Rice subsidy program cost Thailand $27 billion

Thailand’s rice paddy pledging program is a textbook case of how not to run a farm subsidy program. What started as an effort to win farmer support during parliamentary elections in 2010-11 became an economic disaster that cost the government of Thailand $27.7 billion before it ended in 2014.

Under the Rice Farmer Assistance Program, the Thai government paid farmers about $450 a metric ton for their rice. Because that was above the market price for rice, stocks built, leading the government to periodically dump rice into the export market for $380 to $390 a metric ton, according to Robert Cummings, chief operating officer of the USA Rice Federation.

“They had a very high price support program for paddy rice that led to huge stocks of around 15 million metric tons,” he said. “Exports dried up, and it was a very expensive program for a country that is not all that rich. Clearly, we believe they exceeded their WTO commitment, and it left Thailand in a very bad economic situation.”

Because of the high support prices being paid in country, Thailand lost its position as the No. 1 rice exporter and was supplanted by India in that role in 2013. When it resumed exports at levels 20 percent to 30 percent below, it caused market distortions at the expense of U.S. exports. (It is projected to be No. 1 in 2014-15.)

Vietnam is another case of a country’s rice support subsidies exceeding its WTO commitments. Vietnam provides support to its rice prices of $236 per ton through the Vietnam Food Association. Any rice purchased in the program must be exported.

“So that becomes a problem for us,” says Cummings. “We believe Vietnam’s WTO support limit is about $188 million. Depending on how you value it, we think Vietnam’s actual support expenditures are either a little over $400 million or slightly more than $1 billion, still well above their WTO limit.

“And this has had a practical impact on the U.S. rice sector because we believe a major result of this program has been that Vietnam last year was able to enter the Mexico market with milled rice. The combination of Vietnam’s lower price and a decline in the U.S. long grain supply caused Mexico to purchase Vietnamese rice.”

At the same time China, India, Thailand and Vietnam have been pouring resources into supporting their rice producers, the last two farm bills have seen a steady decline in support for U.S. growers, Cummings noted.

The Congressional Budget Office estimates that under the previous farm bills, the U.S. government provided an average of $1.53 billion in annual support for rice between 2000 and 2004. Under the Agricultural Act of 2014, CBO projects the annual outlay for rice from 2014 to 2018 will average around $231 million.

For more information on Thailand’s rice subsidy program, visit http://www.ibtimes.com/thailand-rice-subsidy-scheme-what-it-how-it-toppled-thai-leader-yingluck-shinawatra-1792788.

 

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