Rice export: Vietnam overtakes Thailand

Thailand threatens to lose its top position as the world's largest rice exporter to Vietnam this year. Rice exports have collapsed, the main culprit being the mortgage system that the Yingluck government has taken from the stable.

In the mortgage system, farmers receive 15.000 baht per ton, 5.000 baht more than the market price. The export price of rice is now US$130 per ton and is more expensive than rice from Vietnam. Thailand can hardly compete on quality; foreign competitors spend ten times as much on quality improvement as Thailand.

Chukiat Opaswong, honorary president of the Thai Rice Exporters Association, spoke of these gloomy reports about Thailand's main export product yesterday at a seminar organized by opposition Democrats. Chukiat said Thailand exported 1 tons of rice between January 23 and February 465.000, 41 percent less than the same period last year.

Nipon Wongtrangan, former president of the association, said that in general there is nothing wrong with the mortgage system as long as the price guaranteed by the government does not exceed 80 percent of the market price.

According to Democrat Warong Dejkijwikrom, the system is extremely susceptible to abuse and irregularities. He said he has received many complaints from farmers who are being exploited by rice millers. Farmers don't have much of a choice when the time comes to sell the rice.

Some sell the rice to buyers who pass by and thus save on transport costs. Some millers place their own rice in the mortgage system under the name of farmers, who receive compensation from them.

NB The export price quoted in the article must be an error, as according to my latest reports, the export price of Thai rice is US$550-570.

www.dickvanderlugt.nl – Source: Bangkok Post

[Explanation: The rice mortgage system, reintroduced by the Yingluck government, was launched in 1981 by the Ministry of Commerce as a measure to alleviate the oversupply of rice in the market. It provided farmers with short-term income, allowing them to postpone selling their rice.

It is a system in which farmers receive a fixed price for their paddy (unhusked rice). Or rather: with the rice as collateral, they take out a mortgage with the Bank of Agriculture and Agricultural Cooperatives. The Yingluck government has set the price for a ton of white rice at 15.000 baht and Hom Mali at 20.000 baht, provided the moisture content of the rice does not exceed 15 percent. The quality of the rice also affects the price. Current market prices are 5.000 baht lower.

Farmers who want to participate in the program hand in their rice to a rice mill, where a committee checks the quality and variety. Within three days, the farmers can collect their money from the Bank of Agriculture and Agricultural Cooperatives. After that, they have the choice between paying off their mortgage at a low interest rate or keeping the money, which means selling their rice to the government. The government later sells the purchased rice to packing companies, exporters or governments of other countries.

The difference between the price on the open market and the mortgage price makes the system attractive. If market prices are lower than the mortgage price, the system is downright a subsidy to farmers. If the market price is above the mortgage price, farmers can claim their rice and sell it on the market – in either case, they are not at risk.]