Friday, October 31, 2014

Let market set rice prices, says expert

Photo by R. Raman (AfricaRice) 

by Lanie C. Reyes

BANGKOK, Thailand - “It is best to let the markets determine rice prices; it should not be dictated by the government.” This is what Vichai Sriprasert said during a plenary session at the 4th International Rice Congress (IRC2014) on 30 October in Bangkok, Thailand.

"Thailand had been the world's largest rice exporter for thirty years," said Mr. Vichai Sriprasert. He pointed out that the country became successful because of the free trade policy initiated by King Rama IV 150 years ago. Sriprasert is the president and CEO of Riceland International Ltd. and an honorary president of the Thai Rice Exporters Association.

According to Sriprasert, all this changed when Pheu Thai Party made the rice-pledging scheme part of its campaign during the 2011 election and the party promised to buy rice from local farmers at a generous price—about 50% above the market rates. The party’s rationale was to help farmers boost their incomes.

He explained that a policy that pushes rice prices higher to please farmers is understandable in a democratic country where the agricultural sector forms a big chunk of the population. Politically, this means more votes that will help secure seats in the government.

However, the policy backfired when rice traders suddenly switched their purchases from Thailand to other rice suppliers like India. During the same year, India lifted its four-year-old rice export ban and stabilized the rice market and prices. Under the rice-pledging scheme, exports dropped to third place behind India and Vietnam.

He pointed out that farmers were not told that when prices are too high, not all the surplus crop could be exported. As a result, government warehouses bulged rice stocks to the tune of around 80 million tons, equivalent to two years worth of unsold rice, with not enough cash to meet farmer obligations.

“Farmers are poor not because of economies of scale,” he said. Farmers typically own small pieces of land, and even if prices are increased by 50%, they will still be poor. “A solution,” he said, “is land consolidation.” He added that some countries are already doing it.

“Rice prices should be left alone in the market,” he said. “If the prices are high, no one will buy it, and if it’s low, no one will sell it. Let markets behave the way they should. Let the market discover the right price where everyone agrees to buy and sell.”

Around 1,500 participants from 69 countries are attending the 4th International Rice Congress, or IRC2014, at the Bangkok International Trade & Exhibition Centre (BITEC).

IRC2014 is being held under the patronage of the Royal Government of Thailand, specifically the Ministry of Agriculture and Cooperatives, and is touted as the “Olympics of rice science,” being the largest gathering of rice science and industry held every four years. 

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