Thailand, look how the EU deals with its farmers

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rice subsidiesThailand has just prolonged its populist policy of buying rice from farmers at up to more than 50 per cent above the world market price for the third year in a row, deliberately facing $8.7 billion in losses for the upcoming harvest season alone. Over the past two seasons, the rice subsidy scheme reportedly cost up to $16 billion, but no official figures exist as the issue is a treated like a state secret.

The sole purpose of the big waste of taxpayers’ money is to keep voters, among whom are millions of farmers from the north and northeast, loyal to the Pheu Thai-led government under Yingluck Shinawatra by “improving their income”.

No matter that

* Thailand lost its position as the world’s leading rice exporter which it undisputedly held for three decades due to the now overpriced rice

* The government is sitting on 17 million tonnes of rice which is partly rotting, and warehouse storage bills are huge

* The enormous amount of money to disperse is a feed through for corrupt officials, wholesalers and traders

* Rice has become a smuggling good with truckloads of rice brought in from neighbouring countries and sold for a higher price in Thailand

* The income situation and social security of the farmers has not really improved because prices of food, transport and agricultural tools have risen significantly in the past and rural development is not happening

* Market forces in the long run will be more powerful than the Thai government

Though agricultural subsidies are the norm in many developing and developed countries, the Thai example is unique as it totally ignores the competitive environment and no long-term strategy can bee seen behind the pledging scheme.

The European Union (EU), for example, is spending around 50 billion euros ($67.5 billion) annually on agricultural subsidies, aids and rural development in the union in line with its Common Agricultural Policy. However, this policy is being reformed almost every year and adapted to market conditions to reduce intervention mechanisms and make the agricultural sector of the bloc competitive in the long run.

There are quotas for certain crops and products. If a country exceeds a set quote, farmers have to pay a penalty. This just happened with milk: Five EU member states – Austria, Germany, Denmark, Poland and Cyprus – exceeded their milk quotas for deliveries in 2012/2013, and farmers must therefore pay penalties totaling roughly 46 million euros ($62 million) for a surplus production of roughly 163,700 tonnes of milk.

The dairy quota system was introduced in the 1980s in order to address problems of surplus production. Where a member state exceeds its national quota, a surplus levy of 27.83 euros ($37.60) per 100 kilogramme is payable in the member state concerned, paid by the producers in proportion to their contribution to the overrun during the quota year.

This system, which will eventually run out in 2015, prepares farmers for real market conditions, avoids a slump in the milk price, allows to rein in subsidies, to reduce direct payments to farmers and to transfer the money to the Rural Development Fund, which focuses on revitalising rural areas in other ways, addresses issues such as climate change, renewable energy, biodiversity and water management, and aims at improving the competitiveness of farm, forest and agri-food businesses, helping protect the natural environment, supporting rural economies and assisting quality of life in rural areas.

So, Thailand, would this probably be a smarter solution to bring the rice sector in order again and, at the same time, keep your farmers happy?

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Reading Time: 3 minutes

Thailand has just prolonged its populist policy of buying rice from farmers at up to more than 50 per cent above the world market price for the third year in a row, deliberately facing $8.7 billion in losses for the upcoming harvest season alone. Over the past two seasons, the rice subsidy scheme reportedly cost up to $16 billion, but no official figures exist as the issue is a treated like a state secret.

Reading Time: 3 minutes

rice subsidiesThailand has just prolonged its populist policy of buying rice from farmers at up to more than 50 per cent above the world market price for the third year in a row, deliberately facing $8.7 billion in losses for the upcoming harvest season alone. Over the past two seasons, the rice subsidy scheme reportedly cost up to $16 billion, but no official figures exist as the issue is a treated like a state secret.

The sole purpose of the big waste of taxpayers’ money is to keep voters, among whom are millions of farmers from the north and northeast, loyal to the Pheu Thai-led government under Yingluck Shinawatra by “improving their income”.

No matter that

* Thailand lost its position as the world’s leading rice exporter which it undisputedly held for three decades due to the now overpriced rice

* The government is sitting on 17 million tonnes of rice which is partly rotting, and warehouse storage bills are huge

* The enormous amount of money to disperse is a feed through for corrupt officials, wholesalers and traders

* Rice has become a smuggling good with truckloads of rice brought in from neighbouring countries and sold for a higher price in Thailand

* The income situation and social security of the farmers has not really improved because prices of food, transport and agricultural tools have risen significantly in the past and rural development is not happening

* Market forces in the long run will be more powerful than the Thai government

Though agricultural subsidies are the norm in many developing and developed countries, the Thai example is unique as it totally ignores the competitive environment and no long-term strategy can bee seen behind the pledging scheme.

The European Union (EU), for example, is spending around 50 billion euros ($67.5 billion) annually on agricultural subsidies, aids and rural development in the union in line with its Common Agricultural Policy. However, this policy is being reformed almost every year and adapted to market conditions to reduce intervention mechanisms and make the agricultural sector of the bloc competitive in the long run.

There are quotas for certain crops and products. If a country exceeds a set quote, farmers have to pay a penalty. This just happened with milk: Five EU member states – Austria, Germany, Denmark, Poland and Cyprus – exceeded their milk quotas for deliveries in 2012/2013, and farmers must therefore pay penalties totaling roughly 46 million euros ($62 million) for a surplus production of roughly 163,700 tonnes of milk.

The dairy quota system was introduced in the 1980s in order to address problems of surplus production. Where a member state exceeds its national quota, a surplus levy of 27.83 euros ($37.60) per 100 kilogramme is payable in the member state concerned, paid by the producers in proportion to their contribution to the overrun during the quota year.

This system, which will eventually run out in 2015, prepares farmers for real market conditions, avoids a slump in the milk price, allows to rein in subsidies, to reduce direct payments to farmers and to transfer the money to the Rural Development Fund, which focuses on revitalising rural areas in other ways, addresses issues such as climate change, renewable energy, biodiversity and water management, and aims at improving the competitiveness of farm, forest and agri-food businesses, helping protect the natural environment, supporting rural economies and assisting quality of life in rural areas.

So, Thailand, would this probably be a smarter solution to bring the rice sector in order again and, at the same time, keep your farmers happy?

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