Thai priem minister vetoes pumping up paddy price by 200 baht

Prime Minister Abhisit Vejjajiva has put the brakes on a Commerce Ministry proposal to raise the buying price for paddy by 200 baht, saying that higher-than-market prices would affect the government's rice insurance scheme and confuse farmers. Commerce Minister Porntiva Nakasai said the premier had instead directed the ministry to study other ways to shore up rice prices. The Commerce Ministry recently came up with a plan to raise state buying prices for paddy by 200 baht per tonne from the current benchmark prices now set at 8,919 baht per tonne as a way to overcome the domestic paddy price slump, especially for 5% white rice. The price increase was meant to drive up market prices and cut the price gap between market rates and the government's insurance scheme, reducing the government's compensation as a result. The Democrat-led government first introduced the crop insurance or options programme for the 2009-10 harvest season to manage key crop prices and guarantee farmers' incomes. It replaces a pledging scheme used by successive governments that offered high prices and proved to be politically popular in rural communities. The new price insurance scheme represents income support paid directly to farmers. Payments will be based on the difference between insured prices and benchmark prices, regardless of the market prices farmers receive when they sell their crop. The insured prices are based on average costs and a profit margin of 30% to 40%. The benchmark prices are based on the weighted average wholesale prices of rice in Bangkok equivalent to paddy with less than 15% moisture content. The benchmark price is set on the first and sixteenth days of each month. The programme is designed to benefit all farmers, particularly small-scale operators. Compensation will be transferred directly to farmers by the Bank for Agriculture and Agricultural Co-operatives (BAAC). Farmers will manage their own sales decisions in terms of when to capitalise on the spread between the insured price and the benchmark price. "I must admit it will be tough to attract millers to participate in the government's rice-buying scheme, as traders by nature want to buy cheap," said Mrs Porntiva. Traders and millers mostly prefer the pledging scheme, as they earn extra revenue from rice polishing and warehouse rentals for storing government rice.