Rethinking rice policy

Rethinking rice policy

While the caretaker Yingluck administration and the anti-government movement are busy blaming each other for the failure to pay rice farmers for their pledged rice, one thing is clear from the rice scheme debacle. Being financially unsustainable, it must inevitably come to an end.

But if not the rice-pledging scheme to help farmers, then what?

The solution starts from looking at what the rice scheme has done to the farmers, the rice industry, and the environment in order to avoid its disastrous path.

In only two years since the programme started, more than 700 billion baht of taxpayers' money has been spent to pay rice farmers at 40-50% above the market price. This amount does not include tens of billions of baht for rice mills to store some 17 million tonnes rice — now rotting away because the government has failed to sell it.

The rice-pledging scheme has also created a state monopoly which has destroyed the rice industry as a whole. With rice merchants having no rice to export when most grains are hoarded by the state, Thailand has lost its ranking as the world's No.1 rice-exporting country. Meanwhile, farmers have stopped producing high-quality rice to grow poorer quality but quick-yielding rice to cash in on the rice scheme.

They have also borrowed money to pump expensive — and highly toxic — chemical fertilisers, pesticides, and herbicides in to their rice fields, which pose severe health hazards and further contaminate the food chain and water downstream.

While it will take years to restore the stature and prominence of Thai rice in the world market, farmers in Thailand — despite the gigantic farm subsidies — remain the poorest among their peers in Asean countries.

This is not surprising. When your farm production costs are the highest, your gain is subsequently the lowest. According to the University of Thai Chamber of Commerce, the production costs of Thai rice farming are 139% higher than those in Vietnam and 37% higher than Myanmar. When it comes to net income, Thai farmers earn only 1,556 baht per rai against 3,180 baht in Vietnam and 3,484 in Myanmar.

Meanwhile, the rice scheme is causing great distress among neighbouring countries, amid claims of rice dumping and a move to file a complaint with the World Trade Organisation.

Pledging has also destroyed organic rice farming in the country. Organic farmers quit farming organically to cash in on pledging while organic rice mills went bust when they were unable to compete with the government’s high prices.

The answer is clear. To raise farmers’ income, a new rice policy must reduce their production costs. This requires sufficient funding for rice research, better irrigation, land to till, and the government’s commitment to reduce the use of farm chemicals, now the biggest chunk of production costs.

At present, the Agriculture Ministry only devotes 1.3 billion baht per year to agricultural research while spending 22 billion baht to import 160,000 tonnes of farm chemicals a year.

There are plenty of examples nationwide of how farmers can substantially lower production costs through the use of organic fertiliser and pesticide. That their rice is a prized item shows how Thai rice can become competitive in a market glutted with chemical-fed rice.

But weaning farmland off chemicals takes time. Financial help is necessary to help farmers nurture their rice fields back to health and to withstand lower yields in their first few years. Land reform is also a must since renting land is also a big production cost for landless farmers.

If the next government continues to fail to address this production cost problem, there is little chance of farmers escaping the poverty trap.

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