Stuck on the tiger's back

The government's programme to buy rice from farmers is a political dream and a practical, economic nightmare. Paying premium, fixed prices for paddy seemed like a good idea at the time. But the Pheu Thai government now is stuck with a serious problem. It can't get rid of the rice purchase project, or even change it significantly, because the farmers will revolt.

It can't get rid of the purchased rice in the normal way, without sticking taxpayers with a huge bill.

Commerce Minister Boonsong Teriyapirom has finally said what everyone knew he would have to say. The government will sell millions of tonnes of rice from over-stuffed warehouses, and the public will take the losses.

Mr Boonsong said on Friday he intends to put seven million tonnes on the market. He will try to sell it to foreign governments, and he will open auctions inside the country.

All of this will occur at a time when the price of rice _ alone among the world's major grains _ is continually falling. Two years ago, before the rice-purchase project began, a tonne of rice was selling for an average price of US$371 (10,700 baht) on world markets. Last Friday, as Mr Boonsong spoke to the media at Nonthaburi, the price tracked by the United Nations' Food and Agriculture Organisation was $315, or 15% less.

Those are mean prices, and not exactly what Thailand will receive for rice sales. In some cases, it will receive more. The top Thai rice _ khao hom mali, now sold worldwide as jasmine rice for its pleasant aroma _ receives a significantly higher price, and is by far the top selling imported rice in the North American market. But some sales of ordinary milled, broken rice will also be at prices below the worldwide mean.

Samarendu Mohanty, a senior economist at the International Rice Research Institute in the Philippines, said two things bluntly that should be said at home. First, "the government will have to subsidise" its foreign sales. If it does not sell rice at a price lower than what it bought it, then it simply will not sell rice.

Second, "it's likely to weaken global prices". If anything, Mr Mohanty is optimistic. In a world where all major rice growers have surpluses, prices will continue to drop. Thai sales of millions of tonnes will push prices down even more.

Mr Boonsong has a glib way of presenting this. In his political world, the government will sell rice from bulging warehouses, and use the income to fund part of the purchase of rice from the next crop. Note carefully: "part of". In the minister's world of populist politics, the country may lose "only" 80 billion baht this year.

By climbing on the back of the rice-purchase tiger, the government put itself and Thailand in a double bind. Farmers were key voters that put Pheu Thai into power. They will not easily or quietly accept removal of the rice floor prices, or even serious changes to the programme. On the other hand, the subsidies for a major export crop will bring more lawsuits in international trade, and at the World Trade Organisation.

The major losses to the nation cannot go on indefinitely, but the government obviously has no idea how to climb off the tiger's back.