Just as the media and the public are losing interest in the government's populist rice pledging scheme, the latest report from the Rome-based Food and Agriculture Organisation (FAO) warns that Thailand may be running out of space to store rice.
It is a timely, if not a rough, wake-up call that the scheme is still kicking but that the worst about it is yet to emerge, like opening Pandora's box which is about to burst and spill out all the worms.
The FAO predicted that the rice stockpile will surge to a record high this year due to the rice pledging scheme to the point that there may be no room in warehouses to store the staple. According to the report, milled rice holdings may jump 40% to 18.2 million tonnes in 2013 as the government is expected to buy as much as 11 million tonnes of unmilled rice this harvest compared to nine million tonnes from the last harvest.
The UN agency said there may be a "looming shortage of storage space" as the government's stock release plans have progressed slowly, further aggravating the supply situation for an export sector that is "faced with little offshore demand".
Rice exports plunged 37% to 6.73 million tonnes last year _ the lowest level since 2000 _ rendering Thailand's fall from the world's top rice exporter to third place after Vietnam and India.
Due to India's decreased production forecast of 4%, the Commerce Ministry hopes that it may be able to reclaim the number one exporter title back from India this year. But this may prove to be a pipe-dream.
Global rice production for 2013 is expected to outpace consumption, according to the FAO report. The world's rice carry-over stocks are expected to rise by 7%, or 10 million tonnes, to a new high of almost 170 million tonnes, marking the eighth consecutive year of stock accumulation.
In Asia, paddy output is forecast to reach 661 million tonnes or 441 million tonnes of milled rice, up 0.8% on 2011, underpinned by widespread gains and particularly large increases in Bangladesh, China, Indonesia, the Philippines, Vietnam and Thailand. Output is also rebounding in Africa due to better weather. So are the forecast outputs in Australia, Russia and the US.
So which rice importing countries will buy Thai rice which is about 40% higher than the market price, thanks to the generous rice pledging scheme which offers Thai farmers 15,000 baht per tonne of unmilled white rice and 20,000 baht a tonne for Hom Mali fragrance paddy?
This has been homework for the Commerce Ministry to tackle but for which the public or the taxpayer knows very little about. The officials concerned at the ministry, from minister Boonsong Teriyapirom on down, have been reluctant to give out any information pertaining to the amount of rice stockpiled, the actual amount of rice sold or to be sold under the government-to-government deals and to which buyers and at what prices.
We have been bluntly told that all the information is classified and, therefore, cannot be disclosed publicly as exposure may be harmful to the country.
For any merchant with any common sense, the only way to make Thai rice saleable and competitive in the world market is to sell it at market price or lower _ but that will mean having to absorb a loss incurred from the difference in the buying and selling prices. But in real politics, this will amount to an admission of failure of the rice pledging scheme and hence subject the government to opposition attacks.
Dumping the rice in the world market too is not possible as it will invite protests from the other rice exporting countries.
Another possible option is to sell the rice cheap to domestic consumers on the pretext of helping them. Again, this approach may not help much in easing the brimming rice stockpile unless the consumers themselves double or triple their rice intake on a daily basis _ which is impossible in real practice.
With old rice stocks left unsold and facing the prospect of rotting the longer it is held in warehouses, and with the arrival of new rice bought and to be bought, where will the staple be kept if all the warehouses are filled to capacity? This is a problem for Commerce Minister Boonsong and his men to worry about, to deal with and, probably, to face the consequences of in case Pandora's box bursts open.
The World Bank has estimated that the total cost of the rice pledging scheme this year may be as much as 440 billion baht compared to 376 billion baht a year earlier.
Somebody will have to be made a scapegoat, but it definitely will not be the man in Dubai who initiated the scheme and who claimed that it would reap economic gains that are about three times the cost.
But whether the claim is valid or not, it is the taxpayers who, in the end, will foot the bill.
Veera Prateepchaikul is a former editor, Bangkok Post.
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Article source: http://www.thethailandlinks.com/2013/02/11/fao-warning-shows-folly-of-rice-pledging/
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