Farmers’ debts have become so severe and chronic that every government in recent memory has been forced to make it a priority. The military-led administration of Prayut Chan-o-cha is no exception, and earlier this month the Prime Minister expressed concern over the nation's 1.9 million indebted farmers. He has ordered several ministries to find urgent solutions to the problem and emphasised farmers should be saved from losing their farmland.
This is a real risk for indebted farmers, many of whom took their cases to the government last week. As detailed in Spectrum, farmers are often left not only at the mercy of the rain, or lack of it, but also at the whims of loan sharks. Whether through over-zealous borrowing or being encouraged to enter loan restructure agreements, many have been left with debts they struggle to manage from season to season.
According to deputy government spokesman Maj Gen Sansern Kaeokamnerd, there are more than 1.6 million farmers carrying a combined debt of about 388 billion baht — or 237,000 baht per person on average.
However, this is a situation that cannot be easily fixed as there are various factors behind the debts. First of all, Thai farmers face the uncertainty of the cyclical nature of commodity prices, especially when they grow low-quality produce for a wide market.
Thai farmers also earn the least of all rice farmers in Asean nations. According to last year’s survey by the University of the Thai Chamber of Commerce, Thai farmers’ net profit after rice sales was only 1,560 baht/tonne. Production costs are high, exceeding 9,760 baht per tonne. Rice harvests typically yield 450 kilogrammes per rai.
In comparison, Vietnamese farmers had average production costs of 4,070 baht/tonne with a rice yield twice as large as Thai farmers produce.
The National Statistical Office of Thailand reported that in 2011, a farmer household earned 19,400 baht on average per month with an average expense of 14,200 baht. However, about 36.9% of them earned less than 10,000 baht per month. Seventy-five per cent were indebted. The situation now is certainly worse because the survey was done when the commodity prices were better than they are now.
Unfortunately, the priority so far has been placed on subsidies. The Yingluck government, for instance, guaranteed a sale price for rice at 15,000 baht per tonne, while the market price was only half that. Farmers might be happy to see a higher rice price, albeit unrealistically, but the scheme was a double-edged sword because it encouraged farmers to increase the quantity while placing a lower priority on the quality of their rice. This is not to mention the massive corruption incurred in the process of the rice-pledging scheme.
Meanwhile, as many farmers said in our Spectrum report, they suffer from a monopolised system when it comes to buying seed and fertiliser used in farming. They can only buy seeds and grain from a handful of suppliers who monopolise all agriculture-related trade, which in turn can influence market prices.
Some farmers are not equipped with the knowledge to manage their finances efficiently, especially after their children leave to work in the cities. Previous governments tried to help farmers manage their finances efficiently by, for instance, introducing accounting books and urging people to work out their finances according to their expected income.
There were also micro-finance schemes introduced to bring informal debt into the system. But those plans seemed to be too slow to solve the problem.
In recent years, household debt in Thailand has spiralled. Bank of Thailand data shows that debt levels rose from 61% of the gross domestic product in 2009 to 85% late last year, making Thailand’s household debt the highest in Southeast Asia.
The old style of farming where growers were just at the mercy of Mother Nature no longer works. Government assistance must come in many forms. For instance, cooperatives should be promoted to strengthen the power of small scale farmers, and the government should support them with technology or rice milling to help them add value to their products. Market systems must be established to help farmers acquire seeds and fertiliser at reasonable prices and be environment-friendly.
Relieving farmers’ debts is an issue of national importance as it will affect the future and lifestyles of all people in Thailand. Should farming land be owned by a majority of individual farmers who can be proud of the ownership in their golden land? Or should we just let the market dictate, and let the land plots fall into the hands of a handful of big-time investors?
The farm sector has long been the social safety net for people, as was evident when the economic crisis hit in 1997. When the younger generation lost their jobs, they still had the farming land of their ancestors to fall back to. But that may no longer be the case if this chronic issue of debt is not properly addressed.