Government Failure: Thai Rice Buffer Stock
Tuesday, July 14, 2009
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Over the last twenty to thirty years, buffer stock schemes introduced by national governments or collectives of producers have been riddled with problems. The fiscal costs of buying the storing products purchased at guaranteed minimum prices have come to haunt many governments including those in the EU who paid billions of euros for inefficient and inequitable farm support policies. Here is another example of a misguided price support scheme - the Thai rice mortgage scheme introduced a couple of years ago when global food price inflation was at its most severe.
According to this excellent piece from the BBC, “The Thai government is now sitting on a vast stockpile of rice that it bought at peak prices. As the country is such a big supplier to the world market, it cannot sell all this rice without depressing prices even further.” And the gains have been unevenly spread….“rich farmers in the central plains are in areas with irrigation, so they can grow something like three crops a year…..poor farmers in the north-east, they don’t have surplus of rice to sell, so they don’t benefit from this programme at all.”
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