Associations seek protection for farmers from steep price and demand fluctuations.

03/11/2008 (The Nation, Business) - Concerned agricultural assoฌciations have called on the government to draw up a "national agenda" for the farm sector to shield onethird of the country's population from fluctuating prices and unpredictable factors to achieve sustainable development.

Participants from Thai Rubber Association, Thai Tapioca Trade Association, Thai Oil Palm and Palm Oil Association, and Charoen Pokphand group, the country's biggest agroconglomerate have raised the same issues, saying it is an urgent task for the government.

They shared the same views in a recent seminar entitled "Global economic crisis: the future of Thai agricultural business" organised by Krungthep Turakij last week.

They said the governฌment should treat the farm sector as a priority policy by drawing up a "national agenda".

The plan should focus on fixing important crops, zoning growing areas, yield and technology developฌment, storage and quality improvement. The agenda will allow farmers to learn more about market demand and price in the future to lay out their farmฌing plans.

The lack of supporting information will lead farmers to face losses. However, the farm sector is exposed to the vagaries of nature, which is an unpredictable factor. As a result, advanced technology to upgrade farm crop quality is needฌed as well as big silos to hold stock when faced with a surplus.

Commodity goods enjoyed rising prices during the first half of this year. However, the conฌtinued negative mood in financial sectors since the US subprime mortฌgage troubles, the bankruptcy of investment banks and falling oil price since the third quarter, have forced prices to drop.

With the uncertain policy, farmฌers cannot learn more about price and demand in the future.

Chen Wong, president of Thai Tapioca Trade Association, said casฌsava price has dropped since the US credit crunch in September. In parฌticular, the price has dropped everyฌday in October in accordance with oil prices.

Cassava price is quoted at Bt1.8 per kilogramme compared with the peak price of Bt2.70 in February this year. Total production is forecast to reach 29 milฌlion tonnes, up 15 per cent as yield per rai increased by 7 per cent.

The Cabinet last week approved a budget of Bt4.75 billion to guarantee the cassava price at Bt1.8 per kilogramme. However, growers want a guaranteed price of Bt2.50 per kiloฌgramme.

"It is possible to guarฌantee the high price. The Bt1.80 per kg is a reasonฌable price as we have to look forward to other facฌtors such as production in both European Union and nonEU member as well as consumption in China," Chen said.

He said grain prices have reached the bottom and tended to be steady. The prices of key grains have dropped to a record low, for instance wheat dropped by 60 per cent and maize by 50 per cent.

However, Thailand has to wait and see the outcome of the US genฌeral election and whether there will be any new policy to drive the counฌtry's economy. In addition, the EU's grains plantation season will start next month.

Chen stressed that the governฌment should have a clear policy on ethanol as tapioca is a raw material to support manufacturing. At presฌent, cassava price is tied closely to the government's ethanol policy.

Wiwan Boonyaprateeprat, secฌretarygeneral of Thai Oil Palm and Palm Oil Association, said palm oil is directly hit by the world crisis. Malaysia and Indonesia, which account for 80 per cent of world supplies, have had to reduce their export prices. In addition, Malaysia faced defaults in its export orders to China and India.

As a result, both countries have handled exceedingly high stockฌpiles.

Thai crude palm oil hit the record high of Bt44 per kg, and farmers enjoyed the palm fruit price at Bt6 per kg in March this year. However, the price dropped to Bt3.8 and to Bt2.6 per kg now. In addition, the industry is facing a crude oil overฌsupply problem.

Total crude oil production reached 1.4 million tonnes this year, which exceeded demand by 300,000 tonnes. Of the total proฌduction, 70 per cent targeted domestic consumption and the rest for biodiesel production.

Wiwan said the serious problem came after the government allowed import of 30,000 tonnes early this year to prevent shortage later in the year. However, the production is higher than the projection.

She said the government should implement policy that encourages people to use more biodiesel both B2 and B5. Despite distribution in the market, consumers are relucฌtant to fill them. Particularly, B5 does not market well as consumers feel it will reduce their car's engine power.

"The government should conฌcentrate on designing good promoฌtion campaigns to encourage biodiesel consumption," she said.

Luckchai Kittipol, president of Thai Rubber Association, said rubฌber is a popular commodity that hedge funds prefer to buy. However, the collapse of Lehman Brothers had forced them to sell as car sales dropped - an important factor in bringing down rubber prices.

After September 26, the world rubber price dramatically dropped as China, the biggest consumer, stopped purchasing for seven days due to its long holiday to celebrate National Day. Then the price hit the floor on the next two days leading to market panic.

Thai rubber price hit the bottom at Bt48 per kg on October 17. The price, however, has adjusted to Bt5060 per kg now.

Thailand, Malaysia and Indonesia, as the world's biggest rubber producers, have agreed to reduce their production in line with the drop in car demand . They also cooperated in cutting down rubber trees, which are older than 20 years ,by 169,000 hectares or about 3.56 million rais. Production of these three countries account for 80 per cent of world rubber.

In addition, they will reduce the period to tap rubber trees from three to two days. It aimed to reduce supฌply into the market.

"World rubber trading has reflected its real price which domesฌtically should not trade over Bt100 per kilogramme," Luckchai said, adding that every one baht increase will generate an additional Bt3 bilฌlion foreign exchange income.

Montri Congtrakultien, chief executive officer and president of crop integration business group of Charoen Pokphand Group, said Thailand should concentrate on increasing production of farm goods by introducing hybrid strains. It will help farmers cope with rising proฌduction costs.

Thailand is the world's biggest exporter of many farm crops such as rice, rubber and shrimp.

However, yield per rai and production costs are also at high levels.

For example, Thai rice yields an average of 800 kg per rai compared with over 1,000 kg in Vietnam and China.

"We cannot spend a huge budgฌet to subsidise the farm sector like other developed countries so we have to have a proper plan, with focus on zoning food crops and fuel crops," Montri pointed.

Apichart Jongsakul, secretarygeneral of Office of Agricultural Economics, said the office will launch a special service via mobile phone. It will allow farmers to have more information on marketing in terms of crop prices and marketing trends.

The service will encourage farmฌers to have better farming plans and forecast prices in the future to reduce their risk.