The global rice market has avoided the turmoil that has occurred in other markets over the last two years as production has remained large and carryover supplies have grown over the past four years. Rice price support policies of the new government of Thailand, the largest exporter in recent years, is reducing exports for the current marketing year and causing redirection of some trade. Thailand has chosen a farm policy that is inconsistent with its position as a leader in rice trade.

The government of the Puea Thai party Prime Minister Yinglak Chinnawat took office in August of 2011 after pledging during the election campaign to reinstate a previous rice Paddy Pledging Program with intervention prices 30-50 percent higher than rice market prices. It replaced a Price Insurance Program that had operated for two years. The government had expected the program to attract 6-7 मिलियन मीट्रिक टन (एमएमटी) on a milled rice basis out of a 20.5 MMT milled crop for the 2011-12 marketing year. Despite crop losses dues to severe late-summer and fall flooding, total rice production in Thailand is about unchanged from recent years. The U.S. Agricultural Attach in Thailand reported the government now estimates the pledging program will account for 4.6 से एमएमटी 14.0 MMT of milled rice equivalent production from the main rice crop, about two-thirds of what had been expected to enter the program. The pledging program will be continued for the smaller off-season rice crop harvested from March 1 through June 30.

The government is also holding about 2.0 MMT of old crop intervention stocks. This plus the pledging program stocks from the main crop of 4.6 MMT would push government controlled stocks to at least 6.6 MMT. The off-season crop will add to those supplies. According to the Foreign Agricultural Service (एफएएस) यूएसडीए की, end of the marketing year stocks will likely be near 8.0 MMT milled rice equivalent, up from the 5-6 MMT range for the last three years and the largest ever.

In the last four marketing years according to estimates by the FAS, total global exports have been 30-34 MMT per year milled rice equivalent with Thailand moving an average of 9.5 एमएमटी, समेत 10.5 MMT last year. This year Thailand is expected to export about 7.0 एमएमटी, with some suggesting as low as 6.0 MMT. If exports are 7.0 MMT or less that would be the lowest for Thailand since 1999/2000.

Vietnam has been the second largest exporter at an average of 6.1 एमएमटी, with last year at 7.0 MMT. Vietnams exports are expected to be near 7.0 MMT again this year. India has been liberalizing its rice trade and is expected to be the third largest exporter in 2011/12 पर 4.5 MMT after exporting 3.8 MMT last year and averaging 2.1 MMT the two years before that. Pakistan is expected to the fourth largest exporter at 3.8 एमएमटी, near the upper end of its range in recent years. अमेरिका. will be the fifth largest with exports just over 3.0 एमएमटी, a little below its recent yearly average. India, Pakistan and other countries are filling a portion of the gap in exports and overall global trade will be down by 9.0 percent from a year earlier.

Speculation has begun about what the Thai government will do next. High intervention prices will encourage continued large production unless unfavorable weather occurs. There is no indication the government wants to continue to hold larger and larger stocks. Requiring farmers to cut production in return for participating in government price intervention programs is generally not viewed as a viable option. Selling government stocks to other governments at less than market prices will be seen as a market intervention that would likely violate WTO trade subsidy rules. The government has created a situation that has no positive alternatives. Recent market prices indicate that Indian and Vietnamese products continue to be $70-90 per metric ton cheaper than comparable Thai products.

The events and outcomes in Thailand are not unique or particularly surprising. Promising in a political campaign to raise market intervention prices for a commodity is common. If the commodity is export dependent, buyers will search for alternatives and avoid the higher priced products to the extent they can. The heavy summer and fall rains provided an additional necessity to look elsewhere as transportation to the ports was curtailed. An alternative supplier like India can easily under sell the Thai government set price.

Consumers in rice importing countries are left with higher prices and lower supplies. The 100 MMT of global stocks anticipated to be held at the end of the marketing year are deceiving. China will hold 44 MMT of stocks, but exports less than one MMT per year. These stocks are held for internal food security reasons. India will hold about 24 MMT. India is more involved in trade, but also holds stock mainly for internal food security issues. The two together will hold almost 70 percent of world stocks. The other major exporters beyond Thailand carry only minor stocks and cannot contribute significantly to additional export supplies.

Thailands market interventions are coming at an opportune time for global markets. Supplies are available from other sources, and firm market prices are providing incentives to make additional supplies available in future years. Importing countries are learning again the need to diversify and not rely on governments currying favor with political constituencies.

The outcome of these events is certain. The Thai government will at some point lower intervention prices and face high budget costs for disposing of unwanted government stocks, probably only for export in 2013. If one or more exporters has a short crop, that would make moving the stocks easier to achieve. If crop yields are average or above the market situation will be burdensome.

This is one of those policy situations where all participants can learn again about the difficulties of government intervention in market activities. There are ways to support a market-driven, export-dependent agriculture that are less harmful to trade. The U.S. and EU learned the lessons through repeated policy failures over the last 60 years. The Price Insurance Program allowed market forces to set prices and the government to provide support when market prices were low. Thai rice remained competitive with rice from Vietnam, India and other competing exporters. The Paddy Pledging Program sets government mandated prices first and forces all the other facets of market exchange to adjust to those prices.

रॉस Korves व्यापार और प्रौद्योगिकी के बारे में सत्य के साथ एक आर्थिक नीति विश्लेषक है