Government to slash rice crop, sell stockpiles to cut glut

Thailand, the world’s biggest rice exporter, plans to cut production to reduce its surplus and boost prices, complementing a drive by the government to sell record stockpiles that are clogging warehouses nationwide.

Rough-rice output may be cut to 33.73 million tonnes by 2016-17, down from an average of 35.11 million over the past six years, according to Apichart Pongsrihadulchai, vice agriculture minister. Growers will be encouraged with incentives including soft loans to shift from rice to sugar cane or to mixed farming with livestock, Mr Apichart said in an interview.

A Suphan Buri rice farmer tends to his crop in this October 2014 photo. The government plans to cut production to reduce a local surplus and boost prices as it tries to sell record stockpiles that are clogging warehouses nationwide. (Bangkok Post photo)

Thai authorities, led by military-leader-turned-prime minister Prayut Chan-o-cha, are grappling with the legacy of the previous government's rice-buying policy. Yingluck Shinawatra's administration paid rice growers guaranteed, above-market prices for their crop, spurring increased production and the build-up of the country's biggest ever stockpiles. The government last week offered almost one million tonnes for sale from the state reserves, which it wants to clear over the next two years.

"We need to restructure our rice production to solve a surplus problem," Mr Apichart said in Bangkok on Jan 30. "We aim to slash production to be balanced with local consumption and exports. Hopefully, that will boost prices."

Thai 5% broken rice declined 7.1% last year, extending a 23% drop in 2013. The Asian benchmark price was at $422 a tonne on Jan 28, the day before the government offered the one million tonnes for auction.

Over the next two years, about 700,000 rai are targeted to be switched from rice to sugar cane, and a further 1.1 million rai will be switched to mixed farming, said Mr Apichart. The government also plans to eliminate rice planting during the dry season across 400,000 rai, he said.

Speaking after Monday's meeting of the National Rice Police Committee in Nakhon Ratchasima, Prime Minister Prayut Chan-o-cha said the government and farmers need to work together to grow crops suitable for their land.

"Farmers should focus on growing quality rice that matches the amount of (available) water in order to fetch high prices. If some locations cannot produce quality rice, farmers should be supported to grow other crops," he said.

A buyer looks at a sample of rice as he walks past stacks of the grain during a pre-auction rice inspection at the warehouse of the Boonnapa rice mill in Chok Chai, Nakhon Ratchasima province on Jan 26. (Bloomberg photo)

Smaller harvests

Targeted output of 33.73 million tonnes would return Thai rice production to the same level as it was in 2009-10, according to the plan. The projected surplus — the excess of output over local demand and export needs — will drop from about 1.1 million tonnes in 2016-2017 to just 200,000 tonnes in 2019-2020. The policy to shift land away from rice is subject to approval by a rice-policy committee, Mr Apichart said.

Under Ms Yingluck's rice-buying spree, production climbed to a record in 2011-2012, while reserves expanded to 17.8 million tonnes last year. That's equivalent to more than 40% of global trade.

Last month, the National Legislative Assembly impeached Ms Yingluck and banned her from politics for five years for her role in overseeing the rice-buying programme. The Attorney General's office said criminal charges will follow.

Minister of Agriculture and Cooperatives Pitipong Phuengboon Na Ayudhaya said in an interview in October that there would be incentives for growers to switch crops to curb oversupply, notably from rice to sugar.

At the Phimai Agricultural Cooperative Monday, Gen Prayut said he had instructed the Interior Ministry to take the lead in developing a database containing Thai farmers' incomes, careers and other identifying information ib their agricultural products in order to facilitate the government's assistance programmes.