The FT and Forbes have recently run stories on Thailand’s controversial plans to pay farmers above-market rates for rice.
In short, farmers say the price hike is a necessary for them to make a fair wage.
Exporters say their margins are already thin, and that by making Thai rice more expensive, the government will price the commodity out of the global market.
(Thailand exports 30 percent of the world’s rice, so there are global and regional concerns about food costs, as well.)
The FT‘s Beyond BRICS blog reports:
Rice is more than just another commodity: for 3bn people it is a vital part of their daily diet, and when prices hit over $600 a tonne, or some 50 per cent above their 10 year average, they start to worry.
The 10-year average for Thailand’s benchmark 100 per cent grade B white rice is around $400 a tonne but today it is selling for $619 a tonne. That is partly because Thailand, the world’s biggest exporter, has said that it would pay its farmers Bt14,800/tonne – equivalent of about $800/tonne in the export market, in a move aimed at boosting the incomes of rural farmers.
Questions of the sustainability of the project have centered around the depth of Thailand’s pockets – it supplies about a third of the global trade of 30m tonnes annually – and its political resolve, but supply side economics are also going to play a role.
Earlier, Forbes weighed in:
Governments in Asia always keep a close eye on food staples like rice. The domestic price of rice matters, and so does the amount of rice available on global markets. This is why all eyes are on Thailand, the world’s largest exporter. Its government plans to start buying rice from farmers next month at a generous premium to market prices. Some reckon this will set off another rally in world rice prices. Others argue that a bust is more likely, given ample stocks. Either way, it’s another reminder of how agricultural subsidies distort commodity markets.
(All emphasis mine.)
