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Thailand Agribusiness Report Q4 2009
Market |
Agriculture, Farming & Raw Materials |
Report Type |
Market Research |
Country |
Thailand |
Published |
6 August 2009 |
Number of Pages |
64 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
In the Thailand Agribusiness Report for Q4 2009, we examine the difficulties the Democrat Party-led government is having with agricultural policies. Through Q209 and into Q3, the issue of what to do with the country's large and rising stocks of food grains was never far from the nation's headlines. The proposed auctioning off of rice and corn stocks caused a rift between the Democrat Party of Abhisit Vejjajiva and its main coalition partner the Bhum Jai Thai Party, loyal to northeastern strongman Newin Chidchop who is serving a five-year ban from holding political office .
Bidding held by the commerce ministry, controlled by Bhum Jai Thai, for the sale of 449,000 tonnes of corn and 2.6mn tonnes of rice, came under widespread criticism for the low price received amid allegations of a lack of transparency. In May, Abhisit stepped in to stop the sale, to the annoyance of his coalition allies. While there was talk of a collapse of the coalition, this was never really likely given that neither party is anywhere near ready to face the electorate. It is worth remembering that the government came to power only through the grace of the army and the courts, not through the ballot box .
The dispute did, however, bring renewed focus onto the government's hugely expensive crop mortgaging programme. The programme has put huge strains on the government's ability to store the large amount of crops farmers have sold to the government and failed to redeem given the generous price offered. The mortgage scheme has been blamed by exporters for hurting the competitiveness of Thai exports as it pushes up the price. The delay in the auctions of government stocks has also led to a shortage of rice on the market. The scheme now has a seemingly unshakeable air of corruption hanging over it with commentators alleging that it is of more benefit to politicians and well-connected businesspeople than it is to farmers and the kingdom's agricultural industry .
Despite this, plans to replace the scheme with an intervention price for corn and rice to be based on production costs plus a 20-25% profit margin have been met with complaints from farmers. Under the new scheme, farmers will be paid the difference between the intervention price and the market price without having to sell their crop to the government. The government, however, has elected to keep the current mortgage scheme running alongside for at least the first year .
The Democrat Party is still deeply unpopular in large parts of the North and North East, where almost two thirds of the country's rice crop is grown. When Abhisit made his first trip as prime minister to the North East in July, he needed to be protected from protests by blue-shirted mobs loyal to coalition partner Newin. At the same time, the Bhum Jai Thai Party is hoping to supplant the opposition Puea Thai Party, loyal to deposed former prime minster Thaksin Shinawatra, as the party of the rural poor in the region .
Both main government parties will be unwilling to pursue any policies that would be unpopular with small scale farmers as they try and sure up their support before they are forced to face the ballot box in the coming years. This will severely limit the scope of the government to improve the competitiveness of Thai agricultural exports, particularly rice. While talk of Thailand losing its spot as the world's number one rice exporter to Vietnam are premature, with the government focused on short-term survival, the long-term health of the sector may not get the attention it needs .
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