Rice: Farmers get B11,525, market price 4,500-7,000

Govt to pay farmers 11,525 baht a tonne for Hom Mali rice compared to 4,500-7,000 baht market price. Global prices drop as supply rises, demand falls.

RICE & AGRICULTURE

Rice subsidy set at B11,525 a tonne

31/10/2016
Online reporters and Sunthon Pongpao

The government will pay farmers 11,525 baht a tonne for their Hom Mali rice compared to the market price of 4,500-7,000 baht.

This is a government subsidy since the price being offered to farmers by the government is greater than the price farmers could get if they sold their rice on markets. 

The Rice Board has set the high price under its so-called "barn programme". The cabinet was likely to approve the assistance on Tuesday according to.Commerce Minister Apiradi Tantraporn.

WHY LOW GLOBAL RICE PRICES?

A worldwide oversupply of rice and lower demand were the reasons for low rice prices given by the commerce minister.

The global rice yield rose 2.4% due to promising rain while worldwide demand dropped by 1.5%, she said.

Rice prices around the world have fallen as a record crop is forecast for the 2016-17 harvest season, the UN Food and Agriculture Organization (FAO) said in its latest Rice Price Update.

International rice prices in the first eight months of 2016 were 9% below the levels of a year earlier, the FAO’s All Rice Price Index shows.

A sharp fall in the export prices of Thai rice in August was noted by the International Grains Council (IGC).

“The market in Thailand was weighed down by sluggish international demand and increasing secondary crop arrivals, while additional pressure stemmed from efforts by the government to offload state reserves through a series of auctions,” the IGC said. “At $369 [a tonne], 5% broken rice was down by $43 month-over-month."

BREAKDOWN OF RICE SUBSIDY

The price is for Hom Mali Fragrant rice (paddy) with 15% moisture content.

Of the subsidy, 8,730 baht is for a tonne of paddy.

The rest would be paid in the forms of specific subsidies for rice harvesting, improvements and storage.

The aid is capped at 10 rai of paddy per household, the commerce minister said.

THIS YEAR'S HOM MALI OUTPUT

The commerce minister estimated this year's Thai hom mali rice output at 10 million tonnes, expected to reach markets within the last quarter of this year.

Most of the output would come next month.

The commerce minister also encouraged farmers' groups to sell their rice online directly to consumers so they can fetch higher prices, instead of selling their rice through rice millers.

FARMERS GROUP BLAMES LOW PRICES ON TRADERS & MILLERS

Khwanchai Mahachuenjai, a leader of the rice farmers' organisation in Ayutthaya province, said on Monday that paddy prices ranged from 4,500-5,000 baht a tonne in the Central Plains and the Northeast.

He blamed the low prices on rice traders and millers.

BARN PLEDGING SCHEME: DIFFERENT FROM RICE PLEDGING SCHEME

This government's answer to the costly rice-pledging scheme of its predecessor (the Yingluck government) is a barn-pledging scheme.

Although the methods are similar, a key difference is the government only subsidises the interest a state bank should have received for the loans to farmers.

Growers also keep the grain in their barns instead of at contracted warehouses like in the rice-pledging programme.

There are also restrictions which limit the number of farmers eligible for the subsidy to effectively one third of all farmers, unlike the "buy-every-grain" pledge of the Yingluck Shinawatra government.

HOW WILL THE PROGRAM BE FUNDED?

It is not clear at this stage where the money would come to pay for the portion of the non-grain subsidies in the package approved by the Rice Board on Monday.

Aimed at slowing down the market supply of jasmine and glutinous rice paddy, the new programme involves having the state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) lend to farmers in the North and Northeast.

BARN PLEDGING PROGRAM: HOW IT WORKS

In the previous harvest years of the barn programme, growers were required to keep harvests in their barns and the bank gave them loans equal to 90% of the target prices, plus 1,000 baht a tonne as the storage cost.

In return, the government subsidised the interest for farmers, with a cap of 300,000 baht per household, or 20 tonnes of paddy.

FARMERS WITHOUT BARNS CAN JOIN COOPERATIVES

For their part, the farmers kept the paddy until the time was appropriate to sell it.

Farmers who didn't have barns could join through cooperatives.

PROGRAM APPROVED IN OCTOBER 2015

The government approved the programme in late October 2015.

For 2015, the crops were limited to jasmine and glutinous paddy in the North and Northeast.

The maximum pledged amount was 2 million tonnes for a maximum credit line of 26.74 billion baht.

The pledged prices were not more than 13,500 baht a tonne for jasmine paddy and 11,300 baht for glutinous paddy, or 90% of themarket prices at the time.

Critics said the cap at 2 million tonnes was less than a third of the 7-million-tonne output of the two varieties.

ONLY 80,000 FARMERS PARTICIPATED

Because of the restrictions and higher rice prices at the time, 80,000 farmers pledged 450,000 tonnes for loans totalling 6.39 billion baht for the 2014-15 crop year, according to BAAC data as of March 31, 2015. 

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