Breaking the vicious rice-subsidy cycle

The government has set aside a budget of more than Bt60 billion for measures aimed at curbing market supply and stabilising rice prices. The move came after a decline in the prices of the grain, which the government initially blamed on perceived collusion between politicians and rice millers.
With all the fuss surrounding the issue of tumbling rice prices, citizens might wonder why Thailand continues to subsidise the price more than three decades after the first such support programme was introduced by the government of Prem Tinsulanonda. Trillions in taxpayers’ money has been spent in the ensuing 35 years to help prop up the price of rice, which seems to be in a perennial state of oversupply. 
Thailand now produces 25 million tonnes of rice annually and the population consumes between eight and nine tonnes a year. But consumption keeps declining as more and more Thais turn to other food grains, chiefly wheat. The country thus faces a surplus rice supply exceeding 15 million tonnes each year. Of that, about 10 million tonnes is earmarked for export, maintaining Thailand’s status as one of the world’s rice-exporting giants.
The obvious ideal is to grow enough rice to meet domestic demand and avoid excessive oversupply, and thus crucially save all the money spent on subsidising rice prices. Subsidies only encourage farmers to grow more rice than we need, since they’re assured that the government will shore up the price whenever its market value decreases. If there is no attempt to curb supply, this vicious cycle of subsidies, oversupply and price crises will continue endlessly, and billions more of taxpayer’s money will have to be sacrificed.
What’s standing in the way of common sense is the insistence among some politicians and businesspeople that rice subsidies continue – the greedy rationale being that they’re the 
 ones who benefit most. Corrupt politicians collude with unscrupulous rice millers and exporters to make money from subsidy scheme.
A key factor in any effort to change the system is politicians’ reliance on the farming community as a voter support base. Thailand has an estimated 3.7 million farming households – more than 15 million people, almost a quarter of the population. Earning their support at election time has always been pivotal in Thai politics, and candidates and their parties have never been able to kick the habit of buying farmers’ votes, if not through cash handouts on the campaign trail then through generous rice subsidies. The latter is, of course, always done at the expense of other taxpayers.
It would be better if rice farmers weren’t so quick to sell their freshly harvested paddy to millers or middlemen. In doing so they are playing along with an unstable system and helping to create an oversupply, which in turn depresses market value. They should rather insist on working with local agricultural cooperatives or other community enterprises to get their rice milled so that the husked rice can be sold directly to consumers. And in the meantime the farmers need to reduce the pricing risk they face annually by diversifying in terms of the crops they |grow.
It is encouraging to see farmers now being broadly encouraged by the populace to sell their rice directly to consumers. The notion is likely impractical for large quantities, but it will hopefully get the message across to more growers and consumers that it’s worth promoting and supporting direct sales. The farmers get fairer prices for their crop and the consumers can buy rice more cheaply. 
Producers should next add extra value by offering processed rice products, backed initially with technical assistance from state agencies.