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Agriculture in ThailandAgriculture in ThailandPart BPart B

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IV. MarketsIV. Markets

1.1. Factor Markets:Factor Markets:

Land Rights:Land Rights: High tenancy rates in central and High tenancy rates in central and

north (old rice areas), but small rates north (old rice areas), but small rates elsewhereelsewhere

In 2003, total= 24%, central= 44%, In 2003, total= 24%, central= 44%, north= 36%, northeast= 16%, north= 36%, northeast= 16%, south= 5%south= 5%

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IV. MarketsIV. Markets

1.1. Factor Markets:Factor Markets:

Land Rights:Land Rights: Unclear Unclear ownership ofownership of farmers’ land farmers’ land 20% of farmers are “squatters” in 20% of farmers are “squatters” in

forest landforest land

Problems of Problems of no incentive for no incentive for land conservaland conservationtion

No loan collateral, and low No loan collateral, and low productivityproductivity

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IV. MarketsIV. Markets

LaborLaborSeasonal demand and supplySeasonal demand and supplyMore cash-wage labor VS household More cash-wage labor VS household

labor exchangelabor exchangeSupply from the Northeast, but no Supply from the Northeast, but no

year-round surplusyear-round surplusMore labor shortage in recent yearsMore labor shortage in recent years

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IV. MarketsIV. MarketsLaborLabor

More farmers become “professionals” More farmers become “professionals” rather than “casual”rather than “casual”– ““professionals”: new generation, new professionals”: new generation, new

technology coping with market changes technology coping with market changes and labor shortage; households obtaining and labor shortage; households obtaining >60% of income from agri., and heads of >60% of income from agri., and heads of families have no second jobsfamilies have no second jobs– number of “professionals” rising from number of “professionals” rising from

0.94 million HH in 1986 to 1.36 million 0.94 million HH in 1986 to 1.36 million HH in 2004 (20% of total farm HH)HH in 2004 (20% of total farm HH)

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IV. MarketsIV. Markets

CreditCreditTraditional (informal) sources VS Traditional (informal) sources VS

formal sources (Bank of Agriculture formal sources (Bank of Agriculture and Agricultural Cooperatives or and Agricultural Cooperatives or BAAC)BAAC)

Debt problem for small farmersDebt problem for small farmers60% of farming households are 60% of farming households are

indebtedindebtedNot enough long-term creditNot enough long-term credit

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IV. MarketsIV. Markets

2.2. Output Markets:Output Markets: Not much government interventionNot much government intervention, ,

except in riceexcept in rice Arm’s length marketsArm’s length markets through middlemen through middlemen

: efficiently organized, except product qua: efficiently organized, except product qualitylity

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IV. MarketsIV. Markets

2.2. Output Markets:Output Markets: Contract farming: firms contract farmers Contract farming: firms contract farmers

in advance to produce and sell products at in advance to produce and sell products at fixed prices e.g. poultry, pigs, tobacco, fixed prices e.g. poultry, pigs, tobacco, pineapples, vegetablespineapples, vegetables

Contract farming: lower price risk for Contract farming: lower price risk for farmers, quality control, technology farmers, quality control, technology promotionpromotion

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IV. MarketsIV. Markets

2.2. Output Markets:Output Markets: Sugar cane: pre-arranged 70:30 price Sugar cane: pre-arranged 70:30 price

split between growers and sugar millers, split between growers and sugar millers, with negotiated basic farm pricewith negotiated basic farm price

A case of bilateral monopoly, with A case of bilateral monopoly, with political power to get subsidy from govt. political power to get subsidy from govt. and domestic sugar consumersand domestic sugar consumers

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V. PoliciesV. Policies

Land Land Not clear in granting land rights for Not clear in granting land rights for

agriculture: natural forests VS economic agriculture: natural forests VS economic forestsforests

Clashes between officials and farmers over Clashes between officials and farmers over unclear “forest land”unclear “forest land”

Slow land titling for farmersSlow land titling for farmers

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V. PoliciesV. Policies

IrrigationIrrigation 20% of agri. Land is irrigated (VS rainfed)20% of agri. Land is irrigated (VS rainfed) Fail to increase efficiency of existing systems, Fail to increase efficiency of existing systems,

wasteful use of water, and conflict among wasteful use of water, and conflict among different usersdifferent users

Present system based on “unlimited supply”Present system based on “unlimited supply” ““Pricing of water” still politically Pricing of water” still politically

unacceptableunacceptable

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V. PoliciesV. Policies

CreditCredit 3 modes: 3 modes:

– In the past, commercial banks required to In the past, commercial banks required to lend x% of deposits to agri.; but not so lend x% of deposits to agri.; but not so successfulsuccessful

– BAAC, most successful with large impact, BAAC, most successful with large impact, reaching 90% of farm householdsreaching 90% of farm households

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V. PoliciesV. Policies

CreditCredit 3 modes: 3 modes: – mortgage scheme, paddy-pledging scheme: mortgage scheme, paddy-pledging scheme:

farmers pledge their paddy with BAAC at farmers pledge their paddy with BAAC at guaranteed price, and get loans at subsidized guaranteed price, and get loans at subsidized rate; problems of small price impact, rate; problems of small price impact, corruption, and expensive subsidycorruption, and expensive subsidy

– Recent change to “price gaurantee” at Recent change to “price gaurantee” at minimum levels for rice, corn and cassava by minimum levels for rice, corn and cassava by the Apisit governmentthe Apisit government

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V. PoliciesV. Policies

CreditCredit 3 modes: 3 modes: – Past debt deferment program, allowing farmers Past debt deferment program, allowing farmers

to postpone debt repayment for 3 years; to postpone debt repayment for 3 years; problems of financial discipline and benefit to problems of financial discipline and benefit to the not-so-poor farmersthe not-so-poor farmers

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V. PoliciesV. Policies

PricingPricing Border measures on exports & importsBorder measures on exports & imports Heavily-taxed agriculture in the past; a contrHeavily-taxed agriculture in the past; a contr

oversial “rice premium”oversial “rice premium” Agricultural taxes reduced after Agricultural taxes reduced after 19821982 Some protection Some protection from importfrom import for sugar, for sugar,

soybean, soybean, cotton, oil palmcotton, oil palm Ineffective direct price interventionIneffective direct price intervention

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VI. Future DirectionsVI. Future Directions

Three causes of agri. decline since 1980s:Three causes of agri. decline since 1980s:

– Natural decline: agri. share naturally Natural decline: agri. share naturally declines with economic growth; but not declines with economic growth; but not clear why this is always true analyticallyclear why this is always true analytically

– End of land frontier: land surplus ended in End of land frontier: land surplus ended in 1980s1980s

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VI. Future DirectionsVI. Future Directions

Three causes of agri. decline since 1980s:Three causes of agri. decline since 1980s:

– Dutch disease: industrial export boom Dutch disease: industrial export boom causes baht appreciation, adversely causes baht appreciation, adversely affecting agri. exports (But the baht affecting agri. exports (But the baht depreciation after the crisis has invalidated depreciation after the crisis has invalidated this argument? What about the recent baht this argument? What about the recent baht appreciation?)appreciation?)

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VI. Future DirectionsVI. Future Directions

Thai agriculture at a crossroads with no land Thai agriculture at a crossroads with no land surplus and good export marketsurplus and good export market

Absolute decline of agricultural labor, and Absolute decline of agricultural labor, and labor become more scarcelabor become more scarce

Not enough water during dry seasonNot enough water during dry season

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VI. Future DirectionsVI. Future Directions Towards land-intensive, capital-intensive, and Towards land-intensive, capital-intensive, and

less water-intensive horticulture (fruits, less water-intensive horticulture (fruits, vegetables, flowers) and livestockvegetables, flowers) and livestock

Towards safe and organic food crops Towards safe and organic food crops (alternative agriculture)(alternative agriculture)

Different government role is required: away Different government role is required: away from price intervention, towards R&D from price intervention, towards R&D promotion and extensionpromotion and extension

Role of genetically modified organism Role of genetically modified organism (GMO)?(GMO)?

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VII. Recent Issues: Agriculture VII. Recent Issues: Agriculture and the Economic Crisis in 1997and the Economic Crisis in 1997 Thai agriculture was less affected than other Thai agriculture was less affected than other

sectorssectors Agriculture (rural economy) absorbed some Agriculture (rural economy) absorbed some

laid-off workerslaid-off workers Reduced government spending in rural areasReduced government spending in rural areas

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VII. Recent Issues: Agriculture VII. Recent Issues: Agriculture and the Economic Crisis in 1997and the Economic Crisis in 1997 Rural community development efforts Rural community development efforts

strengthenedstrengthened The King’s “sufficiency economy”: produce The King’s “sufficiency economy”: produce

for own consumption and sell the surplus to for own consumption and sell the surplus to reduce risk in world marketreduce risk in world market– Household, community, and national levelsHousehold, community, and national levels– Farm land use: 30/30/30/10 Farm land use: 30/30/30/10 water irrigation + water irrigation +

poultry & aquaculture/ rice/ other cash crops/ poultry & aquaculture/ rice/ other cash crops/ housing & backyard productionhousing & backyard production

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VII. Recent Issues: Agriculture VII. Recent Issues: Agriculture and Thaksin’s Policyand Thaksin’s Policy

Kitchen of the worldKitchen of the world Debt postponement/defermentDebt postponement/deferment Asset capitalizationAsset capitalization One Tambon One ProductOne Tambon One Product Free Trade Agreement with China, Australia, Free Trade Agreement with China, Australia,

NZ and impact on temperate-zone fruits, NZ and impact on temperate-zone fruits, vegetables, and dairy productsvegetables, and dairy products

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VII. Recent Issues: Agriculture VII. Recent Issues: Agriculture and High Oil Prices and High Oil Prices

High oil prices since 2004 High oil prices since 2004 biofuels become biofuels become a more competitive substitutea more competitive substitute

Ethanol from sugar (molasses), maize, and Ethanol from sugar (molasses), maize, and cassavacassava

Biodiesel from oil palm, coconut, jathropa, Biodiesel from oil palm, coconut, jathropa, and algaeand algae

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VII. Recent Issues: VII. Recent Issues: Agriculture and High Oil Agriculture and High Oil

Prices Prices Agricultural wastes can be used as fuels in Agricultural wastes can be used as fuels in producing electricity, e.g. sugar cane waste, producing electricity, e.g. sugar cane waste, paddy husk, cassava roots, wood waste, as paddy husk, cassava roots, wood waste, as well as bio-gas from animal wastewell as bio-gas from animal waste