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Abolishing Rice Price Intervention?
Bangkok Post, April 7, 2004
The rice industry has urged the government to scrap its 22-year-old price intervention programme, alleging that it is plagued by corruption and has resulted in huge financial losses for the government.
Many farmers, millers and exporters have criticised the lack of efficiency and transparency at the two agencies involved in the annual price intervention programme: the Marketing Organisation for Farmers and the Public Warehouse Organisation.

The taxpayer-funded exercise is aimed at shoring up paddy prices by having farmers pledge paddy with the government. The two agencies then keep the grain in storage until farmers redeem it.


"But from time to time, we have had to acknowledge bad news, such as rice being moved out and sold for a profit," said Suwan Kathavuth, the president of the Thai Farmers Association. "It's too easy for state officials to conspire with millers or exporters to exploit the scheme, leaving it running inefficiently and wasting government funds," he said.

Farmers surveyed by Kasetsart University also suggested the government replace the programme by setting guaranteed minimum paddy prices, which would allow them to use future harvests as collateral against loans from the Bank for Agriculture and Agricultural Co-operatives.

Since the state-run bank has no storage facilities, farmers would have to store the paddy themselves until it is redeemed. The bank would then pay the difference if market prices go up, or the government would absorb the loss if market prices fall.

Ennoo Suesuwan, senior executive vice-president of the BAAC, said the government may support the programme by investing in more paddy dryers and rice storage silos for communities.

This would save the government the expense of having to rent private warehouses, panellists at a recent seminar agreed.

The two state agencies, the MOF and PWO, have no warehouse facilities of their own and generally rent space from millers and exporters.

Pramote Vanichanont, the president of the Rice Mills Association, said the rice pledging scheme should be scrapped because it had become a tool for politicians.

"It has become a tradition. The government carries on with the scheme instead of rethinking market intervention," Mr Pramote said.

"For example, the market price for paddy is now 5,700 to 5,800 baht a tonne. The pledging scheme offers only 5,100 baht a tonne. It's not needed because right now, nobody will pledge their grain to the government."

Mr Pramote said he wanted the government to concentrate more on strategic planning for the rice industry, which would help increase the export competitiveness of Thai rice.

He said Vietnam, the country's arch-rival, which has spent more than US$ 100 million (four billion baht) on research and development, plans to introduce its first strain of fragrant rice this month. "We spend only 40 million baht a year on R&D while huge sums are spent on the price intervention programme," Mr Pramote said.

The government's Rice Policy Committee each year sets aside 10 billion to 20 billion baht for the pledging programme. In 2002, it was reported that the scheme lost nine billion baht.

Vichai Sriprasert, the president of the Rice Exporters Association, agreed, saying the government had for years paid unnecessary costs for warehouses, rice maintenance charges and logistics.

"All those fees cost the government about 2,000 to 3,000 baht a tonne," he added.

Commerce Minister Watana Muangsook, secretary of the Rice Policy Committee, dismissed the suggestion, saying the government would use the intervention plan as a psychological mechanism to prop up market prices.
MGR Archive 8.4.2004
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Region Type Price  
Russia Rapan $ 700
USA Jupiter Rice $630
USA Calrose #1 $830
USA Calrose #1 Paddy $480
EU Prices Baldo €660
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