ASEAN KEY DESTINATIONS
Thai rice plan to distort market
Ahead of October 7, when the policy will go into effect, middlemen are hanging on to their stocks in anticipation of the government buying 'every grain' at the promised price of 15,000 baht ($497) per metric ton.
That is 5,000 baht per ton more than in a scheme under the previous government, and well above the prevailing farm price of around 8,500 baht per ton.
While the scheme will make farmers happy, it will eventually drive prices higher even for local rice consumers as the expensive rice is released into the market, unless the government can absorb the cost on a long-term basis.
Meanwhile, as Thai middlemen hoard their stock, prices for other countries buying Thai rice have already gone up.
Jimmy Soh, owner of Singapore rice importer Chye Choon Foods, said the price of rice has gone up by about 20 per cent since March to S$780 per ton currently.
Traders had begun reacting when the price of rice became an issue at the start of the election campaign.
"In the business sense, it does not make sense to artificially inflate the prices of rice like that," said Soh.
"It's just not a sustainable idea. But I guess she has to keep to her pre-election promise."
Yingluck's Puea Thai party swept into power in the July 3 election on the back of a raft of populist promises including the rice mortgage pledge, and dealt the Democrat Party a crushing defeat in the process.
Since then, a rice price committee has been formed, with indications that the government is trying to find ways to backpedal. But if it does that, it will lose a lot of credibility with its rural support base.
"I believe the government will fulfill its election pledge," said Puea Thai party official Suchart Thadathamrongvej, who is not in the government but was one of the architects of the party's economic policy.
But, he admitted, "It's going to be a problem. The mechanism of the scheme hasn't been thought through."
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