Thailand Crisis

Datas for exports in april have been published (source BOT).

Here is an update of the chart about exports of rice (value in millions USD and volume in metric tons).

Compared with the previous month, we have -12 % in volume, but a +6 % in value (normal, the prices continued to increase in april).

Now if we compare year-on-year (april 2007), we have +62 % in volume and a whooping +137 % in value.

What about the “rice crisis” ? Well… we don’t speak about it anymore.

The new crops have curbed the emotion worldwide, and some countries have removed their ban on exports… So the prices went down.

However, rice remains an issue in Thailand. The government has decided a very generous -and controversial (read here)- program to subsidy the prices paid to farmers. I will follow up with another article.

We have now a total budget for the rice subsidy program decided by the government.

42 billions THB (1,3 billion USD).

The government can’t lie anymore : it is a subsidy. A massive one.

It will buy at high price from farmers, and sell at cheap price to the consumers (even though the volumes are still ridiculous, read here).

The government has released a plan to intervene in the domestic rice market, using a budget of 42 billion baht.

Deputy Prime Minister and Commerce Minister Mingkwan Saengsuwan said the government will purchase jasmine rice from farmers at between 19,000 to 20,000 baht per ton, round-shaped rice at 14,000 baht per ton, and sticky rice at 9,000 baht per ton.

He said the rice moisture must remain at 15 per cent, and the state will purchase sticky rice at 7,000 baht per ton if it contains over 25 per cent moisture.

Today, Mingkwan will lift a ban on rice transportation between provinces, in order to allow farmers to sell their stock to all rice mills around the country. Tomorrow he will attend a meeting of the National Rice Policy Committee to design a funding plan for the state’s rice procurement.

Subsequently, the government will purchase rice from growers without limit. (TOC)

The Joke Of The Day from Surapong, Finance Minister (and Deputy Prime Minister)…

Deputy Prime Minister and Finance Minister Surapong expresses confidence that the government’s intervention in rice prices will help the price mechanism return to normal and increase profits for farmers.

The deputy premier says the Commerce Ministry’s measure in buying rice from farmers will prevent merchants from taking advantage of the farmers. He also affirms the government’s rice price intervention does not distort the actual price. (PRD)

Okay. I’m going to -try to- decipher :
-prices of rice are going up
-the government sell rice at -20 % of the current price
-this intervention does not distort the prices
-and this intervention “will help the price mechanism return to normal and increase profits for farmers“.

Indeed. It’s the Joke Of the Day.

The ability of thai officials to state blatant counter-truth is breathtaking.

And furthermore, selling 500 tons of cheap rice (read here)… when the consumption of the country is 9,6 millions tons per year… is nothing but a PR operation. And a blatant lie.

Take Malaysia for instance. They just bought 200 000 tons from Thailand (300 000 more to come).

“Malaysian Prime Minister Abdullah Ahmad Badawi late Monday announced the country would, for the first time, spend at least 725 million ringgit to subsidise foreign rice imports to keep retail prices of the staple affordable.” (TNA).

Now this is serious subsidie.

And by the way :

The price of Thai rice has swung back to Bt27,000 from Bt23,000 a tonne of paddy regular rice in two days, thanks to the export of a big lot of 200,000 tonnes to Malaysia. (Nation)

A government promotion for the retail sale of 100,000 five-kilogramme bags of rice selling at Bt120 (US$3.7) per bag sold out in just an hour on Monday, a senior Thai Ministry of Commerce official said Monday.

Each buyer was allowed to only three bags of rice, drawn from government warehouses nationwide, and sold at about 20 per cent less than the current market price.

Of the total 100,000 bags,18,250 were sold in Bangkok while the balance was distributed and sold in nine other provinces. The idea of selling packaged rice was initiated by the Commerce Ministry to cope with public demand for rice in the market following complaints that there was not enough rice for shopping malls.

People were lining up at rice sales outlets since 9am and the entire supply of 100,000 bags of rice were sold out within an hour, said Mr. Yanyong.

Disappointed rice buyers were allowed to place their signatures to book for future rice sales, scheduled for May 20 and May 30, when it will sell 100,000 bags of rice on each day, said Mr. Yanyong. (TNA)

What to think about it ?

First, the volume is ridicule. Thailand consumes 9,6 millions of tons of rice per year…

It’s a PR operation.

Second, when 33 000 persons (minimum) line in queue to save 30×3 = 90 THB (half the minimum daily wage in BKK)… and other people are “disappointed” because they were not served… then I’m not sure we can rejoyce ourselves.

But in a way, it’s a good reminder : the vast majority of the thai population has low income.

Look at the datas of average wages for employees (here).

This is why inflation is an explosive issue… much more than in western countries. The government is making a mistake by pushing on GDP growth instead of fighting inflation.

And fighting inflation DOES NOT MEAN to increase wages !

Datas for exports in march have been published (source BOT).

Here is an update of the chart of rice exports.

March set a new record with 1 209 093 metric tons (and 533 millions USD in value) ! That’s a 108 % increase compare to march 2007.

To the people who believe that with rice, Thailand has just entered in a golden area of amazing prosperity (yes I heard that…) … I would like to remind you 2 facts :

-total exports in march reached… 14,76 billions USD…
-the high prices… affect the thai people themselves, in their day to day live, and especially the poor people

Thailand is the first exporter of rice in the world… But unfortunatly, interesting articles about rice are not published by the thai press… but rather by the western medias.

Kamolsak Thongta was working at a garage in northern Thailand when rice prices began to soar. So he quit his job, found a plot of unused land and became a farmer.

“With the price like this, I don’t think this is a risky business,” said Kamolsak, 46. “Rice gives good return.”

That rush to profit from the global rice shortage may cause long-term pain for Thailand and world markets.

Farmers trying to cash in now are depleting water supplies set aside for the dry season, which may curtail yields by as much as 75 percent later this year, said Prasert Gosalvitra, head of the government’s rice department. More intensive farming also may make paddies less productive in the future, knocking Thailand from its spot as the world’s biggest rice exporter, he said.

“It is scary in the long term,” said Apichart Jongskul, secretary general of the national Office of Agricultural Economics. “There are impacts on natural resources like water and soil that should be taken into account.” (Bloomberg)

A perfect “contre-temps”.

Rice gained for a fifth day as the extent of the devastation in Myanmar from a cyclone became clearer with as many as 100,000 people dead, and Malaysia agreed to purchase the grain from Thailand, the world’s biggest exporter. (Bloomberg)

And meanwhile, the thai government starts its “cheap rice” campaign.

The Commerce Ministry will sell 300,000 5kg bags of 5-per-cent white rice at Bt120, undercutting the prevailing market price of Bt150 to Bt160.

Thongthong Chandrangsu, deputy permanent secretary of the Justice Ministry, who was named to head the Commerce Ministry’s body on the cheap-rice campaign, said the selling price would be adjusted later to be more in line with market prices.

Of the first 100,000 bags, 73,000 will be sold in Bangkok, while the remaining 27,000 will be offered in nine provinces.

“The government’s cost is Bt83.34 per bag, but we also need to take into account market prices and the competitiveness of private rice packers,” said Thongthong. (Nation)

First, now they are talking about 1 500 tons (before, no figures were given). Second, we have now a 20 % discount (minimum), not 15 % like stated before. Eventhough, the price will probably go up.

Third, Thailand consumes around 9,6 millions metric tons of rice per year… Therefore 1 500 tons… it’s peanuts.

Fourth, as stated in the article… what about the “competitiveness of private” rice packers (and retailers) ? ! Indeed, that’s a big question !

That’s the beauty of the vacuity of thai policies : short term only.

Act first, think after. Particularly for the consequences.

UPDATE
“Thailand will export 500 000 tons of rice to Malaysia following information that the neighboring country’s rice stock for consumption will only be sufficient for the coming five days. ” (PRD) Rice shortage in Malaysia…

The government yesterday announced a new measure to buy rice directly from farmers, to ensure that they benefit from skyrocketing prices for the product.

The measure is aimed at not only maintaining the government’s working rice stockpile, but also alleviating the burden of the rising cost of living on the common man by selling 5-kilogram packs of rice directly to consumers.

Commerce Minister Mingkwan Sangsuwan yesterday said some of the government’s 2.1 million tonnes of rice would be released. The selling price would be at least 15-per-cent lower than the current market price of Bt160 to Bt190 per 5kg pack of white rice.

As the fears of exporters and rice millers will exert pressure on the prices, the government will purchase paddy rice directly from farmers. The government will offer farmers the market price, which will also enable it to maintain the government stockpile of 2.1 million tonnes at all times.

The first stocks should be released within the next two weeks.

The ministry did not say how many volumes it would release but said the government would buy enough rice to replenish whatever was released from the government’s security stocks. (Nation)

Okay, now it’s official.

2 importants points :

-the government is going to use its security stock (within 2 weeks), in order to sell rice at subsidized price (-15 % compare to full retail prices).

-meanwhile the government will buy directly from farmers (at full price), in order to replenish its security stock

The key question, and of course the Minister remains silent on this issue, is : what quantity ?

My point : is it a mere public relation decision (with symbolic quantities), or is it a real program with real quantities of rice ?

This kind of policy, that can have a direct effect on the market (supply-demand), kept in secret, is likely to be a failure.

The government refuses to play the transparency card… It’s a wrong signal sent to the market.

It’s coming.

The Commerce Ministry will seek Cabinet approval to repackage some of its 2.1 million tonnes of rice sitting in warehouses into five-kilo bags for sale to consumers after the domestic price of jasmine rice surged to over Bt30,000 per tonne.

“Local rice prices now are quite high. The ministry has already prepared measures to tackle the problem. However, we don’t want to implement any that interfere in the market mechanism,” Commerce Minister Mingkwan Sangsuwan said last week.

He declined to reveal how much stock would be released and how much the packed rice would sell for at retail. (Nation)

How can we describe this operation ? Market manipulation. Nothing less, nothing more. What is the usual outcome of such policy ? Failure.

First : it sends a very bad message to the market. Basically : you foreigners are stupid enough to buy rice at very high price, but us in Thailand we need lower prices.

Second : it’s going to help people, sure, but temporarily, and meanwhile it’s a fabulous opportunity for scams and business !

We can be sure that a lot, and I mean A LOT, of those special “bags-to-help-poor-people” are going to be… resold to make a profit, quickly !

The Thai Rice Packers Association said yesterday that orders for 5-kilogram packs from the modern trade had soared by 43 per cent from 1.98 million bags last month to 2.84 million this month.

Tesco Lotus demanded the most at 1.2 million packs, followed by Big C at 600,000, Carrefour and Makro at 350,000 each, and Tops Supermarket 150,000.

Robust demand among modern retailers is one of the major factors roiling the market, as well as driving the rice price up because of unbalanced supply and demand.

As usual, the gvt misses… a factor.

Rice is much cheaper since a few weeks in supermarkets… compare to the small shops up country.

So it makes sense for people to rush in Tesco and to buy and stock.

The Commerce Ministry has urged consumers to moderate their purchases as prices should settle down and domestic supplies are adequate. (Nation)

Since the beginning of the rice crisis, the authorities send conflicting signals : one day it’s the fault of the speculators, or the people hoarding, the day after it’s because of unbalanced supply and demand.

The outcome is easy : people don’t trust what the governement says…

They trust what they see on the ground : prices are going up.

Another astonishing statement from the Prime Minister during his weekly TV-radio show.

Prime Minister Samak Sundaravej appealed to Thais nationwide to bear up under higher costs for rice - even to eat less if necessary, because higher prices help the farmers.

But he said all Thais should consider that higher prices mean that farmers are able to sell their rice stocks at more than double the usual price to exporters, and increase their income.

“‘If you sacrifice and pay more for rice - a bit more, not much more - it will benefit farmers,” he said. If necessary, eating a little less rice would let the farmers sell it at even higher prices for export. (Bangkok Post)

Let’s study what it means.

-”a bit more, not much more“… Samak is living on another planet. The prices increased by 10 to 30 % !

-”eat less so we can export more”. Samak aknowledges that the prices at export are higher compare to the domestic market, That there is an imbalance between production and consumption worldwide. And that it’s of course okay to… squeeze and milk foreign customers !

He forgets that the countries that need badly the thai rice right now… are developing countries (like Philippines, Pakistan, Iran etc.).

Rice is not a luxury… It’s basic food for hundreds of millions of -poor- people…