pidemics, meeting hygienic standards, and non-tariff barriers stand as the the main challenges for Thai farmers and the agricultural industry in the years to come.

To produce only premium products to offer globally might not be enough for Thailand to meet the goal of being the "Kitchen of the World". Instead, producers at all levels of production must have the particular knowledge to combat exotic diseases, as well as constantly meet new requirements set by individual markets.

More importantly, competent authorities need to address these new issues quickly, effectively, and in a transparent manner. Otherwise, the situation will worsen as in the case of the bird-flu outbreak, which has hurt Thailand's poultry industry to a greater extent than what was initially projected.

The outbreak, officially confirmed in January 2004 and re-emerged six months later in July, has severely hurt farmers and processors and devastated the country's chicken export businesses.

Local chicken farming has dropped by 60%, with the number of farmers in 2004 to November dropping to only 45,000 families. Of that amount, 12,000 were contracted farmers that raise chickens for export companies, according to Yukol Limlaemthong, the director-general of the Livestock Development Department.

The number of chickens produced weekly fell to eight million, from 20-21 million and local chicken consumption has declined by half to only 7-8 kilogrammes per head per year.

"In October (2004) alone, we found that the total number of chicken in the entire industry stood at only 83 million birds, compared with 150-153 million birds year-on-year," Mr Yukol said.

Birds were culled at small farms rather at bigger ones, especially during the second outbreak, he said.
As for chicken exports, the total value is expected to plunge to 20 billion baht in 2004, about half of what was generated in 2003, as a result of the import ban on fresh chicken from many importing countries.

Another looming bird-flu outbreak notably upset Prime Minister Thaksin Shinawatra, driving him to declare an intensive one-month war against the virus in October, with an aim to contain it. Unfortunately, the goal was not achieved.

In fact, experts from the World Health Organisation said there was now evidence that the virus was closer to being a pandemic.

An expert from WHO said at a conference organised by the organisation in Bangkok in late November that fresh evidence which showed that ducks played a key role in the second bird-flu wave in the region is a concern because the infected animals excreted more of the virus than in previous outbreaks.
The expert insisted that unless intensified international efforts were made to take control of the situation, a pandemic was inevitable.

Countries in risk areas were suggested to draft a pandemic preparedness plan, share information and improve conditions at livestock farms to combat the virus that has also reportedly led to the culling of more than 120 million birds in the region.

Mr Yukol said the government would be busy in 2005 working to get rid of the virus as quickly as possible with zoning for exports and disease-free compartments being among the top requirements for the biosecurity of the farming sector.

The government has earmarked to lend up to 30 billion baht worth of low-interest rate loans of 2% to farmers and processing plant operators to revamp their facilities.

As of the end of November, the virus was still detected in 22 provinces in the central and lower North regions but not in the North, Northeast and South.

A proposal to use vaccines as a precautionary measure was unacceptable to importing markets such as the European Union, which has banned Thai fresh chicken since the outbreak. Its schedule to resume the imports in March 2005 remains uncertain.

The decline in the poultry industry has deeply hurt related farm industries as well, animal feed in particular.
"A number of small chicken farmers have gone out of business and for the rest to survive, the government has to slash their production costs," said Kavivud Nerngchamnong, president of Feed Stuff Users Promotion Association.

He said with the number of chickens raised per week sharply falling, the consumption of animal feed had taken a plunge as well.

A cut in the import tax on soybean meal, a key ingredient used in the feed industry, to 0% from 5%, has been called for.

The feed industry comprises 60 billion baht worth of factories, with a total of 165,000 employees.
"To slash costs would not only assist the livestock industry but enable the sector to better compete when the market becomes more open under various free trade area agreements," Mr Kavivud noted.
Thailand's feed sector is also facing difficulties from foreign countries.

The fresh rules for GM food and feed issued by the European Union, Thailand's fourth largest food importer, could serve as a wake-up call for Thai farmers and food producers, who now recognises the importance of tighter restrictions on food safety.

Exporters of farm and food products have also been made aware of the new regulation of the EU on labelling and traceability requirements on products that contained genetically modified organisms.
Failing to comply with the new regulation could lead to the rejection and even the destruction of shipments. Therefore, exporters and food producers should adopt reliable GMO inspection and labelling processes to protect the lucrative food export industry.

The National Centre for Genetic Engineering and Biotechnology (Biotec) said under the new regulation, which took effect in April 2004, food and animal feed products which contain more than 0.9% of GM materials must be labelled. Exporters must also identify the sources of GM materials even if The cost of intervention

FARM-PRODUCT price invention has always been a convenient tool for any government seeking political favour from farmers.

Commerce Minister Watana Muangsook, a member of the ruling Thai Rak Thai Party, has in recent months announced a wide of range of intervention plans for key agricultural products _ rice, tapioca and maize _ and vowed to prop up farmers incomes in 2005.

The plans, of course, cost money. Billions of baht is needed to support pledging schemes, which normally end up with huge losses resulting from the buy-high, sell-low policy and poor handling of the pledged products.
In November 2004, the Commerce Ministry announced it would use about eight billion baht to buy five million tonnes of cassava roots at 1.20 baht per kilogramme, up from the average 0.90 baht of the previous season. In the same month, it increased the pledging price of Hom Mali paddy for the season to 10,000 baht a tonne, up from 9,000 baht it had announced a month earlier.

Mr Watana also won favour from chicken producers when he sought a cabinet approval for a fund of about six billion baht to buy more than 100,000 tonnes of frozen meat from big exporters to help ease their cash-flow problem.

Viewing the plan would benefit exporters rather than farmers, the cabinet turned down the proposal and instead had the central bank extend soft loans for them for a certain period.

But critics slam the intervention plans for lack of proper management that has wasted taxpayers' money and for causing corruption among state officials.

Thanavath Phonvichai, a lecturer of the Thai Chamber of Commerce, said the price-intervention programme would not have been necessary in the first place if the government had managed farm output in a way that could avoid surpluses in the market.

Zoning and early warnings could effectively replace them and he would like to see the new government focus on these two measures rather than resorting to the price-interference schemes.

But whether they are effective or not, economists believe they are here to stay for the foreseeable future. The Thai Rak Thai Party will likely offer fresh populist policies in its campaigns for the Feb 6, 2005 general election to gain votes from rural people after its debt-suspension plan and village funds succeeded in impressing villagers.

Farm sector praises state policies

Most farmers have seen improved profits, incomes and competitiveness,
but many agree that more needs to be done

Not only has it won the hearts of farmers, the current administration is likely to also gain high marks from local agribusinesses, who laud the government's economic stimulus policies for effectively helping promote consumption at the grassroots level and indirectly raising farm prices.

Agro-industrialists credit the government of Prime Minister Thaksin Shinawatra for giving a boost to prices for rice, rubber, and palm oil _ all key farm goods _ and raising farm incomes considerably during its four years in office.

At the same time, some analysts dispute the assertion that TRT deserves all the credit for the turnaround in rural fortunes, pointing out that soaring prices for certain farm commodities could be linked instead to higher demand worldwide, not the administration's policies.
But leading businessmen argue that economic stability and the government's unconventional measures have helped to increase confidence among foreign investors, and attracted more investment in farm-related industries.

The government's plan to promote the country as a regional auto hub was credited by a leading rubber industry executive as having played a major role in rising local investment.

"The plan has convinced major tyremakers to expand their businesses here and that's good for the local rubber industry," said Viyavood Singcharoenkul, managing director of Sri Trang Agro-Industry Plc.

Mr Viyavood said rubber trade over the past two years has been quite active, a remarkable change from the past when price wars had prevailed in the market due to oversupply combined with slack demand.

He said future risks that the new government, to be chosen on February 6, might face included a drop in global oil prices which might drive down synthetic rubber prices, the soaring costs of which have helped to prop up demand for natural rubber.

A soft-landing by the Chinese economy was also a make-or-break factor as well, but the present momentum could take a long time to cool off given the frenzied state of the mainland's business scene.

While high farm prices could draw more consumption at the grassroots level, higher manufacturing costs are a big concern for food manufacturers.

Salil Tohtubtiang, managing director of Kuang Pei San Food Plc, a canned seafood producer and distributor, said it was crucial for the government to either maintain the cap on diesel prices well into next year or at least lift the cap gradually to prevent it from being a knockout punch for producers and consumers.

Mr Salil praised the way the Thaksin administration had solved the country's economic problems, arguing that TRT's policies had made a good impression on the world community. As evidence, he cited Thailand's improved competitiveness ranking, which was upgraded to 29th in the world in 2004, up from 30th in 2003.

But rice traders warned that the government should not be satisfied with the current hike in farm prices, which might not last. Instead, it should lay a firm foundation for the sector aimed at beefing up the sector's international competitiveness by increasing investment in research and development along with the development of an effective, nation-wide irrigation system.

Vichai Sriprasert, president of the Rice Exporters Association, said record high rice exports from Thailand in 2004, at 10 million tonnes, reflected unusual demand driven by the effects of drought in the major rice-producing areas. The next government, he said, might be faced with a widespread drought caused by the El Nino weather phenomenon.

He said the drought problem could be overcome by an effective irrigation system that would help raise the output of Thailand's rice paddies higher, from only 400 kilogrammes per rai at present, far below the 700 kg in Vietnam and 1,000 kg in China.

the amount is less than 0.9% of the overall ingredients.
But the Agriculture and Co-operatives Ministry has only budgeted a small amount to help farm and food products meet the global market requirement under the concept "Farm to Table" to transform the country into the "Kitchen of the World".

The ministry has set aside 7% of the total 53.63 billion baht 2004/2005 fiscal budget for operating three strategic goals that include plans to add value to farm products and raise food standard.

Panisuan Jamnarnwej, president of the Thai Frozen Food Association expressed doubt over the government's ability to set up an effective traceability system on farm food, especially fishery products.

Mr Panisuan, did praise, however, the government's initiative to promote food safety since the start of 2004 but said the implementation was still lax.

He said food manufacturing plants should all embrace at least a basic standard of Good Manufacturing Practice in 2005 to ensure quality production processing.

He added that those who fail to adopt the standard should be punished or their plants shut down.
Harsh punishment would assure the production of safe food by Thai operators and free the industry from import barriers imposed by buying countries, he said.

Producers of farm products were also suggested to sell processed products rather than raw materials in order to enjoy more value-added and avoid possible import barriers related to food hygiene.

In terms of trade, there are more options for traders to shift from traditional transaction patterns to advanced ones such as the futures market.

Thailand's first futures market, the Agricultural Futures Exchange of Thailand, began trade on Aug 26, 2004. It could ultimately lead to major changes in the farm trade although currently the trade volume remains small, with only rice and rubber traded. Contracts for tapioca and shrimp are scheduled to begin in 2005.

Napaporn Kurupasutchai, the chief of the AFET, hopes to see heavy trade volume in the future, when the prices are used as references in global trade.