Lowest Hom Mali prices in 10 years spur rice barn scheme to encourage rice farmers to store rice & not rush releasing newly harvested rice on market.
AGRICULTURE
Rice barns: New rice pledging scheme?
28/10/2016
Phusadee Arunmas
Domestic prices of Thai Hom Mali paddy fell yesterday to only 9,500 baht per tonne, the lowest in 10 years.
The government is being urged to speed up the implementation of measures to curb a sharp fall in price of Thai Hom Mali rice.
A rice pledging scheme for farmers with their own rice barns (rice storage facilities) is being considered this year.
WHY RICE BARNS?
A rice barn scheme would encourage rice farmers to store their rice for a period of time and not to rush in releasing their new harvested rice to the market.
Why is this a good thing?
As the supply of a good increases, the price of the good falls, according to the basic law of supply and demand in economics (see here).
At harvest time, the price of rice is typically lower because so much rice is on the market at one time (the market is flooded with rice).
Rice sellers can usually fetch a higher price if they are able to store rice and wait for an ideal time to sell, as rice millers and middlemen are able to do.
Of course there are issues here, smaller farmers may lack the funds and financing to build rice barns.
Even if smaller farmers have rice barns they will still need temporary financing to store the rice without selling it for a period of time (bridge financing, holdover financing). The small farmers will have incurred debts in growing the rice that need to be paid off now.
[Note also that such measures only counteract short-term price fluctuations during the year. If the fall in prices is a long-term trend that stretches over many years, then deeper adjustments obviously must be made so that farmers are not producing rice at a cost above the market price.]