As the 100 billion Baht rice pledging scheme monster bears down on Thailands budget, news has been hitting media outlets this week about the Thai Governments plans to finally trim the pledged price.
Having already taken out Baht 117.7 billion in the shape of loans to finance the infamous rice pledging scheme in 2011/12, the news comes just in time for the Bank for Agriculture and Agricultural Cooperatives (BAAC) final admission that it has run out of funds to finance the scheme which saw the Thai government pledging to pay farmers 15,000 Baht ($504) for each ton of paddy it bought.
One of the most hotly debated topics amongst food security analysts in recent years, the rationale for the infamous pledging scheme on paper made perfect sense.
An intrinsically populist policy that helped catapult Yingluck Shinawatra- the current Thai Prime Minister-- to her office, the scheme was designed to raise the prices of the popular Thai rice in the international market and at the same time help with the redistribution of income to the rural poor in Thailand.
But the program-which in all earnestness began in a bid to improve the earning power of the poor Thai rice farmer-somewhere along the line morphed into a widely criticised policy that has resulted in warehouses filled with rotting rice that the Thai government is unable to sell off as its product has become largely unaffordable in the global market.
The cereal crops with a large footprint, any abnormal fluctuation in the prices of rice, have the single-handed ability to affect the livelihoods of millions of people across the globe.
Had the Thai government played its pricing- and timing-cards right, global rice prices indeed would have shot up significantly after a small lull in Thai exports which would have had a severe impact on global trade supplies!
However, one factor that weighed in on Thai plans to conquer the world markets was the Indian governments decision to lift its four-year ban on export of non-basmati varieties. As a consequence, the effect on global prices was largely mitigated when Indias export surpluses off the back of record production were mobilised into the open market.
What has been Thailands loss moreover has also been a gain for other rice exporting nations. While the Thai government had been running out of warehouses to store the rice it had bought, Thai rice exports had been falling to dangerous levels, shrinking by 35 percent year-on-year in 2012.
And in the meantime, countries like China-where the Thai varieties are wildly popular-have had to buy their long-grain white rice from places such as Pakistan-a country which has historically been linked to exports of the specialised Basmati varieties.
But now, with the news of a possible slash back in pledging prices, there are signs that the Thai Governments stance might be softening on the matter somewhat. While Thai policymakers have remained adamant that the programme is a means to correct the long injustices suffered by the countrys rice farmers, the long-term effects of the policy could only hurt the farmers even further.
Moreover, with the high stakes game that the Thai government has been playing having obviously backfired, the time might be near when the stored rice is made available in the market on lowered prices. While it will help the country recover some of the 260 billion Baht it has already spent on the subsidy, it will also put pressure on countries like India and Pakistan which have been enjoying Thailands relative absence from the markets.
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