Populist policies hurting farmers: BoT's think tank

Populist policies hurting farmers: BoT's think tank

State subsidies have distorted crop prices, sunk farmers deeper in debt and contributed to falling productivity and higher inequality in resource accessibility, according the Puey Ungphakorn Institute for Economic Research.
State subsidies have distorted crop prices, sunk farmers deeper in debt and contributed to falling productivity and higher inequality in resource accessibility, according the Puey Ungphakorn Institute for Economic Research.

Long-standing state subsidies have distorted crop prices, sunk farmers deeper in debt and contributed to falling productivity and higher inequality in resource accessibility, says the Bank of Thailand's think tank.

Agricultural policies have also dampened farm product prices and increased risk in the sector, said Sommarat Chantarat, head of financial system research at the Puey Ungphakorn Institute for Economic Research (Pier).

"Populist polices -- price subsidies, price intervention, farmer debt schemes and agricultural debt payment suspension -- have distorted farm product prices and farmers' motivation," she said. "They have led to lower productivity of the agricultural sector."

For over a decade, Thailand's cultivation has been concentrated in some popular crops, especially rice, rubber, palm, cassava and sugar cane, and such concentration is also found in the same locations and seasons, Mrs Sommarat said, adding that monoculture of popular crops is a rising trend.

Risk-adjusted returns of local farmers have declined over the past decade.

Mrs Sommarat urged the government and policymakers to support farmers the right way.

The state and policymakers should focus on agricultural policies, technology and automation to improve farming productivity.

"We're concerned about policies to help farmers because the state always subsidised when farm product prices sank by offering farmers credit to buy fertiliser and pesticide," Mrs Sommarat said. "Such assistance led them into a debt trap. The best solution for farmers is to shift towards planting high-yielding returns such as fruits and flowering trees."

According to Bank of Thailand senior economist Jirath Chenphuengpawn, a recent Pier survey found that crop concentration during 2003-13 production increased by 2% a year on average and rose 4.2% a year during 2015-18 because of the larger area of rice farmland.

In 2015, rice and sticky rice plantations represented 57.7% of total farmland, rising to 63.7% in 2017.

Mr Jirath said two-thirds of farming households practice monoculture.

Popular crops with higher risk and lower return -- especially sugar cane, corn and sticky rice -- generated returns of a mere 0.8%, 1.0% and 1.3% respectively during 2006-17.

Lower income and higher debt are key factors undermining farming household livelihood, Mr Jirath said.

Farm household income averaged 57,032 baht in 2017, while the ratio of debt per household was 1.3.

The survey also discovered that farm households are a significant part of the ageing society and the problem is more serious than for the overall country.

Farmers aged 60 or above represented 37% of total farm households in 2013, rising from 26% in 2003.

The portion of households with only elderly farmers doubled from 5% in 2003 to 10% in 2013. At the same time, households with younger farmers aged 25-40 declined from 60% during the same period.

"Ageing farmers are limited in their use of technology and innovation, slowing improvement and development of the sector," the survey said.

There are currently more than 500 mobile farming apps worldwide, with 61 developed by Thais.

Of the 61 Thai apps, four are potential apps and most of them were developed by the private sector, while one-fifth of the apps are not accessible or inoperative.

Pier suggests letting the private sector develop mobile farming apps with government support.


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