does it have lower price or higher quality?) การแข่งขัน
international competitiveness

sector - a part of the economy y ภาคเศรษฐกิจของประเทศ (public sector = government, private sector = all businesses, household sector = families and consumers, banking sector,...) (See Wikipedia)
private sector - all the privately owned (not by government) in the country

Expansion of the pledging scheme turned the government into a major buyer in the market, crippling the international competitiveness of the private sector, said Assoc Prof Somporn.

suffer - to experience physical or mental pain
suffer a slight loss  - lose a little bit of money

Kittiratt Na-Ranong, deputy prime minister and finance minister, has admitted the government may suffer a slight loss from the scheme. But he said farmers are enjoying a better price, as the mortgage price for white paddy has increased to 15,000 baht a tonne from 10,000 baht before, while Hom Mali paddy is now 20,000 baht a tonne, up from 12,000 baht.

global - throughout the world ทั่วโลก
global rice prices

significantly - in an important way อย่างสำคัญ
push up global rice prices significantly

benefit - to get help or an advantage from something ผลประโยชน์
questionable - involving doubts about whether something has been done properly ที่น่าสงสัย
any real benefit to farmers is questionable

However, a government official said the Pheu Thai Party had thought the scheme would help to push up global rice prices significantly. But since that has not happened, any real benefit to farmers is questionable.

domestic - within the country ภายในประเทศ
domestic market - a market inside the country
paddy price in the domestic market - the selling of rice inside the country (not for export to other countries)

The Thai Rice Exporters Association said the global price for Thai grade-B 5% white rice is now US$624 a tonne, up by $70 from a month ago. The Thai price is $170 above that of India and Vietnam.  The International Trade Department said the paddy price in the domestic market remains about 5,000 baht below the pledging price.