Rice : was Samak too generous with farmers ?

A rice crisis… could lead to another one.

Quick reminder : prices of rice on the world market have more than doubled in 2008. Supply was tight (a few countries banned exports), and demand high etc.

The thai economy took great advantage of the situation (look at my chart about exports, per month). A real  honey pot.

Meanwhile, Samak’s government wanted to boost farmer’s income. The mechanism is easy : every year, the state buys a large stock pile of rice. Samak decided to increase the buying price to 14 000 THB per ton.

A few months later… the prices on world markets are going down… Therefore, we see a cisor effect between the price thai exporters are willing to pay to farmers (or can pay) and the government’s own buying price (which is too high).

Perfect secondary effect of government intervention. Perfect market distorsion. It’s Economy 101. Always.

Samak is now back where he belongs (AKA history’s garbages)… So the sharks are showing up again, with rather strong words to ask for a policy review. 😉

Unless it reviews the current high price level used by the previous Samak Sundaravej regime, Thai rice exporters will have to go on a long holiday next year as they will not be able to compete with other rice-exporting countries,” association president Chookiat Ophaswongse said.

The government currently buys white paddy rice from farmers at Bt14,000 per tonne as part of the market intervention programme, compared with the prevailing market price of around Bt12,000.

Chookiat said the country’s rice trading system will be seriously damaged by such a price distortion.

The previous Samak Cabinet aimed to buy a total of 8 million tonnes of paddy rice from October 16 till February next year.

If the government insisted on intervening at Bt14,000 per tonne, then it could face a potentially huge burden of having to set aside a state budget of up to Bt120 billion for this scheme [which would incur big losses based on the current market price]. (Nation)

6 Responses to “Rice : was Samak too generous with farmers ?”

  1. 1 Bedwyr 15 September 2008 at 12:08 pm

    Paraphrasing Mr Micawber is always fun:

    Yearly income 20 pounds, yearly expediture 19s 6d, happiness.
    Yearly income 20 pounds, yearly expediture 20s 6d, misery.

    Mr Micawber wisely notes however that in Thailand, where all rules of economics and arithmetic are suspended, none of this need apply.

    For a while.

    Remember that idiot Pridyathorn was quoted as saying shortly after the collapse of the SET (and whom the WSJ described as being ‘remarkably incompetent’).
    “No need for anyone to resign, it will all come back sooner or later”. Or some such shite.

    Clearly Lewis Carroll had holiday’d in old Siam.


  2. 2 ThaiCrisis 15 September 2008 at 12:13 pm

    Lewis Carroll is a big fan of Thailand, indeed. A long term resident.
    I can confirm : I see him every morning, on Bangkok’s streets.*
    He’s a good friend.

    He’s living in the Rabbit Hole. 😉

    Anyway. Don’t worry… With the current GLOBAL crisis (I guess you follow the total mess today on the markets…) Thailand can’t escape a severe return to reality.

    Outside the Rabbit Hole.

  3. 3 Bedwyr 16 September 2008 at 1:43 am

    I am sure you are right. And then of course they will blame the evil foreigner. After all, Thais could not possibly be to blame for their own manure pile, could they? They are blessed. They have the golden one.


  4. 4 dooda 6 October 2008 at 11:31 am

    Another critique of the rice pledging scheme by a former finance minister and BOT governor, published today at Bangkok Post. He is estimating possible losses of up to
    40 billion baht from the current and a newly proposed schemes.


  5. 5 Andrey 13 November 2008 at 3:24 pm

    Hello, can you please provide a link to a summary on Thailand rice market state policy (state procurements, exports regulations, etc)?
    We are considering imports from Thailand and would like to know more on this issue.

    Thanks a lot.

  6. 6 ThaiCrisis 13 November 2008 at 5:32 pm

    I’m afraid you won’t find those informations in the mainstream medias.

    For a good reason : it’s technical… political and quite opaque !

    The state’s policy regarding what they call “pledge rice programs” for instance changes constantly.

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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