Rice exports this year are set to fall to less than half of the government target of 3 million-tonnes as traders are withholding stock from its trading partners in an attempt to secure more favourable prices being offered by illicit Chinese importers, officials said.
U Lu Maw Myint Maung, joint secretary general of the Myanmar Rice Federation, told The Myanmar Times, that Myanmar exported nearly 1 million tonnes of rice through the first nine months of the fiscal year at the end of January, falling short of the 1.01 million tonnes of rice exported during the same period last year.
“Because of an unstable local rice price, we have not been able to speed up exports during the rainy season, he said. “If we had, Myanmar would probably have been able to export about 2 million tonnes this year, because there is enough reserve.”
He said that traders are increasingly looking to sell rice through Shan State’s Muse border, alongside China’s Yunnan Province, where they can earn as much as 28 percent more profit by dealing with tax-dodging Chinese
importers.
Though there is nothing illicit about local rice sellers trading over the borders, many Chinese traders are subject to a 17pc import tax on all rice bought from Myanmar, a tax many choose not to pay, he said. While they are then able to offer a better premium on imports, they also tend to not honour contacts and pay significantly less than promised.
“Local traders would not easily be able to reclaim their rice back because of the high transportation charges and would have to sell at the lower price,” U Lu Maw Myint Maung said. “This led to fluctuations in the local price, so that big exporters could not draw up contracts for as much as we
wanted.”
He said that the price of 25pc broken rice on the international market goes for US$315-$320 per tonne. That is compared to the 2480 yuan ($404) the same rice is sometimes sold for through the Muse border. Five percent broken rice, meanwhile, is sold for $405-$415 per tonne in the international markets, well short of the 2740 Yuan (about $446) per tonne it fetches along the Yunnan border.
In an effort to deal with the problem, the government has been in talks with Chinese authorities to try and formalise the rice trade, U Maung Aung, an adviser to the Ministry of Commerce he told The Myanmar Times.
“We have been trying to sign an MOU [memorandum of understanding] with regional governments in China to permit importing rice from Myanmar legally,” he said.
“Although they have not permitted rice imports, market demand is very big, so they seize illicit rice imports from Myanmar only sometimes,” he said.
As a result, experts believe that the price being offered by illicit traders in China would likely not begin to decrease until the end of the high trading season.
“The price [of rice exported to China] is not likely to go down until March as we are now exporting 3000 to 3500 tonnes of rice through Muse a day,” said U Thauk Kyar, an executive member of the Muse rice traders’ association.
The fiscal 2012-2013 total of 1.6 million tonnes was the highest in 46 years, thanks to the demand from China for exports via the newly booming Muse border post, which accounted for 60pc of the total 1.6 million tonnes exported last year, said U Lu Maw Myint Maung, adding that China has faced in increased demand for quality rice over the past year.
However, with Myanmar’s entry into the EU generalised system of preferences last year, Myanmar traders have started to export to Europe, said U Lu Maw Myint Maung.
“EU traders can import rice from Myanmar without paying import taxes if they can prove the country of origin,” he said.
Former joint secretary of the Myanmar Rice Federation and rice exporter U Myo Thura Aye said that 10 EU countries, including Spain, Portugal, Belgium and the Netherlands, are now buying rice from Myanmar.
“We’re exporting 5000 tonnes a month to Europe and 20,000 tonnes to Africa,” he said, adding that a smaller amount is going to the Philippines and Malaysia.
In addition, Myanmar Agribusiness Public Corporation (MACPO) announced last week that come May they will export up to 8000 tonnes of rice to Japan this year, said U Soe Tun, the company’s director.
“MAPCO is going to export … rice to Japan jointly with Japanese firm Mitsui & Co after it won a tender of Japanese government to import rice,” he said, adding that they would start importing 5pc broken rice at $470 per tonne.
By Zaw Htike
Tuesday, 11 February 2014
Vietnamese rice faces barriers in biggest markets
Indonesian Minister for Economic Affairs Hatta Rajasa has requested the Ministries of Trade and Agriculture to take a probe against the illegal rice imports from Vietnam.
According to the Vietnam News Agency, the minister said there are some evidences about the importers’ license abuse.
The request has been made following the information that the illegal rice imports from Vietnam are being wholesaled in Cipinang or Baten province in eastern Jakarta on January 30, estimated at 16,900 tons.
The volume of rice was sold more cheaply than the domestic products. Sources said the rice has been imported to Indonesia with the legal license granted by the Indonesian Ministry of Trade.
Hatta Rajasa emphasized that the Indonesian government never allows individuals to import rice, and that it has authorized Bulog, an agency of the country, to import rice to stabilize the market prices. Therefore, it is highly possible that Vietnam’s rice has penetrated the Indonesian market through legal channels.
Prior to that, in October 2013, NFA, the Filipino food agency, warned that the contract on importing 120,000 tons of rice signed between the Filipino private import firms and the Southern Food Corporation (Vinafood 2) is invalid, and that the imports will be blocked by the country’s customs agencies.
According to NFA, under the country’s national quota program, Filipino businessmen can only buy rice from Thailand, India, China and Australia. The importers must obtain the special import licenses from NFA before they import rice from other countries.
Vietnam’s rice exports to the loyal markets of the Philippines, Indonesia and Malaysia have dropped dramatically recently, thus leading to the sharp fall of the total rice exports.
The rice exports to the Philippines dropped by 63 percent in the first nine months of 2013, while the exports to Malaysia dropped by 35 percent. Especially, Indonesia did not import rice from Vietnam.
In the context of the sharp falls in the exports to the loyal markets, the Vietnam’s rice production was “saved” by the strong rise in the exports to China. The export volume to the market in 2013 was four times higher than that in 2012, about 1.6 million tons.
China consumed 32 percent of Vietnam’s total rice exports, while African markets bought nearly 30 percent.
However, Vietnam has been warned against the reliance on China as the main export market. The unstable market would upset Vietnam’s rice export strategy one day if Vietnam does not follow a reasonable business development plan.
Nguyen Dinh Bich, a well-known rice expert, on his article on Thoi bao Kinh te Saigon--while noting that Vietnam had to lower the export prices sharply in 2013, which was a big bitterness, has warned that the same scenario may repeat in 2014.
The US Agriculture Department has predicted that the demand from the three Vietnamese loyal markets would soar in 2014 to 4 million tons, while the demand from eight Asian big rice importers would increase by 20.1 percent to 9.22 million tons. However, Bich commented that it would be not easy to boost exports to the markets.
According to the Vietnam News Agency, the minister said there are some evidences about the importers’ license abuse.
The request has been made following the information that the illegal rice imports from Vietnam are being wholesaled in Cipinang or Baten province in eastern Jakarta on January 30, estimated at 16,900 tons.
The volume of rice was sold more cheaply than the domestic products. Sources said the rice has been imported to Indonesia with the legal license granted by the Indonesian Ministry of Trade.
Hatta Rajasa emphasized that the Indonesian government never allows individuals to import rice, and that it has authorized Bulog, an agency of the country, to import rice to stabilize the market prices. Therefore, it is highly possible that Vietnam’s rice has penetrated the Indonesian market through legal channels.
Prior to that, in October 2013, NFA, the Filipino food agency, warned that the contract on importing 120,000 tons of rice signed between the Filipino private import firms and the Southern Food Corporation (Vinafood 2) is invalid, and that the imports will be blocked by the country’s customs agencies.
According to NFA, under the country’s national quota program, Filipino businessmen can only buy rice from Thailand, India, China and Australia. The importers must obtain the special import licenses from NFA before they import rice from other countries.
Vietnam’s rice exports to the loyal markets of the Philippines, Indonesia and Malaysia have dropped dramatically recently, thus leading to the sharp fall of the total rice exports.
The rice exports to the Philippines dropped by 63 percent in the first nine months of 2013, while the exports to Malaysia dropped by 35 percent. Especially, Indonesia did not import rice from Vietnam.
In the context of the sharp falls in the exports to the loyal markets, the Vietnam’s rice production was “saved” by the strong rise in the exports to China. The export volume to the market in 2013 was four times higher than that in 2012, about 1.6 million tons.
China consumed 32 percent of Vietnam’s total rice exports, while African markets bought nearly 30 percent.
However, Vietnam has been warned against the reliance on China as the main export market. The unstable market would upset Vietnam’s rice export strategy one day if Vietnam does not follow a reasonable business development plan.
Nguyen Dinh Bich, a well-known rice expert, on his article on Thoi bao Kinh te Saigon--while noting that Vietnam had to lower the export prices sharply in 2013, which was a big bitterness, has warned that the same scenario may repeat in 2014.
The US Agriculture Department has predicted that the demand from the three Vietnamese loyal markets would soar in 2014 to 4 million tons, while the demand from eight Asian big rice importers would increase by 20.1 percent to 9.22 million tons. However, Bich commented that it would be not easy to boost exports to the markets.
India As rice bran oil gains traction, output rises
Even as consumer awareness remains a challenge for the rice bran oil, India’s rice bran oil production is growing by about 50,000 tonne every year, informed industry leaders here.
Of the total global production of around 12 lakh tonne of rice bran oil, India currently produces 9 lakh tonne per annum. However, with growing awareness and rising demand, the production is increasing by about 50,000 tonne per annum, claimed the Solvent Extractors’ Association of India (SEA).
“India has the potential to produce around 15 lakh tonne of rice bran oil. We are producing about 9 lakh tonne but only 3 lakh tonne goes for direct consumption. As the awareness rises, the production will increase too,” said B V Mehta, executive director, SEA at a press conference on Wednesday.
After India, Japan is the distant second in the production of rice bran oil with production of about 70,000 tonne per annum, followed by Thailand with around 60,000 tonne and China at only 50,000 tonne per annum of rice bran oil production.
However, the rice bran oil costs more than the conventional oils like sunflower or cottonseed oil. “The prices are higher by Rs. 10-15 per kg. So we can position this oil between the expensive olive oil and the conventional oils with greater nutritional benefits,” said Dr A R Sharma, chairman and managing director, Ricela Health Foods Ltd.
The rice bran oil has been recommended by the National Institute of Nutrition (NIN) for its nutritional properties. “The viscosity of rice bran oil is very light and is bland. Food cooked in this oil absorbs 15-20 per cent less oil, thereby reducing the chances of cholesterol,” said Dr Varsha, Founder chairperson, Indian Institute of Nutritional Sciences.
SEA has initiated a series of awareness programmes in big and small towns across India and to reach out to the maximum number of people with the benefits rice bran oil offers.
Of the total global production of around 12 lakh tonne of rice bran oil, India currently produces 9 lakh tonne per annum. However, with growing awareness and rising demand, the production is increasing by about 50,000 tonne per annum, claimed the Solvent Extractors’ Association of India (SEA).
“India has the potential to produce around 15 lakh tonne of rice bran oil. We are producing about 9 lakh tonne but only 3 lakh tonne goes for direct consumption. As the awareness rises, the production will increase too,” said B V Mehta, executive director, SEA at a press conference on Wednesday.
After India, Japan is the distant second in the production of rice bran oil with production of about 70,000 tonne per annum, followed by Thailand with around 60,000 tonne and China at only 50,000 tonne per annum of rice bran oil production.
However, the rice bran oil costs more than the conventional oils like sunflower or cottonseed oil. “The prices are higher by Rs. 10-15 per kg. So we can position this oil between the expensive olive oil and the conventional oils with greater nutritional benefits,” said Dr A R Sharma, chairman and managing director, Ricela Health Foods Ltd.
The rice bran oil has been recommended by the National Institute of Nutrition (NIN) for its nutritional properties. “The viscosity of rice bran oil is very light and is bland. Food cooked in this oil absorbs 15-20 per cent less oil, thereby reducing the chances of cholesterol,” said Dr Varsha, Founder chairperson, Indian Institute of Nutritional Sciences.
SEA has initiated a series of awareness programmes in big and small towns across India and to reach out to the maximum number of people with the benefits rice bran oil offers.
Thailand BoT seeks to allay rice loan fears
The Bank of Thailand has found no evidence of unusual money withdrawals this week, despite media reports that depositors have pulled more than 9 billion baht from three banks over fears their money could...
Salinee Wangtal, assistant governor of the Central Bank, said the bank’s monitoring systems had found no reports of unusual money withdrawals that were cause for concern.
She made the comments in response to media reports that around six billion baht from two-state run banks and three billion baht from a commercial bank had been withdrawn within the space of a week.
Anti-government protesters had speculated that the state-run Government Saving Bank and Krungthai Bank could be sympathetic to lending the caretaker government money to finance the beleaguered rice scheme. TMB Bank, which used to be state-run but is now a commercial operation, was also implicated as a potential source of funds for the pledging programme. However, all three have denied that they plan to offer loans to finance the scheme.
The caretaker government now owes farmers for more than 100 billion baht for rice pledged under the initiative.
Ms Salinee insisted that commercial banks in Thailand are still performing well, having generated combined profits of 220 billion baht in 2013 as banks.
The non-performing loan average for Thai banks stands at 2.4% of total outstanding loans, which is also normal, she said. A non-performing loan is a loan that is in default or close to that point. The Thai banking system also has the highest allowances for doubtful debt in the world, at 3.8% of outstanding loans, she added. Doubtful debts are those debts that banks are unlikely to be able to collect.
Ms Salinee said the central bank projected that loan extensions will grow by 8-10% this year, which is in line with economic growth but lower than the 11% loan extension growth seen in 2013.
Salinee Wangtal, assistant governor of the Central Bank, said the bank’s monitoring systems had found no reports of unusual money withdrawals that were cause for concern.
She made the comments in response to media reports that around six billion baht from two-state run banks and three billion baht from a commercial bank had been withdrawn within the space of a week.
Anti-government protesters had speculated that the state-run Government Saving Bank and Krungthai Bank could be sympathetic to lending the caretaker government money to finance the beleaguered rice scheme. TMB Bank, which used to be state-run but is now a commercial operation, was also implicated as a potential source of funds for the pledging programme. However, all three have denied that they plan to offer loans to finance the scheme.
The caretaker government now owes farmers for more than 100 billion baht for rice pledged under the initiative.
Ms Salinee insisted that commercial banks in Thailand are still performing well, having generated combined profits of 220 billion baht in 2013 as banks.
The non-performing loan average for Thai banks stands at 2.4% of total outstanding loans, which is also normal, she said. A non-performing loan is a loan that is in default or close to that point. The Thai banking system also has the highest allowances for doubtful debt in the world, at 3.8% of outstanding loans, she added. Doubtful debts are those debts that banks are unlikely to be able to collect.
Ms Salinee said the central bank projected that loan extensions will grow by 8-10% this year, which is in line with economic growth but lower than the 11% loan extension growth seen in 2013.
Myanmar to export high-quality rice to Japan
Myanmar will export 6,000 tonnes of high-quality rice to Japan for second time in May, according to the Myanmar Agribusiness Public Corporation (MAPCO).
“We are now preparing to export 6,000 tons of rice that have already been tender awarded. Japan is going to buy native paddy strains and Myanmar is now test exporting high-quality rice to European countries,” said Soe Tun, director of the MAPCO.
Myanmar is also exporting 25-mark high quality rice to China and Africa. MAPCO exported 5,000 tonnes of high-quality rice to Japan for the first time in 45 years and is working to export more.
Japan examined Myanmar paddy strains in all 257 kinds of laboratory tests, including insecticide tainting and samples with or without chemical substances.
Ye Min Aung, managing director of MAPCO, said that Myanmar rice dealers are now preparing to export high-quality rice to the international market. That is why rice dealers should prepare for an emerging market that specializes in quality.
“We will export r200,000 tonnes of rice to Japan in this fiscal year, cooperating with Japan’s Mitsui Company. We have a plan to export rice to Africa and other international markets,” said Ye Min Aung.
Myanmar has also begun exporting rice to European markets under an advantageous EU trade scheme.
“We are now preparing to export 6,000 tons of rice that have already been tender awarded. Japan is going to buy native paddy strains and Myanmar is now test exporting high-quality rice to European countries,” said Soe Tun, director of the MAPCO.
Myanmar is also exporting 25-mark high quality rice to China and Africa. MAPCO exported 5,000 tonnes of high-quality rice to Japan for the first time in 45 years and is working to export more.
Japan examined Myanmar paddy strains in all 257 kinds of laboratory tests, including insecticide tainting and samples with or without chemical substances.
Ye Min Aung, managing director of MAPCO, said that Myanmar rice dealers are now preparing to export high-quality rice to the international market. That is why rice dealers should prepare for an emerging market that specializes in quality.
“We will export r200,000 tonnes of rice to Japan in this fiscal year, cooperating with Japan’s Mitsui Company. We have a plan to export rice to Africa and other international markets,” said Ye Min Aung.
Myanmar has also begun exporting rice to European markets under an advantageous EU trade scheme.
Monday, 3 February 2014
Rice Market: More Medium Grain Planted if California Stays Dry
Export sales are picking up, with this week’s postings totaling 65,100 tons. Long grain took the lion’s share.
There were also 2,000 tons of medium/short milled sold to Jordan and 600 tons sold to Australia out of the 2014/15 crop. This is the second time we have seen very early sales of medium/short sold out of next year’s production, and we wonder if these are buyers trying to assure supplies out of next year’s potentially water-deficient planting in California.
There were also 2,000 tons of medium/short milled sold to Jordan and 600 tons sold to Australia out of the 2014/15 crop. This is the second time we have seen very early sales of medium/short sold out of next year’s production, and we wonder if these are buyers trying to assure supplies out of next year’s potentially water-deficient planting in California.
India's wheat, rice exports raise hackles at WTO
The US, Canada and Pakistan have questioned India's export of wheat and rice, suggesting that subsidized grains have been shipped out providing gains to local traders.
The queries at the World Trade Organization (WTO) come weeks after these countries reluctantly agreed to India's demand for renegotiating the agreement related to food subsidies that turned into a make-or-break issue at the Bali ministerial meeting in December.
The government has denied the suggestions and said that India is complying with all international norms. "We are on the right track," said a top government official, dismissing the charges.
The queries at the World Trade Organization (WTO) come weeks after these countries reluctantly agreed to India's demand for renegotiating the agreement related to food subsidies that turned into a make-or-break issue at the Bali ministerial meeting in December.
The government has denied the suggestions and said that India is complying with all international norms. "We are on the right track," said a top government official, dismissing the charges.
Saturday, 1 February 2014
California rice crop will suffer from drought
Pat Kennedy is not a popular man.
As the water operations superintendent for Glenn-Colusa Irrigation District, Kennedy had the displeasure Monday of reinforcing what rice farmers already knew — that the 2014 drought could be the worst natural disaster for California crops in history.
The lack of rain and snow this winter in Northern California is worse than the dry times of 1976 and 1977, when another long ridge of high pressure kept winter storms from reaching the state.
"When the well's dry, the well's dry," said Kennedy, referring to Lake Shasta, from which water flows to irrigate a variety of crops under GCID contracts.
As of Sunday, Lake Shasta was at 54 percent of average, and 36 percent of capacity, and suffering the most will be rice, alfalfa and irrigated pasture land, Kennedy said.
About 45 Northern Sacramento Valley rice farmers gathered Monday in Glenn for their annual growers meeting, one of four sponsored by the University of California Cooperative Extension.
Two remaining meetings will be held Friday in Colusa and Yuba City.
Without sufficient rainfall in February and March, Kennedy said farmers could face more than just the 25 percent reduction in water required by their settlement contracts during dry years.
Even now, Kennedy said the Bureau of Reclamation is being "tight-lipped" about exactly how much water might be available.
At best, GCID is looking at delivering about 618,750 acre-feet of water to this season's crops, down from 770,000 in 2013 and 696,000 in 2012.
Farmers say even with the pool of rain expected in from Hawaii this week, they are not optimist that there will be sufficient water to plant even 75 percent of their fields.
The needs of irrigated crops fall behind those for fish, wildlife refuges and other social and environmental concerns, and competition for water is far greater than what water users had to compete with in the 1970s, said Willows farmer John Amaro.
"I will be lucky if I get 50 percent of my water," Amaro said after the meeting.
Amaro, a former Glenn County supervisor, expects the 2014 drought to have far-reaching effects, and could be devastating to the state and the community, which relies so heavily on an agriculture economy.
As the water operations superintendent for Glenn-Colusa Irrigation District, Kennedy had the displeasure Monday of reinforcing what rice farmers already knew — that the 2014 drought could be the worst natural disaster for California crops in history.
The lack of rain and snow this winter in Northern California is worse than the dry times of 1976 and 1977, when another long ridge of high pressure kept winter storms from reaching the state.
"When the well's dry, the well's dry," said Kennedy, referring to Lake Shasta, from which water flows to irrigate a variety of crops under GCID contracts.
As of Sunday, Lake Shasta was at 54 percent of average, and 36 percent of capacity, and suffering the most will be rice, alfalfa and irrigated pasture land, Kennedy said.
About 45 Northern Sacramento Valley rice farmers gathered Monday in Glenn for their annual growers meeting, one of four sponsored by the University of California Cooperative Extension.
Two remaining meetings will be held Friday in Colusa and Yuba City.
Without sufficient rainfall in February and March, Kennedy said farmers could face more than just the 25 percent reduction in water required by their settlement contracts during dry years.
Even now, Kennedy said the Bureau of Reclamation is being "tight-lipped" about exactly how much water might be available.
At best, GCID is looking at delivering about 618,750 acre-feet of water to this season's crops, down from 770,000 in 2013 and 696,000 in 2012.
Farmers say even with the pool of rain expected in from Hawaii this week, they are not optimist that there will be sufficient water to plant even 75 percent of their fields.
The needs of irrigated crops fall behind those for fish, wildlife refuges and other social and environmental concerns, and competition for water is far greater than what water users had to compete with in the 1970s, said Willows farmer John Amaro.
"I will be lucky if I get 50 percent of my water," Amaro said after the meeting.
Amaro, a former Glenn County supervisor, expects the 2014 drought to have far-reaching effects, and could be devastating to the state and the community, which relies so heavily on an agriculture economy.
Rice-pledge catastrophe could be final straw for Thailand
The caretaker Yingluck government has already technically defaulted by failing to pay the Bt130 billion owed since October to farmers under the rice-pledge scheme. More than 200 farmers have asked the Lawyers' Council to represent them in a class action against the government. The farmers, the bottom rung in the Thai social hierarchy, are the creditors, the government the debtor. The rice pledge has become the Achilles' heel of the Yingluck government.
For this reason, caretaker Finance Minister Kittiratt Na Ranong is scrambling to raise Bt130 billion to pay the angry farmers, traditionally a political base of the ruling Pheu Thai Party. Farmers from several provinces, particularly in the North and Central regions, have blocked highways to protest against the government. Many of them have gone bankrupt and are having to rely on loan sharks to stay afloat. At least three farmers under the scheme have committed suicide. The farmers have also threatened to travel to Bangkok to join the mass rallies led by Suthep Thaugsuban. Both the farmers' plight and the Occupy Bangkok Movement have pushed Yingluck to the edge of the precipice.
Initially, Kittiratt kept the budget for the rice-pledging scheme at Bt500 billion. The money is channelled through the Bank for Agriculture and Agricultural Cooperatives, which acts as a go-between with the farmers. Once the farmers pledge their paddy, they receive a pledging document. With the document they can, in theory, claim their money at the Bank for Agriculture. The paddy goes to participating millers under the oversight of the Commerce Ministry. Proceeds from the sale of rice by the Commerce Ministry are supposed to be funnelled back to the Finance Ministry so that it has the liquidity to continue the rice-pledging scheme in the following harvest season.
Taken at face value, this populist policy designed to win farmers' votes is a fairy tale. The reality is that corruption is rampant in the rice-pledging scheme, which has extended its budget from Bt500 billion to more than Bt700 billion. Out of this, losses from both inefficiency and corruption are estimated at about Bt400 billion. So there was no money recycled back from the Commerce Ministry to start the fresh round of the scheme, which started last October. Kittiratt's Finance Ministry had never been prepared to raise the original Bt500-billion budget, hoping instead that the Commerce Ministry would send the proceeds from the rice sale, government-to-government deals or whatever, to keep the scheme alive. But the money never arrived.
As a result, the farmers who have pledged their paddy have not received any payment since October. When Premier Yingluck Shinawatra dissolved Parliament on December 9, she and her Cabinet forgot to approve a fresh budget for the rice pledge, which had been expanded due to failure of the Commerce Ministry to recycle the money back. Thus, it now has no money to pay to the farmers. In its reduced "caretaker" capacity, Kittiratt's Finance Ministry is constitutionally barred from borrowing money that would create obligations for the next government. Kittiratt has resorted to every means to come up the money to pay to the farmers. But he and others involved in attempts to secure the Bt130 billion risk violating the law.
Moody's and other rating agencies are keeping a close watch on the impact of the rice-pledging scheme on the Thai government's fiscal position. Moody's has already expressed concern that the scheme could hurt Thai public finances and affect the country's overall credit rating. Thailand's rating is now two notches above junk status. If its rating were to be downgraded, it would harm the country's public and private finances, as the cost of borrowing would rise sharply. And since the government has already technically defaulted on its debt to farmers, there is a risk that Thailand's credit rating could be compromised. With the US Federal Reserve having just tapered its quantitative easing programme by another $10 billion to $65 billion a month, interest rates are likely to rise and the emerging markets will be targeted for sell-offs.
The rice-pledging fiasco has added salt to Thailand's wounds at a time when it is already facing a full-blown political crisis and global financial crisis.
For this reason, caretaker Finance Minister Kittiratt Na Ranong is scrambling to raise Bt130 billion to pay the angry farmers, traditionally a political base of the ruling Pheu Thai Party. Farmers from several provinces, particularly in the North and Central regions, have blocked highways to protest against the government. Many of them have gone bankrupt and are having to rely on loan sharks to stay afloat. At least three farmers under the scheme have committed suicide. The farmers have also threatened to travel to Bangkok to join the mass rallies led by Suthep Thaugsuban. Both the farmers' plight and the Occupy Bangkok Movement have pushed Yingluck to the edge of the precipice.
Initially, Kittiratt kept the budget for the rice-pledging scheme at Bt500 billion. The money is channelled through the Bank for Agriculture and Agricultural Cooperatives, which acts as a go-between with the farmers. Once the farmers pledge their paddy, they receive a pledging document. With the document they can, in theory, claim their money at the Bank for Agriculture. The paddy goes to participating millers under the oversight of the Commerce Ministry. Proceeds from the sale of rice by the Commerce Ministry are supposed to be funnelled back to the Finance Ministry so that it has the liquidity to continue the rice-pledging scheme in the following harvest season.
Taken at face value, this populist policy designed to win farmers' votes is a fairy tale. The reality is that corruption is rampant in the rice-pledging scheme, which has extended its budget from Bt500 billion to more than Bt700 billion. Out of this, losses from both inefficiency and corruption are estimated at about Bt400 billion. So there was no money recycled back from the Commerce Ministry to start the fresh round of the scheme, which started last October. Kittiratt's Finance Ministry had never been prepared to raise the original Bt500-billion budget, hoping instead that the Commerce Ministry would send the proceeds from the rice sale, government-to-government deals or whatever, to keep the scheme alive. But the money never arrived.
As a result, the farmers who have pledged their paddy have not received any payment since October. When Premier Yingluck Shinawatra dissolved Parliament on December 9, she and her Cabinet forgot to approve a fresh budget for the rice pledge, which had been expanded due to failure of the Commerce Ministry to recycle the money back. Thus, it now has no money to pay to the farmers. In its reduced "caretaker" capacity, Kittiratt's Finance Ministry is constitutionally barred from borrowing money that would create obligations for the next government. Kittiratt has resorted to every means to come up the money to pay to the farmers. But he and others involved in attempts to secure the Bt130 billion risk violating the law.
Moody's and other rating agencies are keeping a close watch on the impact of the rice-pledging scheme on the Thai government's fiscal position. Moody's has already expressed concern that the scheme could hurt Thai public finances and affect the country's overall credit rating. Thailand's rating is now two notches above junk status. If its rating were to be downgraded, it would harm the country's public and private finances, as the cost of borrowing would rise sharply. And since the government has already technically defaulted on its debt to farmers, there is a risk that Thailand's credit rating could be compromised. With the US Federal Reserve having just tapered its quantitative easing programme by another $10 billion to $65 billion a month, interest rates are likely to rise and the emerging markets will be targeted for sell-offs.
The rice-pledging fiasco has added salt to Thailand's wounds at a time when it is already facing a full-blown political crisis and global financial crisis.
Bank of Thailand chief urges sale of rice from govt stockpiles to fund payment to farmers
The central bank governor yesterday advised the caretaker government to raise funds by speeding up the sale of rice from the state's stockpiles instead of borrowing to pay farmers taking part in its rice-pledging scheme.
Prasarn Trairatvorakul, governor of the Bank of Thailand, said the pledging scheme had created problems for farmers because they were not being paid and they suffered badly from lack of savings.
"The government should sell rice from the stockpiles as soon as possible ... even if the sales are made at a loss," Prasarn said.
More than a million farmers have not been paid for their pledged paddy in the 2013-14 harvest season, representing 10.71 million tonnes worth a total of Bt167 billion. The farmers have threatened to block roads and stage protest rallies against the government because of the delay in payments.
After the Finance Ministry on Thursday failed to obtain a Bt20-billion short-term loan in the first batch of the Bt130-billion fund planned to finance the rice-pledging project, TMB Bank was reportedly named as the winner of the bid. However, the ministry said none of the financial institutions had won it.
TMB Bank chief executive officer Boontuck Wangcharoen clarified in a statement released yesterday that the bank did not take part in the loan bidding on Thursday.
"The legal risk is not clear. So the process of credit has not yet been considered as more than half of the bank's directors, who are foreigners, are abroad," Boontuck said in a statement.
Kosit Panpiemras, executive chairman of Bangkok Bank, said it did not take part in the loan auction on Thursday, as the law regarding the loan was still unclear. He said commercial banks had to be careful on such matters.
Narongchai Akrasanee, chairman of MFC Asset Management, suggested that the next government should expand the revolving fund for paying for paddy under the scheme once they are in power. Then they can begin to pay the farmers gradually through any banks that are willing, and not only the Bank for Agriculture and Agricultural Cooperatives.
Prasarn said the problem faced by commercial banks in the auction related to the law, which is still unclear, and they were worried that the next government might not honour the deal. However, he said the BOT would not interfere, as it believes commercial banks can deal with it.
Meanwhile, caretaker Commerce Minister Niwatthumrong Boonsongpaisan said China had expressed concerns about the Thai government's ability to supply rice to it under a government-to-government contract. China could cancel the deal. He said that next week he would discuss the matter with the Chinese company involved.
In January, the government sold 1 million tonnes of rice from its total stockpile of 10 million tonnes. There are sales contracts for another 5 million tonnes, which are awaiting shipping.
Prasarn Trairatvorakul, governor of the Bank of Thailand, said the pledging scheme had created problems for farmers because they were not being paid and they suffered badly from lack of savings.
"The government should sell rice from the stockpiles as soon as possible ... even if the sales are made at a loss," Prasarn said.
More than a million farmers have not been paid for their pledged paddy in the 2013-14 harvest season, representing 10.71 million tonnes worth a total of Bt167 billion. The farmers have threatened to block roads and stage protest rallies against the government because of the delay in payments.
After the Finance Ministry on Thursday failed to obtain a Bt20-billion short-term loan in the first batch of the Bt130-billion fund planned to finance the rice-pledging project, TMB Bank was reportedly named as the winner of the bid. However, the ministry said none of the financial institutions had won it.
TMB Bank chief executive officer Boontuck Wangcharoen clarified in a statement released yesterday that the bank did not take part in the loan bidding on Thursday.
"The legal risk is not clear. So the process of credit has not yet been considered as more than half of the bank's directors, who are foreigners, are abroad," Boontuck said in a statement.
Kosit Panpiemras, executive chairman of Bangkok Bank, said it did not take part in the loan auction on Thursday, as the law regarding the loan was still unclear. He said commercial banks had to be careful on such matters.
Narongchai Akrasanee, chairman of MFC Asset Management, suggested that the next government should expand the revolving fund for paying for paddy under the scheme once they are in power. Then they can begin to pay the farmers gradually through any banks that are willing, and not only the Bank for Agriculture and Agricultural Cooperatives.
Prasarn said the problem faced by commercial banks in the auction related to the law, which is still unclear, and they were worried that the next government might not honour the deal. However, he said the BOT would not interfere, as it believes commercial banks can deal with it.
Meanwhile, caretaker Commerce Minister Niwatthumrong Boonsongpaisan said China had expressed concerns about the Thai government's ability to supply rice to it under a government-to-government contract. China could cancel the deal. He said that next week he would discuss the matter with the Chinese company involved.
In January, the government sold 1 million tonnes of rice from its total stockpile of 10 million tonnes. There are sales contracts for another 5 million tonnes, which are awaiting shipping.
Subscribe to:
Posts (Atom)
