Oct 3, 2014

Cash for farmers Round Two; how do you manage 58 million of them?

P Mak

Yesterday while writing about the past developments in the Kingdom, in this article, one of them was about 40 billion baht of stimulus that will be put into the hands of rice farmers, at a rate depending on how much farmland they own. The market did not take too well to the news and the SET was in the red yesterday and today (lunch intermission).

While most sensible folk in their right mind agree that cash handouts are not the best solution, today we have a classic Pheu Thai remark;

''Former energy minister Pichai Naripthaphan, who sits on the Pheu Thai Party's economics team, said 1,000 baht per rai for each farmer is not enough.
He said the government should instead help farmers by buying rice for at least 10,000 baht per tonne, because production costs in rice farming are currently very high.
"The government is using populism and is afraid of criticism so is not giving full assistance to farmers, who still have to shoulder the high production costs," Mr Pichai said. ''
''The chairman of the Thai Farmers Association, Wichian Puanglamjiak, also said the 1,000-baht aid is not enough.
He said current production costs for farming are around 5,000 baht per tonne, but farmers sell rice for less than 4,000 baht per tonne, leaving them at a significant loss.''  - Source: Bangkok Post

Riiight! Perhaps Pichai was born yesterday but I really marvel at the way these politicians talk.
Lets say you decide to keep a few mistresses at one go. Lets call them Rice, Rubber, and Fruit.
One day, Rice threatens to blow the lid on the affair and in return, you pacify her by increasing her monthly allowance. 
This puts you in debt, but you think its okay. Now what happens if Rubber and Fruit play the same card on you?

Of course, to play the politics game, the largest voter base is the most crucial one. Rural residents are almost 87% of the population, although agriculture is only about 8% of Thailand's GDP (figures from Bloomberg). 
Thailand's farming industry is facing a labour shortage as the young are choosing industrial factory jobs over farming, according to Narong, a Chula University economist. Production costs remain high in farming and somewhere along the supply chain, the pie is mostly taken up by middle-men and others at the end-product stage. There are also 800000 farming households who do not own land.
If I am a small-timer with only 1 rai (1600 sq. m), I get 1000 baht one-off, what can I do with this? Pay the loan shark? Buy a bottle of liquor? Interestingly, a few quarters ago analysts were relating the poor performance of Thai Beverage to lower rural incomes. 
The government has to get it right this time as the house of cards has barely started to be built. Targeted measures to boost efficiency in growing and production or subsidies on pesticide, fertilizer and seed should be more effective in helping the farmers instead of creating an environment of dependency on the government to support weak selling prices. 
Also perhaps this time, you should go and flirt with Organic Vegetable or Sugar cane for example lah! 
Everyone is planting rice because of the previous scheme and in 2011, skyrocketing rubber prices resulted in everyone rushing to plant rubber
We had the Luohan craze where fish shops selling nothing but Luohan sprouted all over the country, and after the quick fad died off, many of the shops disappeared as well. 
We are lucky here in Singapore, that we did not see Luohan sellers demanding our gahmen to buy from them!

1 comment:

  1. Mate how come so much of your commentary is Thai-centric? The SET is an interesting market, there is a lotta value that cannot be realised during the times of demonstration


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