Rapid changes in global market conditions have led to rice prices plummeting, posing a challenging situation for the Thai government.
Farmers in the central and northern parts of the country, who also form an important voting block, recently held protests, demanding that the government tackle the issue of declining paddy prices.
The government responded with short-term measures to shore up prices and plans to spend around 1.9 billion baht.
The National Rice Policy and Management subcommittee on marketing has proposed three main measures to stabilize paddy prices.
Commerce Minister Pichai Naripthaphan, who is chairman of the subcommittee, said the three proposed measures to stabilize the second crop paddy prices in 2025 would cost a total budget of 1.893 billion baht.
The measures include loans to farmers and their cooperatives to delay the second crop, helping with storage costs at 1,500 baht per ton, and requiring rice to be stored for 1-5 months, targeting 1.5 million tons.
The government would also support rice mill operators who stockpile paddy by compensating them for interest at a rate of 6 per cent incurred from stockpiling for 2-6 months and purchasing rice at or above the market price of 200 baht per ton, targeting 2 million tons.
The government would open paddy purchasing points, support the management fee of 500 baht per ton, and entrepreneurs must buy rice at 300 baht per ton higher than the market price, totalling 300,000 tons.
Other measures that are being implemented in parallel include cooperation with retail stores, modern trade, local department stores, setting up sales points offering price not exceeding 100 baht to stimulate consumption, with a target of 500,000 tons.
To promote Thai rice exports, the government would seek cooperation from EXIM Bank to provide special loans to rice exporters at reduced interest rates, Pichai said.
Farmers' demands
Farmers are not satisfied with the government's support measures. They are demanding a price guarantee for white paddy rice of 10,000 to 12,000 baht per ton, while the current market price is only slightly over 8,000 baht.
They cite higher production costs from use of fertilizers and energy. The rice farmers also called for consideration of a measure to help with the management fee of not burning straw of 500 baht per rai.
Output of paddy rice in the second season of fiscal year 2024-25 is expected to total 6.53 million tons of paddy, an increase of 1.08 million tons — up 20 per cent over the previous year's 5.45 million tons.
The produce will start to be released into the market in February 2025, with around 68 per cent, or 4.42 million tons, concentrated between March and April 2025, according to the Commerce Ministry.
The price of white paddy rice as of February 14, was 8,300-9,000 baht/ton (average at 8,650 baht/ton, down 30% from the previous year’s 12,500 baht/ton).
The prices of many types of Thai rice have been continuously decreasing since September 2024 because India has resumed exporting white rice after staying away from the market for over a year, while Indonesia and the Philippines are likely to import less due to sufficient stockpiling.
This has slowed down the demand for white rice from Thailand, causing it to adjust down to a level close to the price in 2022, before India suspended rice exports.
The current price situation (February 14) of other types of rice remains stable, but when compared to the same period last year, they were:
• Thai Hom Mali rice, average 16,000 baht/ton, increased from 14,850 baht/ton (up 8%)
• Glutinous paddy rice, average 13,250 baht/ton, decreased from 13,300 baht/ton (down 0.4%)
• Pathum Thani rice, average 12,100 baht/ton, decreased from 14,400 baht/ton (down 16%)
• White paddy rice, average 8,700 baht/ton, decreased from 12,500 baht/ton (down 30%)
Solution to the crisis
The measure to delay the release of rice in large quantities into the market seems reasonable. Experts want the government to learn from the past mistake of implementing rice price subsidies, which proved unsustainable.
Somporn Isvilanonda, a senior fellow at the Knowledge Network Institute of Thailand, opposes any revival of a price guarantee scheme.
He says the former Yingluck Shinawatra government spent approximately 600 billion baht to purchase rice from farmers, which resulted in a disaster due to widespread corruption.
The price subsidy under the former Prayut Chan-o-cha administration cost roughly the same amount.
Over the tenure of the two previous administrations, rice subsidies had cost the exchequer around 1.2 trillion baht.
“It would have been much better to spend such a huge amount of money on research and improving rice production productivity,” he suggested.
The Thai government currently spends around 200-300 million baht annually on rice breeding research, compared to the approximately 1 billion baht spent by competitors Vietnam.
Rice production in Thailand averages 400 kilograms per rai, while Vietnam’s output is double, achieving an average of 800 kilograms per rai, partly due to the high yield of new rice varieties.
