Analysis
Jonathan Head
BBC World Service

When global rice prices suddenly boomed last year, everyone assumed that farmers in Thailand must have made a fortune.

However, according to economist Amar Siamwalla, some did but only the small minority that has access to irrigation, which allows them to grow more than one crop a year.

"The price spike was an artificial thing, it’s a matter of luck who gets it," he says.

"People who grew rice in the dry season, in the central plains made money but in the north-east they made decent money, but not spectacular money."

Last year’s experience brought home some hard truths to Thailand.

"Most farmers here are in debt to the bank"

Kwanchai Gomez

While it has long exported more rice than anyone else, thanks to its large expanse of land and relatively small population, productivity on its rice farms is still very low and unpredictable.

Kwanchai Gomez is a veteran rice researcher who has been working on improving the lives of farmers for 30 years.

He thinks water is the most important thing that guarantees low risk.

"Risk is the problem of farmers, one year no rain and the next year you have floods," he says.

"So, they have to get a loan and once you get one and if your crop fails, then you get in debt.

"Most farmers here are in debt to the bank."

Government ignorance

For decades, the plight of Thailand’s farmers was largely ignored by the central government. Around the turn of the century, that changed.

TAKING THE PULSE OF THE GLOBAL ECONOMY

• The BBC is Taking the Pulse of the Global Economy, looking at a range of subjects this summer
• Food prices – which remain a concern particularly in many developing economies
• Highly volatile energy prices – which have been a major issue in the past year
• The plight of migrant workers – as the global recession takes hold in many economies
• Housing markets – which have turned from boom to bust in many countries
• Rising unemployment levels – as firms cut back because of falling orders

BBC World Food Price Index

Taking the pulse explained

Thaksin Shinawatra, a populist tycoon, revolutionised Thai politics by tailoring policies directly to the needs of farmers.

His popularity with them helped him to a record series of election victories, before he was ousted by a military coup three years ago.

He established a precedent whilst in power, offering to buy rice from farmers at a guaranteed price.

It was called the rice mortgage scheme and has proved very popular.

However, it is also staggeringly expensive, especially when the government gets the price wrong

"The major mistake was committed last year when the price of rice was very high in the world market," says Nipon Poapongsakorn, one of Thailand’s top rice experts.

"When the price started to decline in May, the government still insisted that the price paid to the farmers has to be maintained at the very high level."

The Thai government is now sitting on a vast stockpile of rice that it bought at peak prices.

As the country is such a big supplier to the world market, it cannot sell all this rice without depressing prices even further.

Unbeneficial

Allegations of massive corruption are now rife throughout the rice business.

Deputy Prime Minister, Kobsak Sapavasu, is the man who has been ordered to sort out the mess.

"It’s pro-business and pro-rich farmer, and basically it’s a programme to finance political campaigns"

Nipon Poapongsakorn

"The numbers are just unbelievable, we are spending it on the wrong policy, at the very best we will lose another twenty billion baht," he says.

The rice mortgage scheme could be close to loosing $1bn at a time of economic crisis.

Worse still, says economist Nipon Poapongsakorn, the scheme has also benefited the wrong people.

"Most of them unfortunately, are rich farmers in the central plains.

"These are the areas with irrigation, so they can grow something like three crops a year.

"While the poor farmers in the north-east, they don’t have surplus of rice to sell, so they don’t benefit from this programme at all.

"It’s pro-business and pro-rich farmer, and basically it’s a programme to finance political campaigns," he added.

Helping themselves

Some farmers in the north-east have decided the only way to escape their perpetual poverty is by owning their own rice mills to ensure they get a bigger share of the profits.

"I wondered why so many farmers were abandoning their farms, then I realised that our problems with debt and crop prices would never be cured just by waiting for the government to help, so I started this mill and so far it has been successful," said Tongsuan Sodpak.

Deputy Prime Minister Kobsak says he wants to replace the mortgage scheme with a direct price guarantee for farmers, where the government does not have to buy their rice.

For the moment though, his coalition partners have forced him to keep the old scheme in place.

Economist Amar Siamwalla believes that government intervention does more harm than good to Thailand’s rice industry.

"I think the best thing the government can do is to stay out of the rice market.

"You should allow millers, traders, exporters and farmers to develop their inherent skills in producing good quality rice.

"Rice farming does require skills, even though it is done by the poorest people.

"Let them hone their skills to produce the best quality rice, to maximise their income, and that would be best for everyone," he added.

This year for the first time, Thailand’s great rivals in the rice business, Vietnam and India are threatening to displace them as the world’s top exporter.

Yet Thailand’s chaotic politics will probably continue to get in the way of policies that could really lift the productivity of the country’s rice farmers.

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