“Thailand’s Misguided Rice Policy”

For many years, Thailand was known to be the world’s greatest producer of Jasmine rice. This is true as in some areas such as the central plains region, get great irrigation. In other areas such as those of the north-east, there is a lack of irrigation. Due to consistent floods, the harvesting of rice crops has become utterly poor and farmers were beginning to face indebtedness and poverty. When in 2001 Thaksin was elected prime minister, he made several promises to create policies directed towards farmers to provide “debt forgiveness and a village loan fund”.

One of these policies was the rice mortgage scheme. Farmers were allowed to sell their crops to the government at a guaranteed price. Unfortunately, Thaksin’s policies were of lowbenefit. The set price floor, or guaranteed price was too high. For rich-farmers, who had irrigation this was a free pay. For other poor farmers, who had no surplus, the scheme was of no benefit. The government is also suffering from this scheme, as the guaranteed prices are unaffordable.

As seen in the graph above, the quantity that the government buys from the farmers is at Q1. The price that they have guaranteed to pay is at P1. The government is buying less crops at a higher price.