Thai Rice Subsidy Scheme
Thailand has for a number of decades held a record of being the best rice exporter in the globe. Nevertheless, its new government has promised the farmers that the prices will be raised as from Oct. 7. There will be no limit that will be set on the amount of rice to be bought. Being the best rice exporter for the last thirty years, Thailand is working its best to maintain its standards. The government has raised the price of the paddy from 8,000 baht a tonne to 11,000 baht as the white rise export price rose from US$ 400 per tone to US$600.
The higher prices will be realized due to the fact that the production cost of rice has risen. The price of the materials that are used by the farmers during planting have also increased incredibly. Despite the farmers’ campaign to reduce it, the price seems to remain high. The cost of the seed has gone high for the last few months. This has led to use of untreated seeds by the farmers. As a result, there is poor harvest that leads to reduced production of rice in Thailand. The reduced production of rice in Thailand affects the whole world considering the fact that Thailand is one of the countries that produce the largest amount of rice in the globe.
The scheme does not develop good-quality rice since the focus that it has does not consider quality but quantity. Therefore, all rice grains are allowed to be pledged at high prices. Every effort being made by the farmers in Thailand aims at producing quantity. They are all looking for ways to increase their product so as to maximize on their returns. Nevertheless, they are not taking measures to retain the high quality of rice that is produced. As a result poor quality rice is being realized from the religion. This is affecting them negatively as their as the amount that they export has gradually decreased.
The farmers in Thailand lack incentives that can assist them to concentrate on the extensive development of quality rice. The farmers are occupied with fast cultivation of rice to catch up with the time frame of the scheme. For the last few decades, farmers have not been getting their returns fairly. Their compensation has been minimal and it has been matched their hard work. This has in turn reduced the morale among the farmers such that they are no longer working hard to produce more rice. The biggest percentage of one that is realized from the sale of rice does not go to the farmers. Instead, the brokers take the biggest percentage passing just a small amount to the farmers (Thai rice, 1966). As a result, no development is done on the schemes thus low-quality rice continues to be produced. To boost the morale of the farmers so as to realize high quality rice production, enough motivation should be given to the farmers. This should be done inform of material rewards that would assist that farmers to develop. When this is done, there is no doubt that high-quality rice will be realized all over Thailand. It will therefore never cease to be the best rice exporting country in the world.
Thailand is going to face a falling rice quality, as the state has to manage a big rice stockpile for a long period of time without any way of releasing the inventory to the market. The holding of the stock by the government has highly influenced the production of rice in Thailand. The amount of the rice that is exported to other countries has reduced since the government has to consider some factors before any amount can be exported. This includes the confirmation of the cost of various units of rice outside the country. They also have to make sure that the security in the foreign land is enough. It is also its duty to taken measures that will ensure that the exported rice will get market so that the farmers can be fairly rewarded (Potential world markets for innovative rice businesses in Thailand, 2006). Management of the rice production by the government has therefore reduced the quality of rice produced by the farmers since the production is under control and is regulated. At times, the huge rice stockpile takes a lot of time to release the inventory thus delaying the storage of more rice. This leads to reduced quality of rice in Thailand. The government should therefore develop strategies to apply in order to come up with better storage facilities that will maintain the production of high quality rice.
The higher-than-market subsidy of the price has sent the incorrect signal, as rice farmers will gradually expand the rice fields beyond their capability. This will as well distort other crops’ planting. The wrong financial report has confused the farmers. They are now preparing their land using the wrong budget having a lot of hope in the rice price rise. The subsidy has motivated the rice farmers such that they are now working beyond their capability. This has been reflected by their efforts to expand their paddy fields to the maximum. They are even going beyond their capability. As a result, poor quality rice is produced (Hamilton, 2003).
The policy has destroyed trading system and rice growing in Thailand that has been steadily developed for centuries. The growing and trading system has finally collapsed. It is no longer working as expected. This has led poor marketing of the rice leading to reduction in the number of sales. The huge amount of rice that was being exported has gradually deceased. The good relationship that maintained high international market does no longer exist, a situation that has reduced the amount of rice that was being exported to various countries. This has killed the morale among the farmers thus the production level has decreased.
Undermining the export competitiveness of Thailand because of the high prices
Rice exports have decreased by 46 per cent from about 7.4 million tones last year to 3.9 million tones at the moment now. Since farmers had been given the wrong financial report that gave them high hopes, they had to decline any export offer that did not meet their expectations. This corresponded to reduction in rice production in Thailand and poor quality rice was as well confirmed.
The policy of the government to release its big rice stocks is placed for only the contacts that exist between government-to-government that means Thailand is going to lose money from any of the export. A lot of the price is going to be quoted in a lower level than the subsidy prices. Therefore, the government is spending the money of the Thailand taxpayers to subsidies consumers who are overseas and can buy cheap rice. Development Economist at National Institute of Development Administration states that the scheme will as well push up production costs. The higher the production cost, the higher will the cost of the products produced be. Therefore, if the international market does not meet the cost that the farmers decide, then it will be a bit hard for them to trade with other countries. The amount of rice exported will therefore gradually decrease. Therefore, the production cost should be pushed up considerably.