Rice export chief says mortgage plan a feast for big firms, famine for small farmers

WITH THE GRAIN: Vichai Sriprasert of the Thai Rice Exporters’ Association says that African nations will not be able to afford Thai rice once the government’s rice mortgage scheme goes into effect.

Any change in government rice policy enters the volatile area of the national psyche where economics, food security and politics overlap.

The government rice mortgage scheme, set for introduction on Friday, will guarantee farmers 15,000 baht per tonne for paddy (unhusked) rice, up 50% over that guaranteed under the Abhisit administration.
With a 30% share of global exports, Thailand is the biggest player on the international rice market. And with government control over national supplies, there are concerns that the government will manipulate global prices or that buyers will look instead to Vietnam, India, Brazil and elsewhere for cheap rice, leaving Thai farmers to bear the brunt of a downturn in exports.
After Thailand's cancellation of a 300,000-tonne government-to-government rice contract last week, Indonesia announced it would scrap a separate plan to buy 70,000 tonnes of rice, worth 1.37 billion baht, from Thai exporters in protest, and look to purchase more from Vietnam.
The Yingluck Shinawatra government hopes the new policy will bring rice prices to a level it considers more realistic, which will benefit farmers. Detractors worry it will benefit landowners and companies with close ties to the government, and that it will encourage corruption and have huge additional storage and implementation costs.
Bangkok Post Sunday spoke to Vichai Sriprasert, CEO of Riceland International Ltd, a leading rice exporter, president emeritus of the Thai Rice Exporters' Association and a member of Thailand's Board of Trade, about the programme's implications for the global rice market, the Thai economy and local farmers.
What will change through the rice mortgage programme?
The competitiveness of the Thai rice industry will be retarded significantly by the government setting prices rather than letting market forces dictate them. We can expect disastrous effects on the currently healthy rice sector. A massive amount of tax money will be needed to implement the government's rice policy. The government plans to set the paddy price at US$500 (15,565 baht) per metric tonne compared to $350, which is what it is trading at in Thai and US markets. That will result in paddy from Thai farmers flowing into government hands. Low farm income cannot be blamed on low prices as the margins are more than adequate but small farm sizes. Thailand has been selling rice to the world market at top prices which provide 50% to 100% profit margins to our farmers. The high mortgage price will prevent rice surpluses from being exported and a lot will remain in the warehouses until it becomes unfit for human consumption.
Who will benefit most?
I don't think it will support small farmers. Under mortgage schemes only big farmers benefit. Thailand has four million farmers, but only 600,000 have signed up to the mortgage programme. One assessment by Ammar Siamwalla [former president of the Thailand Development Research Institute], said 37% of the increase would go to farmers, 46% to businessmen, the rest for warehouse costs, etc.
Can the global market absorb the changes?
If some of them do, it will be just short term. Thailand normally ships about four million metric tonnes to Africa. The poor consumers there cannot afford such a huge hike in the rice price.
India has 25 million metric tonnes in stock, 10 million of which they want to keep for food safety. Just India alone will make the high price policy of Thailand unworkable.
Burma used to export four million tonnes prior to World War II. They can rise to that position again without much difficulty.
China is so advanced in rice technology that their hybrid rice can yield double what our best can do.
The financial woes in the EU and US are spreading. Our pricing must be flexible and is best set by market forces, not the government.
Will the government have to subsidise exports to keep them competitive?
The Pheu Thai government has said it won't sell government rice stocks below the mortgage price plus costs, which means they won't subsidise the price for exporters.
Will this result in large stockpiles?
Stockpiles will be so great the small farmer will have to stop growing rice eventually. Under the previous government's 10,000 baht scheme, there was no surplus as the government did not interfere with the workings of the market mechanism.
Will buyers look to other markets?
It is natural for buyers to look for a better alternative or a substitute. India alone has 15 million tonnes available for sale.

Scientist to farmers: Produce enough rice

DR. GELIA T. Castillo, national scientist and member of the Philippine Rice Research Institute (PhilRice) Board of Trustees, challenged Mindanao farmers to improve their yield.
Castillo issued the challenged during the recent Farmers’ Field Day and Forum in PhilRice Agusan in Basilisa, Remedios T. Romualdez, Agusan del Norte.
Close to 1,000 farmers, students, representatives of local government units, and members of the press from Regions 10, 11, and 13, attended the activity.
Recognizing the issues on food production, Castillo said "farmers have a huge role to play" in producing more rice to feed the ballooning population.
"The Caraga region has slightly higher per capita rice availability (129 kg) than the national average (119 kg)...The challenge now is how to increase rice productivity so the region can contribute to Philippine rice self-sufficiency," Castillo said.
Castillo stressed that 27 percent of the country's population are in 26 marginal provinces while 17 and 16 percent are in non-rice producing cities in the National Capital Region and non-rice producing provinces, respectively. To feed this population and for the country to be rice self-sufficient in 2013, Castillo urged farmers in provinces with higher per capita rice availability to increase their production.
Castillo noted that the farmers’ inquisitiveness and their eagerness to bring their children to PhilRice experimental fields to learn with them show the tillers’ determination in improving their yield.
Meanwhile, PhilRice Executive Director Eufemio T. Rasco Jr. assured farmers that the Institute will intensify rice research and development efforts in Mindanao as some of the country’s poorest farmers are in the region. In Northern Mindanao and in Davao and Caraga regions, the areas covered by PhilRice Agusan, wet and very wet climatic conditions limit the farmers in attaining high yield.
To help farmers attain high yield, PhilRice-developed varieties such as NSIC Rc160, a variety with an average yield of about six tons per hectare (t/ha). The variety, with a maximum yield of 8 t/ha, was the farmers’ most preferred among the other varieties owing to its good eating quality and yield.
NSIC Rc160 is also good for ratooning or letting the rice plant produce new tillers after harvesting the crop.
“It feels great learning that farmers like the variety we bred at PhilRice,” said Dr. Manuel Jose C. Regalado, PhilRice deputy executive director for research.
Regalado also announced that the Department of Agriculture will train farmers’ associations on seed production to improve their capability in producing their own high-quality seeds.
DA-PhilRice is a government-owned and –controlled corporation that aims at developing high-yielding and cost-reducing technologies so farmers can produce enough rice for all Filipinos.

National Assembly worries of losing fat land

VietNamNet Bridge – Considering the plan on land use in the next 5-10 years submitted by the government, the National Assembly Standing Committee showed its worry over the reduction of rice land.

According to the government’s report, the land for rice cultivation reduced by 270,000 hectares during ten years (2001-2010), mainly in the Red River Delta, the southeastern region (building industrial zones, new residential areas) and the Mekong Delta (for aquaculture and planting fruit trees).

The report says that the rice area reduced but rice productivity keeps increasing, so the country’s food security is still maintained.

In the report, the government emphasized to strictly preserve the rice area, with 3.81 million hectares by 2015 (308,000 hectares down from 2010).

The National Assembly Standing Committee agreed with the government but it reminded the government of threats from climate change, salt water encroachment, urbanization and industrialization.

National Assembly Chairman, Nguyen Sinh Hung, expressed his concern over the feasibility of this goal. “Rice can be grown in land for orchards, but once land is devoted to industrial zones and residential areas, it cannot become rice land again. It is a thorny problem to maintain the above rice area, particularly in the threat of climate change,” he said.

He questioned the government about the reduction of 308,000 hectares of rice land from now to 2015. “How will this area be used? How much of it will be devoted to industrial activities?”

He analyzed: “If only one third of the above area is devoted to industrial activities, the goal to maintain 3.18 million hectares of rice land will fail because industry will be accompanied with services, transportation, education, healthcare, cultural activities, which all need land. Thus we cannot preserve rice land.”

According to the government’s report, land for industrial activities increased from 23,000 hectares to 100,000 hectares in the 2001-2010 period. However, only 46 percent of the area of industrial zones is occupied.

Deputy Minister of Natural Resources and Environment, Nguyen Manh Hien, said that it is necessary to devote land to industry to serve the country’s goal to become an industrialized country in the next ten years.

National Assembly Chairman, Nguyen Sinh Hung, agreed, but he emphasized that industrial facilities should use forest and unused land, not rice land.

DWR-Rice Farmers Resolve Water Temperature Issue

The California Natural Resources Agency'S Department of Water Resources issued the following news release:
Rice growers near Oroville Dam are benefiting from a creative fiscal solution to a water temperature problem.
The State Department of Water Resources (DWR), which operates the dam, announced that a $2.4 million payment to several water districts is going to rice growers in those districts, compensating for complaints that Oroville water releases were too cold for ideal rice growing. Funding comes from State Water Project contractors.
The payment was made this month to local water districts receiving water from the dam's Thermalito Afterbay. The districts have water rights that predate operation of the California State Water Project (SWP). Oroville Dam is the SWP's key storage facility in Northern California.
The payments arise from an agreement among DWR and the districts. It resolved concerns on the cold water farming impacts of Afterbay deliveries. Water needs to be cold to safeguard fish downstream. But the districts voiced concern over cold water's negative impacts on rice yields.
DWR and the districts reached agreement on the issue collaboratively, using jointly developed data and analysis. The initial payment covers several years of concern and will be followed by annual payments, based on measured rice yield impacts and relevant market pricing.
"This agreement illustrates DWR's desire to find reasonable ways of balancing the sometimes conflicting benefits of our operation," said DWR Acting Deputy Director Carl Torgersen. "Tax money is not involved because this solution is funded by the water contractors who are charged for SWP operations."
Districts participating in the agreement include the Western Canal Water District, Richvale Irrigation District and Biggs-West Gridley Water District. Butte Water District and Sutter Extension Water District have future options to participate.
Estimation of cold water crop impacts involves direct measurement of rice yield loss using GPS-equipped harvesters, spectral analysis of satellite imagery to determine areas of impact and economic analysis of the value of rice. Under direction of a technical panel, valuation of the lost production is then determined.
Contact: Ted Thomas, Information Officer, 916/653-9712