Rice insurance prices in sync with global forces The Bank for Agriculture and Agricultural Co-operatives will set aside 60 billion baht in credit to help prop up rice prices during the upcoming harvest.
Finance Minister Korn Chatikavanij said the loan facilities next month would support the government's broader intention to shift state farm policies toward a price-insurance programme.
One-third of the 60 billion baht in credit will be allocated to local rice mills as working capital to purchase paddy from local farmers. Another 20 billion baht will be offered directly to farmers as loans, with the remaining 20 billion going to the Public Warehouse Organisation to finance the purchase of up to 2 million tonnes of rice during the upcoming harvest.
Authorities earlier this month inaugurated a crop insurance programme starting with corn, insisting that coverage will eventually be expanded to all locally grown major agricultural commodities.
The insurance scheme, which has a budget of 43 billion baht this year from the government's 1.45-trillion-baht Thai Khem Kaeng infrastructure programme, will compensate farmers if market prices fall below previously established benchmark prices.
In the initial stages, the insurance programme is expected to cost 18 billion baht to cover corn and tapioca farmers, and 25 billion for rice farmers.
The programme will replace the long-established subsidy policy where the state-owned BAAC offers farmers loans pledged against their upcoming harvest.
The BAAC has incurred liabilities of well over 100 billion baht in recent years as pledging prices are typically set well above actual market prices, giving farmers an incentive to sell their produce to the state.
The government says the insurance programme will incur significantly less cost for taxpayers, as the state will pay only the difference in benchmark prices and market prices to farmers, rather than buy produce outright. Authorities also expect to save significant amounts by eliminating storage and logistics expenses incurred by state agencies under the previous subsidy programme.
Benchmark prices would be set based on global market forces, he said.
"The benchmark price that will be set by the government under the insurance programme will be a price that the government can expect to receive when selling into the global market," he said.
Mr Korn said another advantage of the insurance programme was its capacity to directly reach greater numbers of farmers when compared with previous crop-pledging schemes.
A total of 390,000 corn farmers have registered for the insurance programme, compared with only 80,000 beneficiaries of the most recent pledging programme.
An estimated 3 million rice, corn and tapioca farmers are expected to participate in the insurance programme this year, representing nearly half of the country's farm households.
Mr Korn said benchmark prices for rice paddy would be based on rice with moisture content of no more than 15%.
The Thai Rice Exporters Association yesterday set prices for 100% grade-B white rice at $525 a metric tonne, unchanged from last week.
The price of 25% white rice was set at $416 a tonne, down from $414 last week.
Saturday, October 31, 2009
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