Thai Junta’s Populism Flip-Flop Too Late for Ailing Farmers

(Bloomberg) -- Each slash of Chawieng Kaewkam’s sickle through his rice stalks is a reminder of how tough life has become for millions of Thai farmers who have watched grain prices tumble near the lowest point in a decade.

Chawieng can no longer afford to rent a machine to harvest his three acres of paddy in northeastern Ubon Ratchathani province, and must cut everything by hand with the help of his wife and daughter. The current market price of 8,039 baht ($227) a ton for fragrant rice is about 60 percent below the guaranteed rate offered by former Prime Minister Yingluck Shinawatra, whose government was ousted in a 2014 coup.

“At this price, we can’t survive,” the 56-year-old said, adding that even side jobs he used to take in the local construction industry have dried up. “I feel hopeless and depressed," he said. “If things remain bad, I might have to sell land to pay for debts.”

Farmers like Chawieng are emblematic of wider economic woes in northeast Thailand that have the nation’s military rulers anxious as they weigh holding an election next year. That now has the junta embracing similar price support for farmers that they vilified when they seized power.

Over the past decade, Thailand’s generals repeatedly struggled to convince voters in the poorer and more populous northeast region to abandon support for allies of Yingluck and her brother Thaksin Shinawatra, who have won the past five elections dating back to 2001.

Rice prices are a big reason for that. While agriculture accounts for about 8 percent of Thailand’s economy, rice farming employs 16 million people -- roughly a quarter of the population. When prices fall it affects the wider economy, depressing purchases of everything from property to motorcycles to consumer goods.

“Finding a quick and easy solution for rice farmers has become a proxy electoral campaign issue even though a date has not been set for a poll,” said Ambika Ahuja, an analyst with Eurasia Group. “We have the government, political parties, and activist groups reaching out to farmers and providing ad hoc solutions. But these solutions are broadly similar to the extent that they are one form of subsidy or another.”

$1 Billion Bill

Yingluck’s government offered to buy paddy from farmers at levels that were sometimes 50 percent more than market prices, leading to outlays of about $25 billion over more than two years. That led to a 20 percent jump in rice production and a record stockpile of 17.8 million metric tons stored in government-run warehouses.

Junta leader Prayuth Chan-ocha’s administration called the policy unsustainable, and struggled to sell off the stored rice. It also brought malfeasance charges against Yingluck, and last month slapped her with a $1 billion bill -- even though it hasn’t provided an estimate for total losses from the program.

A few weeks later, Prayuth did an about-face and announced his own plan to spend 78 billion baht ($2.2 billion) shoring up prices and subsidizing production costs. Under the policy, the government would offer farmers 90 percent of the market price plus storage fees if they hold the rice for five months. Afterward they could either sell at market rates and pay back the loan, or surrender the harvest to the government.

In another populist move, the military government on Tuesday announced a one-time cash handout of as much as 3,000 baht to help 5.4 million low-income earners.

In Ubon Ratchatani, a province bordering Cambodia and Laos that has reliably backed the Shinawatra family in elections, farmers say the military’s rice program is better than nothing but ultimately too little, too late. They say the new system is too complicated, takes too long to join and requires them to take on the risk of storing their rice.

‘We Want Yingluck’

“During Yingluck’s government, prices were good and farmer’s lives were much better,” said Kangwan Bunprachom, 40, after he sold three tons of rice at a mill rather than save it for the government program. “What I earn from selling rice now isn’t enough to pay debts. When I talk with farmer friends we grieve about the price slump and we want Yingluck to lead the government.”

The rice-price slump has spawned a public-relations battle between the generals and ousted politicians who are banned from campaigning as part of wider restrictions on speech and assembly. Yingluck has bought rice from northeastern farmers and sold it at Bangkok shopping malls, while the military has sent soldiers to the countryside to help some farmers harvest rice -- with photographers and promotional banners in tow.

Since seizing power, junta leader Prayuth has repeatedly warned that farmers cannot rely on government price subsidies, and has encouraged moves to switch to other crops and improve overall quality. It is a plan Prayuth acknowledged could take 10 to 20 years to implement.

Distorting Prices

“Farmers need to change their methods,” Prayuth told reporters on Nov. 18. “They can’t just wait for a new government to sell rice at a satisfactory level and avoid thinking about the burden that will fall on others.”

In Ubon Ratchathani, that argument has some support. Boohieng Rungrachkanont said only one of his three rice mills will turn a profit this year. He blames the falling prices on the huge stockpile amassed under Yingluck’s program, and says the current government’s plan to avoid setting a minimum price “helps farmers without distorting market prices.”

Outside of the agricultural sector, the price drop is also having an impact. Sales have dropped 6 percent this year at Paiboon Jongsuwat’s 165 7-Eleven stores across four northeastern provinces. Paiboon attributes the drop to the fall in crop prices, and he doesn’t see this government coming up with a solution.

“I’m worried that if the rice price remains low, the situation next year could be worse," said Paiboon, the managing director of Yingyong Minimart Ltd. “One of the ways to help stimulate the economy is to make the rice price at a good level, helping farmers to earn some profits. Then they have money to spend and money will circulate in the system."

Also feeling the impact has been Kittisak Kiatsuranon, CEO of Kitcharoenthaiubon, a distributor of motorcycles with 27 branches in two northeastern provinces. His company’s income has been cut in half over the past five years, largely due to plummeting sales of small-sized motorcycles popular with farmers. Some 20 percent of 10,000 customers who financed their purchases are now behind on payments.

“Farmers don’t have money to buy,” he said. “Some don’t even make payments and we have to take the motorcycles back. It has become more difficult asking them to pay.”

For Kangwan, he says he must accept such hardship as the life of a rice farmer.

“Even though I record a loss most of the time, I still have to do it because I don’t have another job,” Kangwan said. “If I don’t do it, I don’t have anything to eat.”

To contact the reporters on this story: Chris Blake in Bangkok at cblake28@bloomberg.net, Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net. To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net, Jason Koutsoukis