The plague and promise of Thai rice

While one province has prospered from organic rice exports, most of the country's indebted farmers still teeter on the brink of poverty

Surin, March 22, 2017 3:08 PM (UTC+8)
A mill worker in Thailand holds harvested rice grains. Agriculture, largely rice farming, employs 40% of the country's work force Photo: Reuters / Jorge Silva
A mill worker in Thailand holds harvested rice grains. Agriculture, largely rice farming, employs 40% of the country's work force Photo: Reuters / Jorge Silva

Four decades ago the Buddhist monk Luang Paw Nan launched a campaign in Thailand’s Surin province to reduce poverty among farmers by encouraging them to grow organic jasmine rice, the fragrant variety of the staple grain that grows primarily in the country’s northeastern region, known locally as Isan.

The ascetic recruited about 100 families, insisting that they also abide by strict Buddhist precepts as a means of keeping their expenses low. Today, Surin is famed for its organic jasmine rice both in Thailand and abroad.

The province was recently cited by the World Bank as an example of dramatic poverty reduction, attributed in part to good working coordination between the government, farmers and civil society in implementing programs such as organic rice farming.

In its recently launched “Getting Back of Track; Reviving Growth and Security Prosperity for All” report on Thailand, the World Bank attempts to identify the policies needed to reduce poverty among the so-called “bottom 40%” of the population, namely the 14 million Thais who live on less than US$6.20 a day.

A rice farmer collects snails and cleans the rice field near Udon Thani, Thailand, September 15, 2015. He is wearing plants on his head to repel bugs and insects. The rural heartland of Thailand's deposed leader Yingluck Shinawatra and her exiled billionaire brother Thaksin is hurting as a result of the military government's economic policies, stirring discontent and the threat of protests. The removal of generous agricultural subsidies has left rice farmers in northeast Thailand struggling with mounting debts, and they will get little relief when they sell their crop in coming months with rice prices near an 8-year low. Picture taken September 15, 2015. REUTERS/Jorge Silva - RTS2I8G
On the farm: A Thai rice grower tends to his crop. Photo: Reuters/Jorge Silva

For an upper middle-income country, Thailand still has an unusually large number of people employed in agriculture, about 14.6 million, or around 40% of the national work force. Many of them are poor, some desperately so.

To eradicate poverty and move up to the elusive higher income status, Thailand needs either to do something about improving productivity and profitability in the agricultural sector or get more people out of farming and into other business sectors.

The 2014 coup-installed government of Prime Minister Prayuth Chan-ocha has made poverty reduction a priority, and yet to date the generals have done little on agricultural reform. The government has followed past administrations in basically handing out money to farmers when prices of rice and other commodities – cassava, corn and rubber – plummet due to falling international prices.

The coup-ousted government of former Prime Minister Yingluck Shinawatra (2011 to 2014) had made hefty rice subsidies its major platform for poverty alleviation, paying rice farmers 40% above market prices for their crops until the scheme ran out of money and the government ran afoul of political street protests.

The boondoggle program left Thailand with an 18 million ton stockpile surplus which, although now down to about 8 million, has contributed to keeping Thai rice prices low on the world market. Thailand exported about 9.5 million tons of rice last year, a tad below world leader India’s total shipments. A new charter, still under royal review, will make such populist policies much more difficult to implement in the future. 

Ousted former Thai Prime Minister Yingluck Shinawatra receives ears of rice from her supporters as she arrives at the Supreme Court for a trial on criminal negligence looking into her role in a debt-ridden rice subsidy scheme during her administration, in Bangkok, Thailand November 4, 2016. REUTERS/Chaiwat Subprasom - RTX2RU77
Populist: Ex-Thai premier Yingluck Shinawatra. Photo: Reuters/Chaiwat Subprasom

Thailand has long prided itself on being the largest food exporter in Southeast Asia, and is currently among the world’s top ten. That status served the country well in reducing poverty between 2001 to 2011, when world agricultural prices increased some 70%, according to World Bank statistics. Populist policies designed to further boost rural incomes also helped.

Between 2011 to 2016, however, global prices have tumbled 27%, led by falling oil prices, and show no clear signs of making a dramatic comeback any time soon. The World Bank estimates many Thais who climbed out of poverty are now at risk of slipping back under the line due to stubbornly low global commodity prices. 

Surin, one of Thailand’s poorest provinces, performed well in reducing poverty between 2000 to 2010, when the percentage of the poor in the province fell from 73.8% to 17.5%, according to figures from the National Economic Social and Development Board (NESDB).

Not all Isan provinces fared as well over the decade: neighboring Sisaket, which has similar demographics, saw its poverty rate drop modestly from 62.2% to 55.9% in the same period.

Thailand has long prided itself on being the largest food exporter in Southeast Asia, and is currently among the world’s top ten.

Why the difference? The World Bank, citing a recent academic study of poverty reduction in Surin and Sisaket, postulates that Surin’s key to success might be attributable to better coordination between the government, civil society and farmers in the province.

“In Surin they involved civil society and non-government stakeholders in a major way in programs,” said Ulrich Zachau, World Bank country director for Southeast Asia. Production of organic jasmine rice, he said, was one of those programs.

The World Bank was right about civil society playing an important role in Surin’s organic rice success but less so about government involvement. In Surin, organic rice farmers now receive 15 baht (US$0.43) per kilogram of paddy, compared with the market price of 9 baht/kilo for non-organic jasmine.

Since they are not paying for costly chemical inputs, an organic farmer can earn about 80,000 baht (US$2,285) per crop, on an average sized farm of 15 rai (2.4 hectares.) That, and a side job driving a taxi in an urban area, usually in the national capital, Bangkok, might be enough to survive.

A variety of rice is on sale at a shop on Phutthamonthon Sai 2 Road. Economists are urging the government set up an institute to carry out rice R&D for commercial purposes. POST TODAY PHOTO/SEKSAN ROJJANAMETAKUN
Thai rice for sale in a local market. Photo: Post Today via AFP/Seksan Rojjanametakun

Rice Fund Surin Organic Agriculture Cooperative Ltd, which has 534 family members (including the original members of Luang Paw Nan’s group) produces about 4,200 tons of organic jasmine a year. The Thai cooperative now exports its rice to high purchasing power markets in France, Hong Kong, Singapore, Switzerland and the United States.

“Organic farming has brought the debt level down among our members,” said Sompoi Chansay, the cooperative’s manager. “It’s also good for their health, the environment, everything. But if you can’t provide them with the market it doesn’t work.”

Surin was lucky to have Luang Paw Nan (who died last year) to promote organic farming and a strong civil society network to take up his work. But civil society stakeholders are less enthusiastic about the local government’s involvement, which began in 2000 when the then-governor started to promote Surin’s organic jasmine rice and provide some farmers with inputs such as organic fertilizers.

What the Surin example demonstrates best is that the government, in general, should stay out of marketing and procurement in the agricultural sector and do what governments do best – invest in infrastructure and research, and amend trade-restricting laws.

Green Net, a major exporter of organic products in Thailand, pulled out of Surin specifically because the government became involved in the trade. “We don’t want to have anything to do with public procurement, because by cooperating with them we are cooperating with corruption,” said Green Net director Vitoon Panyakul.

What the Surin example demonstrates best is that the government, in general, should stay out of marketing and procurement in the agricultural sector and do what governments do best – invest in infrastructure and research, and amend trade-restricting laws.

Organic rice farming, however, is unlikely to end poverty for the majority of Isan’s farmers as it remains a niche market crop. The government, however, could encourage farmers to grow distinctive varieties of rice which might find other niche export markets, analysts say.

“The government has to invest more in research for variety improvement,” said Nipon Paopongsakorn, a rice expert at the Thailand Development and Research Institute (TDRI) a Bangkok-based think tank. That should involve consultations with private sector players who actually sell the rice,” he said.

“When the government introduces seeds to farmers they never think of the commercial aspect, just whether it is disease resistant,” said Vichai Sriprasert, a 40-year veteran of the Thai rice export business. “Someone needs to be aware of the value-chain.”

Thailand's Prime Minister Prayuth Chan-ocha speaks during an announcement the junta's two year accomplishments at Government House in Bangkok, Thailand, September 15, 2016. REUTERS/Athit Perawongmetha - RTSNT3V
Poor policies: Thai premier Prayuth Chan-ocha. Photo: Reuters/Athit Perawongmetha

The bigger demographic picture is that Thailand has too many rice farmers for what appears to be a shrinking market. Local per capita consumption of the grain is on the decline as Thais become wealthier and exporters face steeper competition from lower cost countries such as Vietnam and India.

To compete, Thailand will ultimately need to move toward larger scale rice farms, at least in the central plains which has access to irrigation, albeit limited. Prayuth’s military government has encouraged this path but arguably without much vision or implementation, with existing tenant laws and foreclosure regulations still hindering the purchase of large land tracts.

Eventually the government will need to devise a mechanism that makes farmers pay for water and improved irrigation systems to make large-scale rice farms economically viable. Bigger farms, in turn, would ultimately mean fewer farmers and, perhaps, better profits.

“The big strategy should be getting farmers out of agriculture and create other opportunities in the rural areas. That would mean moving out of poverty,” Nipon said.

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