The extraordinary meeting of the cabinet on Wednesday agreed to reduce the rice pledging price for the second crop in 2013 from 15,000 to 12,000 baht per tonne, as proposed by the National Rice Policy Committee, PM’s Office Minister Varathep Rattanakorn said.
The reduction in the pledging price will take effect from July 1, 2013, while each farming household will be eligible to be paid a maximum of 500,000 baht under the scheme, he said.
Mr Varathep said the decision was based on the changing price of rice on the world market, the baht’s appreciation, and the increase in global rice supply.
The price cut is also aimed at maintaining a balanced budget in 2017, he added.
The secretary-general of the Council of State has endorsed the price change as being lawful, the minister said.
But Prasit Boonchoey, chairman of the Thai Farmers Association, said his association would petition Prime Minister Yingluck Shinawatra asking her to review the cabinet’s decision.
He said rice farmers, particularly those in the central plains, disagreed with the reduction. He said 12,000 baht per tonne for ordinary paddy is too low.
Rice costs more than 8,000 baht per tonne to produce and the 12,000 baht pledging price can be reduced by up to 15% to account for moisture content in the rice, so farmers could receive just 9,000 to 9,500 baht per tonne after deductions for excessive moisture, Mr Prasit said.
Farmers will still make a profit from the rice scheme, but a very small one, which would not be sufficient to cover the daily living costs of farmers' extended families, he said.
Mr Prasit said the association’s representatives in every province would gather opinions and suggestions on the rice pledging scheme and report back.
These opnions will be summarised and passed on to Ms Yingluck, the chair of the National Rice Policy Committee, and Commerce Minister Boonsong Teriyapirom, who is responsible for the rice scheme, he said.
Chukiat Opaswong, chairman of the Thai Rice Exporters Association, welcomed the decision to lower the price, praising the government for admitting that its pledging price for rice was too high.
He predicted that the competitiveness of rice exporters would substantially improve, after rice exports were down by as much as 35% over the past year, due to the high price of Thai rice.
The reduction in the rice pledging price will enable exporters to compete with the state in buying grain for export, Mr Chukiat added, because the rice price differential between the domestic and global markets would be about the same.
The cabinet set the new pledging price at 12,000 baht a tonne, while the price of rice on the world market is 11,000-12,000 baht per tonne, he said.
Mr Chukiat said there could be an over-supply on the world rice market this year because the major producers - India, Vietnam and Thailand - were all expecting bumper crops.
Thai harvests could produce as much as 28-29 million tonnes of rice this year, he said.