Tan Hui Yee Straits Times 14 Nov 12;
Thailand's rice pledging scheme leads to stockpile of 14 million tonnes
Exports dive due to artificial high price
US worries that stocks will be dumped on world market
BANGKOK - Thailand's rice pledging scheme, which is worrying international producers, is expected to come under scrutiny today at a World Trade Organisation (WTO) meeting.
The United States will ask the Thai government what it is doing to prevent its rice stocks from being dumped on the world market at prices below cost. Reuters news agency reports that the USA Rice Federation alleges the scheme acts as an export subsidy, which is not allowed by the WTO.
The American challenge raises the heat on the government of Ms Yingluck Shinawatra, which has come under fire ever since it started buying rice from farmers at a premium of more than 50 per cent over market prices in October last year to make good on her election promise.
Since then, it has amassed 14 million tonnes of rice stocks, causing exports of the grain to dive 46 per cent in the first 10 months of this year compared to the same period last year. Traders have been unable to sell such expensive rice on the world market. This has threatened to unseat Thailand as the world's top rice exporter,
Still, the Thai government has vowed it will remain the top rice exporter this year and next, to deep scepticism. Thailand exports 10.67 million tonnes of rice last year.
Rice harvests worldwide have been plentiful for three to four years, said Food and Agricultural Organisation expert Ramesh Sharma. This gives Thailand little wiggle room to manipulate rice prices on the world market.
While academics say the government is unlikely to unleash its massive rice stocks cheaply on the world market, The Nation newspaper has reported that Thai traders claim it is already selling rice to selected parties at prices below the acquisition cost.
These leaks, if true, have failed to ease the logjam in the rice industry. Overflowing rice warehouses have led the government to even consider using a cargo building at Don Muang Airport to store rice.
Rice exporter Vichai Sriprasert warns the scheme could end up hurting the people it is meant to benefit. "The farmer is going to suffer huge consequences next season, when he produces the rice but there is nowhere to store it," he said.
Already, some rice millers are feeling the pinch. These companies typically process the rice from farmers before sending it to exporters but the overflowing government warehouses have forced them to slow production.
Kasetchokchai Karnkaset rice mill in the outlying Nong Jok district of Bangkok, for example, is milling only half the amount of rice it normally does because of the space shortage.
Its managing director Choksatid Benjarattanapron said: "Our trucks can be stuck at the warehouse for weeks waiting to unload the milled rice."
The bigger problem is the impact of the rice pledging scheme on Thailand's economy. While the fall in rice sales would merely dent Thailand's exports, its impact on public debt is sizeable.
Economist Nipon Poapongsakorn from the Thailand Development Research Institute estimates the government loses at least 120 billion baht (S$4.7 billion) a year under the scheme.
He said: "This is bringing the Thai economy to a stage where it becomes more vulnerable to future shocks."
