By Nattha Thepbamrung and Chaiyot Yongcharoenchai
Criticism of the rice-pledging scheme mounts even higher as farmers who have gone unpaid for months are driven to the streets in protest
Mother of two Sasikarn Puang-In, 41, has been waiting almost two months for the Yingluck Shinawatra government to pay her for her rice and if she doesn’t get the money soon she won’t be able to afford to sow another crop.
From Suan Peung, Ratchaburi province, she farms 25 rai of rice fields, with 10 of those rented.
“I used to get 100,000 baht per season of which at least 70,000 had to be invested for the next season, the rest was for the family’s living expenses. But now, I’ve got nothing back from my last pledge and I have no money for the next season.
“Life is a lot tougher now. My children are in school and we don’t have money to buy food.”
Ms Sasikarn is one of 500 farmers who descended on the Ministry of Commerce headquarters in Bangkok this month demanding the government pay out all outstanding claims under the rice-pledging scheme. The Thai Rice Farmers Association has threatened that unless the government meets its financial obligations this week, mass rallies will be staged countrywide.
The controversial scheme started in October 2011, with the government pledging to buy paddy at 15,000 baht a tonne for white rice and 20,000 baht for hom mali, about 40% above the market price of that time. But a year a year after the programme was launched, rice exports fell to 6.95 million tonnes, down by 34% from 2011, before dropping further to 6.5 million tonnes last year.
The government has spent 689 billion baht in the past two years buying from farmers at prices that were as much as 76% higher than market rates, Bloomberg reported. The US Department of Agriculture expects that government rice inventories will reach a record 14.7 million tonnes this year, compared with 6.1 million in 2010.
The government has said it needs to pay 177 billion baht for about 10 million tonnes bought from farmers since October, however it is facing the prospect of falling international market prices which could be compounded by Thai rice flooding the market. In a bid to speed up sales and generate income to pay the farmers, the government last week put 220,000 tonnes of its rice stocks on the Agriculture Futures Exchange of Thailand (AFET). It plans to sell between 500,000 and one million tonnes in total via the exchange.
The price of Thai 5%-broken white rice, a benchmark grade, tumbled 23% last year and was at $456 a tonne on Feb 5. A slump to $370 by March is possible as more grain is offloaded from state granaries, according to Chareon Laothamatas, president of the Thai Rice Exporters Association.
“In the worst case, if they decide to get rid of the programme and go back to the time when there was no mortgage scheme, it will put downward pressure on global prices,” said Samarendu Mohanty, senior economist at the Los Banos, Philippine-based International Rice Research Institute.
But Darren Cooper, a senior economist at the International Grains Council in London, told Bloomberg that Thailand may not be able to find enough buyers for the stockpiles because major importers in Africa and the Philippines increasingly prefer grain from Vietnam and India, which have both dethroned Thailand as the world’s top rice exporters. Mr Cooper said the forecast of 8.2 million tonnes of Thai rice this year will probably need to be reduced.
The international economics of the rice crisis mean little to Ms Sasikarn though, who admitted that she went in with her eyes wide open when the Yingluck government bumped up the pledge price to 15,000 baht per tonne. She said that she and her farmer friends knew that since the pledging scheme began they knew it was unsustainable and would probably collapse one day.
“I joined the scheme because the government said there are two ways,” she said. “Either join the pledging scheme or sell our rice to mills directly where will only get around 6,000 baht per tonne. We were desperate to accept the [rice-pledging] policy.”
SOW WHAT YOU REAP
Nipon Poapongsakorn, a distinguished fellow at the Thailand Development Research Institute who has studied rice since the mid-1990s, believes the rice-pledging scheme started to decline when former prime minister Thaksin Shinawatra first came to power in 2001.
In 2002-03, after a policy change, prices gradually started creeping up. The government ended up holding virtually all the rice stocks despite setting household limits at 350,000 baht for the October main crop and 300,000 baht per household for the remainder of the year.
“The pledging price started to rise above the then market price, around 5-10%,” Mr Nipon said of the early changes.
“That was steady until Ms Yingluck’s government, when the pledging price rose to 40-50% above market price and the government held all the rice in its hands. This is why this pledging scheme is in big trouble.”
The rice-pledging scheme began in 1982 under the direction of Nipon Wongtra-Ngan, honorary president of Thai Rice Millers, with the simple idea of allowing farmers to be financially sustained by low-cost loans while they waited to get a good price for their crop.
“It is different from what it is now,” Mr Nipon said. “Farmers were expected to keep their rice until the price rose because during the harvest season the rice price is very low.
“Farmers kept their rice in their own granary and got money from the Bank for Agriculture and Agricultural Cooperatives (BAAC) at low interest. A few months later when the price rose, the farmers could sell their rice and return the money with interest to the BAAC.”
Mr Nipon believes the current administration is in a difficult situation to pay out farmers as it would be in breach of the constitution to borrow money while in caretaker mode. The sales must be transparent and free of corruption to earn the farmers’ trust again.
“The problem has been there since the scheme began,” he said.
“The government sold rice from its stocks very slowly. There were many opportunities they did not take to sell the rice. Also, the method of selling the rice was wrong.
“They sold rice at a low price to their partners while the rice grade was never separated at auction, leading to a low price.”
Another option for the government was to return the rice so the farmers could sell it themselves.
A more radical idea is to allow farmers to use the vouchers they have received for pledging their rice, known as Bai Pratuan, to obtain money from banks. The Bai Pratuan could be used as a guarantee or exchanged with financial institutions under commercial law.
For this to happen, the government would need to endorse the Bai Pratuan by agreeing to pay the financial institutions at a later date for the vouchers.
POLITICS AND RICE
Several rallies were launched earlier this month by disgruntled farmers in the upper Central Plains and lower North, as well as in Bangkok, and Thai Farmers Association president Prasit Boonchuey has threatened to escalate the protest in the capital this week if the government does not solve the problem.
But not all rice farmers are unhappy, and with Suthep Thaugsuban, who is leading the wider anti-government protest in Bangkok, calling on the farmers to join his drive to oust the Yingluck administration, supporters of the rice-pledging programme say its critics are politically motivated.
However, Mr Prasit insists this is not so, and said he only turned against the government because it failed to deliver on its promises. The rice scheme was one of a raft of populist policies trumpeted by the Pheu Thai Party while on the campaign trail ahead of the 2011 general election. Mr Prasit told Spectrum that rice farmers across the country were all for the pledging programme and were excited when it launched, as they expected to see a significant rise in income.
“Even though no one ever gets the full 15,000 baht per tonne, it is still a lot better than selling the rice at market prices, which will get them 7,000-8,000 baht per tonne. At least this scheme can get them 11,000-12,000 baht per tonne,” Mr Prasit said.
“But no one has received money from the scheme since last October.”
Mr Prasit said the missed payments have had a knock-on effect throughout the industry. Rice millers and related labourers have also not been paid and many rice warehouse workers have been laid off. >>
>> However, Mr Prasit does not think the pledging scheme should be abandoned. If there is no corruption involved and the pledging programme is better managed, it could really help farmers, he said.
“I believe that the rice-pledging scheme is very useful and it should be continued by the next government, whoever it will be. But there is a lot to improve, especially its process. It should be more transparent,” he said.
According to National Farmers Council statistics released in mid-January, the government promised to pay more than 157 billion baht for more than 10 million tonnes of pledged rice in the current crop. But so far, less than 41 billion baht has been paid. Many farmers who have not been paid are now struggling to pay to grow further rice and are having to borrow against their assets, such as their properties, to fund further rice growing.
The scheme covers all 77 provinces, but farmers in the lower North appear to have experienced the most difficulties in getting paid. Nakhon Sawan is the worst affected, with farmers receiving just over 1.73 billion baht of more than 10.2 billion baht promised.
Kamphaeng Phet is the second-worst affected province. The government has paid little more than 1.82 billion baht of more than 9.76 billion baht promised.
In Phichit, rice farmers have received less than 1.38 billion baht of more than 8.83 billion baht promised, while in Phitsanulok the government has paid a little more than 1.05 billion baht despite vowing to pay almost 7.67 billion baht.
At least eight rice farmers have committed suicide since the payments stalled, with financial worries believed to be the reason.
However, a group of rice farmers in Ayutthaya province remain proponents of the scheme. The Thai Agriculturist Association, led by Wichian Puanglumjiak, says members have been paid well so far, understand why the current delays are happening and will continue to support the Pheu Thai-led government.
Mr Wichian told Spectrum that he was very happy with the scheme, as are most other members of his association.
According to the National Farmers Council statistics, the government has paid more than 650 million baht to rice farmers in Ayutthaya, who have been promised almost 2.04 billion baht. But the shortfall does not worry Mr Wichian.
“We can wait,” he said. “We understand that the government is working hard trying to solve the problem.”
Mr Wichian, an avowed staunch supporter of the Pheu Thai Party, acknowledged that many other rice farmers are unhappy, as seen in their protests. However, he suspects Thai Farmers Association president Mr Prasit has an ulterior motive in his threats to ramp up his anti-government push.
“His group is not legitimate,” Mr Wichian said. “He used to be part of the Thai Agriculturist Association, but he is no longer involved [with us]. He has some other motive rather than helping the farmers.”
He said Mr Prasit is not the right person to talk to about problems in the scheme, as he is clearly “taking sides”.
Mr Wichian said he did not know exactly how many Ayutthaya rice farmers had already been paid. All he knows is that the money keeps coming in and it is flowing right now.
“Those who still haven’t been paid are complaining about how the government works, but that’s only because they don’t understand the whole situation,” he said. “The government is trying its best to help solve the problem as quickly as possible.”
Another rice farmer who is happy with his lot is a man who identified himself as Teerasin, from Ayutthaya’s Bang Pa Han district.
He told Spectrum that there were few rice farmers in Ayutthaya who hadn’t yet been paid. Therefore, few of them intended to join the antigovernment protests in nearby Bangkok.
Those taking to the streets now are mostly the worst-affected farmers from Kamphaeng Phet, Phichit, Phitsanulok and some parts of the upper Central Plains. But Mr Teerasin urged them to exercise more patience.
“I heard that the BAAC is slowly paying them the money. They have to be a bit more patient since it is such a huge amount of money and this takes longer to process,” he said.
“No one in Ayutthaya has been badly affected by the rice-pledging scheme,” Mr Teerasin claimed. “Many of us have already been paid, and those who have not yet been paid are not struggling financially. They all said they can wait.”
He said those who need money to plant the next crop have applied for BAAC loans.
Mr Teerasin explained that the situation in Ayutthaya has also been helped as some rice millers in the province have also bought crops from farmers in order to help them make money while waiting for the government payments.
“The Thai Agriculturist Association takes good care of us. Therefore, we are not affected by the scheme at all,” he said.
The association has pitched three ideas to the government on how to improve the rice-pledging scheme. Initially, the BAAC and rice millers should loan farmers 80% of the amount shown on the payment vouchers. Next, the association would like the scheme to be extended until October. Third, the government should increase farmers’ credit.
But despite claims by Mr Teerasin and Mr Wichian that all is fine and that Ayutthaya farmers are receiving a lot more money than before, there also appears to be a lot of farmers in debt. Mr Teerasin, though, said this was due to a spur in investment rather than dwindling personal finances.
“We saw opportunities to make money [when the scheme was announced],” he said. “So we went ahead and made investments [in anticipation of the increased income]. This creates the impression that we have a lot of debt, but as soon as we get the money for our pledged rice, our situation improves. We can pay off the debts and will then have more money to save.”
Rice farming is not a lucrative trade, but Mr Teerasin said life had been more comfortable under the Pheu Thai-led government.
“I don’t know if the scheme is corrupt but the most important thing is the farmers really benefit from it,” Mr Teerasin said. “We can’t thank the goverment enough.”
THE MIDDLE PATH
Ms Sasikarn and her fellow farmers protesting in Bangkok now realise that they shouldn’t have been lured by a scheme which promised a higher return and encouraged them to sell all their crops to the government.
When the programme was administered by the Abhisit Vejjajiva government, the returns were less, but they averaged 12,000-13,000 baht per tonne for both the main rice growing season and the off season.
“It seemed like the benefits were less, but it worked quite well,” she said. “I could manage to sell as much as I wanted, then the government would pay the difference [from what the pledge price was] which was about 1,200 baht per tonne. Working like this, I could focus on my rice to ensure it was the best quality so I could take it to the mill and get a good price.
“The recent scheme made everyone rush to increase their rice volume. I used to use organic fertiliser, but the fields around mine started to use chemical fertiliser. Rats and insects started to pour into my farm and then I needed to use the chemical one as well.”
Mr Nipon agreed that the previous government administered the rice-pledging scheme better as it did not impinge as heavily on the national economy.
“This scheme focused only on helping farmers,” he said. “The farmers can sell their rice directly to the mill. If their rice price does not reach the guaranteed price, they can get the difference from the government.”
Chanpen Dechjui, 57, a farmer who travelled from Phichit to join the protests in Bangkok, is owed 130,000 baht and is among many of the farmers who do not have enough money to start planting for the next rice season.
She too is pining for the old rice scheme under which she sold her rice for 6,000-8,000 baht per tonne and usually received the difference of about 2,000 baht from the Abhisit government.
Her eyes filling with tears, she said her friends voted for the Pheu Thai party after they announced the rice-pledging scheme changes and the 300 baht minimum daily wage.
“We are not rich people. When we heard these things could help us we grabbed them,” she said.
“We would have had no problems if they sold our rice honestly under the system and gave us the promised money to us. I did not expect that they would do this to us.”
Ms Sasikarn is not optimistic she will ever get paid and sees the government’s response as a stalling tactic.
“I do not really believe that I will get the money,” she said. “I just want to show that farmers are not stupid. If we cannot get the money, at least the government can be removed.”
“The government sold rice from its stocks very slowly There were many opportunities they did not take to sell the rice”
First published: Bangkok Post, February 16, 2014