In Thailand Price Insurance to Replace Mortgage Scheme

This year the program reportedly benefited only 20 percent of all rice farmers despite higher participation (up to 30 percent participation in the current MY2008/09 program which set intervention prices at record levels set in the previous year) (Table 1). Around 60 percent of farmers participating in the program are in irrigated areas in the lower north and the central plain which account for a third of total rice cultivation. A study by the Thailand Development and Research Institute (TDRI) indicates that farmers derived 40 percent of the total program benefits but that poor farmers received little benefit from the programs (Table 2). The program benefited rice exporters, accounting for around 24 percent of the total benefit generated from the mortgage scheme. In addition, the resulting price distortion reportedly brought forward greater production of low-quality rice over the past five years as farmers used fast-growing rice varieties to maximize crop sales to the mortgage program.
The price insurance scheme will replace the mortgage scheme in MY2009/10 intervention program of major crops, including rice, corn, and tapioca. Insured prices will be based on production costs (including transportation cost from farm to the mills of buyers) with profit margin of 20-25 percent. Eligible tonnage will be based on average cultivation and yield of each crop and will be limited. This scheme is designed to benefit all farmers, particularly small-scale farmers. The program will pay the difference between insured prices and market prices at the end of contracts which are based on harvest pattern. The Bank for Agriculture and Agricultural Cooperatives (BAAC) will be responsible for the program administration. The Government will absorb the insurance premium until the program is fully implemented in the future. The scheme will enable farmers to manage the risk of price fluctuation, particularly during the beginning of the harvest.
Price Insurance Scheme for Rice will be finalized in early August
At the Cabinet meeting on July 21, 2009, the Government agreed with the framework of MY2009/10 rice policy to replace conventional mortgage scheme with price insurance scheme. The insured prices will be based on average production costs with profit margin. On July 29, the National Rice Policy Committee agreed to set insured prices of main-crop white rice paddy at 10,000 baht/ton ($296/MT), based on average production cost with profit margin of 30-40 percent. Meanwhile, the eligible tonnage will likely be limited at 20 tons/farmer, based on an average farm size of 40 rai (6.4 hectares) with average yield of 400 kg./rai (2.5 tons/hectare). The Ministry of Agriculture and Cooperatives (MOAC) is reviewing insured prices of fragrant rice paddy and glutinous rice paddy which are expected to be lower than 13,000 baht/ton ($413/MT)