Three years since the Thai government instituted a controversial rice subsidy policy, Thai rice exports are expected to regain a top spot in the world – reaching number two, just behind India.

Thailand was the world’s number one exporter of rice until 2011 when the government began paying rural farmers more for their rice than the market price in an effort to boost rural income. The government would purchase the rice from farmers at 50 percent the market rate and instead of exporting it, the majority was stockpiled in warehouses. The hope was that by withholding the rice from the global market, prices and local farmers’ incomes would increase.

What resulted however was other countries began to fill the gap as Thailand withheld their exports. Vietnam and India knocked Thailand from the top exporter position, costing the country $9.2 billion.

The subsidy expired this past February, leaving the country with 10-15 million metric tons of rice (two years’ worth of exports) left over. Much of that rice was held in storage and is now rotting or has been stolen; leaving Thai rice prices 30 percent lower than before the subsidy.

Thailand’s white rice price is currently quoted at about $380 to $390 per ton, which is around $25 and $40 less than what is offered by Vietnam and India. However, other factors such as weather could affect production. The El Nino effect, which is expected to be a factor later this year, could cause less rainfall during India’s monsoon season, resulting in a loss in rice output for India and giving Thailand the boost it needs to reclaim its former top spot.

Thailand’s population is 65 percent rural and 35 percent urban meaning that rice cultivation plays a major factor in the livelihood of much of the population. While Thailand is also grappling with a recent coup, making up for the losses from the past couple of years is a major priority as the new government works to establish legitimacy in the countryside.

General Prayuth recently ordered state-owned farm banks to disburse $2.7 billion owed to 800,000 farmers who were left unpaid for months for their rice. The government has also pledged to help with production costs including fertilizer and seeds – although it will avoid giving cash handouts. This distribution means that the government will absorb the losses from the old rice as a way to create stability and get the country’s rice production back on stable food.

While government relations may remain precarious over the coming months, it seems that Thailand will continue to develop and focus on providing its population the ability to be on top in rice exporting.

— Andrea Blinkhorn 

Sources: Which Country, FAO 1, FAO 2, World Bank, The Wall Street Journal
Photo: Flickr