The government’s 3-year debt moratorium program for indebted farmers will relieve the pain for only a limited time, but will not actually resolve the debt problem, which is structural and rooted in the inequitable distribution of income from farm produce, according to TTB Analytics of the TMB Thanachart Bank.
For example, the selling price of 100% white rice last year averaged 17.5 baht/kg, but farmers only earned 8.8 baht/kg. Their production costs ranged from 8.16-9.32 baht/kg (depending on their land rent and mechanised harvesting costs) compared to 7.25-8.28 baht/kg a year earlier. On top of that, farmers may incur additional expenses for fertiliser and pesticide.
In summation, last year farmers earned a net income of only 0.64 baht per kilogram of their rice crops.
In contrast, rice millers’ production costs, including rice processing, packaging and transport, amounted to 13.03-13.87 baht/kg. With the selling price of 100% white rice at 17.5 baht/kg, they earned 3.62-4.67 baht/kg (net). In other words, rice millers made a profit of between 20.7% and 25.5%, compared to farmers’ profit of just 3.7%.
Moreover, farmers face risk from price fluctuations for fertilizer and pesticide and climate change, which may impact their crops, while the rice millers have no such risks, according to TTB Analytics.
It said that similar debt moratoria have been applied 13 times by previous governments, without successfully eradicating farmers’ debt problems, because 70% of farmers who participated in the programs have incurred more debt, some of which became non-performing loans.
Unless farmers can expand into milling their crops and selling the rice directly to consumers, they will not be able to earn more to ease their indebtedness, said the analysis.
TTB Analytics noted, however, that the government’s plan to inject up to 100,000 baht for each indebted farmer joining the debt moratorium program, to help them boost their productivity, to process and to market their crops, may help them in the long run if the fund is properly managed.
Recommendations from TTB Analytics include developing farmers into entrepreneurs, selling their farm produce directly to consumers through online platforms, setting up a fund to help farmers to reduce the costs of fertiliser, pesticide and harvesting and introducing smart farming to increase productivity.
Without a structural overhaul of the production process, farmers will not be able to free themselves from mounting debt and all the debt moratorium schemes will be just temporary pain relief, said TTB Analytics.
