Teaming up with India and Vietnam a sound plan to help farmers and ease domestic concerns
Published on April 7, 2008
Commerce Minister Mingkwan Sangsuwan plans to discuss the possibility of forming an alliance with his Indian and Vietnamese counterparts later this month to strengthen their collective bargaining power on the rice market. The idea is welcome. Without the alliance, farming nations will experience the risks of the fluctuation of agricultural commodity prices, as export prices would be set by demand from importing countries, which would be cyclical. Instead, forming an alliance should enable rice-exporting nations to determine the prices.
Rice is a staple throughout Asia. Yet, the living conditions of farmers who grow rice in this region pales in comparison to those of their counterparts in developed countries thanks largely to a failure to manage the farm market systematically against the background of the volatile nature of farm produce.
Thailand, Vietnam and India command more than 60 per cent of the world's rice exports. Thailand was the biggest rice-exporting nation last year accounting for 31.4 per cent of the total; India came second, accounting for 16 per cent, and Vietnam came third, accounting for 14 per cent. Thailand's Commerce Ministry has forecast a minimum export volume of 8.75 million tonnes of rice this year. Exports totalled 9.7 million tonnes last year.
The Commerce Ministry hopes that if the three countries manage to form some sort of alliance, they will be able to determine the rice prices on the world market in the same fashion as Opec (the Organisation of Petroleum Exporting Countries) does with oil.
The alliance would not only boost the bargaining power of rice-exporting nations, it should also help stabilise rice prices for domestic consumption once these nations can collaborate on the amount of rice supplied on the world market.
Without proper collaboration, farmers may not fully benefit from the rising rice prices because they cannot predict the appropriate price level at which they should enter the market.
Even if they expect the price of rice to increase further, many farmers don't have rice barns in which to store their harvests, leaving only the millers or middlemen to fully benefit from the climbing prices.
In fact, the idea to form the alliance was floated a few times several years ago. However, at that time, countries such as India were not enthusiastic about the idea, reasoning that the government's priority was the domestic supply rather than export prices.
However, the recent trend has shown that international movement can adversely affect the local market. The increase in the price of rice has already caused strain throughout the country. In some provinces, rice shops were closed because owners didn't have enough to sell due to millers hoarding rice in anticipation for a future price increase. Some farmers kept their harvests for future consumption. This is despite the fact that the government has said that Thailand has 2.13 million metric tonnes of rice in stock, which could cover consumption needs for around three months.
India and Vietnam applied supply curbs, as a limited supply of rice has resulted in the doubling of the price at which it is traded internationally since January - the price went from US$400 (Bt12,633) a tonne to $760. The curbs of exports caused concern among importing nations, such as the Philippines and Singapore.
In fact, Thailand and Vietnam used to be part of a "rice-pool" cooperation effort to exchange information on the rice trade to avoid price-cutting among one another. This idea could be expanded into an Organisation of Rice Exporting Nations to help set a benchmark for rice prices.
Now that rice is set to be a valuable commodity, the governments of rice-producing countries should seize the opportunity to find ways to help their farmers work under a more predictable and systemic environment apart from technological support to help them improve their yields.
Otherwise, farmers will be left depending solely on unpredictable factors such as weather. And when the rice demand declines, they would be left on their own again.
The Nation
Published on April 7, 2008
Commerce Minister Mingkwan Sangsuwan plans to discuss the possibility of forming an alliance with his Indian and Vietnamese counterparts later this month to strengthen their collective bargaining power on the rice market. The idea is welcome. Without the alliance, farming nations will experience the risks of the fluctuation of agricultural commodity prices, as export prices would be set by demand from importing countries, which would be cyclical. Instead, forming an alliance should enable rice-exporting nations to determine the prices.
Rice is a staple throughout Asia. Yet, the living conditions of farmers who grow rice in this region pales in comparison to those of their counterparts in developed countries thanks largely to a failure to manage the farm market systematically against the background of the volatile nature of farm produce.
Thailand, Vietnam and India command more than 60 per cent of the world's rice exports. Thailand was the biggest rice-exporting nation last year accounting for 31.4 per cent of the total; India came second, accounting for 16 per cent, and Vietnam came third, accounting for 14 per cent. Thailand's Commerce Ministry has forecast a minimum export volume of 8.75 million tonnes of rice this year. Exports totalled 9.7 million tonnes last year.
The Commerce Ministry hopes that if the three countries manage to form some sort of alliance, they will be able to determine the rice prices on the world market in the same fashion as Opec (the Organisation of Petroleum Exporting Countries) does with oil.
The alliance would not only boost the bargaining power of rice-exporting nations, it should also help stabilise rice prices for domestic consumption once these nations can collaborate on the amount of rice supplied on the world market.
Without proper collaboration, farmers may not fully benefit from the rising rice prices because they cannot predict the appropriate price level at which they should enter the market.
Even if they expect the price of rice to increase further, many farmers don't have rice barns in which to store their harvests, leaving only the millers or middlemen to fully benefit from the climbing prices.
In fact, the idea to form the alliance was floated a few times several years ago. However, at that time, countries such as India were not enthusiastic about the idea, reasoning that the government's priority was the domestic supply rather than export prices.
However, the recent trend has shown that international movement can adversely affect the local market. The increase in the price of rice has already caused strain throughout the country. In some provinces, rice shops were closed because owners didn't have enough to sell due to millers hoarding rice in anticipation for a future price increase. Some farmers kept their harvests for future consumption. This is despite the fact that the government has said that Thailand has 2.13 million metric tonnes of rice in stock, which could cover consumption needs for around three months.
India and Vietnam applied supply curbs, as a limited supply of rice has resulted in the doubling of the price at which it is traded internationally since January - the price went from US$400 (Bt12,633) a tonne to $760. The curbs of exports caused concern among importing nations, such as the Philippines and Singapore.
In fact, Thailand and Vietnam used to be part of a "rice-pool" cooperation effort to exchange information on the rice trade to avoid price-cutting among one another. This idea could be expanded into an Organisation of Rice Exporting Nations to help set a benchmark for rice prices.
Now that rice is set to be a valuable commodity, the governments of rice-producing countries should seize the opportunity to find ways to help their farmers work under a more predictable and systemic environment apart from technological support to help them improve their yields.
Otherwise, farmers will be left depending solely on unpredictable factors such as weather. And when the rice demand declines, they would be left on their own again.
The Nation
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