Economics Case Study: The Effects of Rice Subsidies in Thailand

This case study examines the impact of rice subsidies in Thailand, focusing on the rice price scheme and its outcomes. It explores how rice farming, the primary source of income for many Thai farmers, has been affected by government policies and market fluctuations. The paper discusses the evolution of rice subsidies, from post-war export requirements to price support mechanisms aimed at boosting farmer income and exports. It analyzes the political dimensions of farming, the government's role in influencing agricultural practices, and the advantages and disadvantages of price support. Furthermore, the study considers alternative farming methods that could improve efficiency and sustainability, along with the interconnectedness of government policies and farmer livelihoods, highlighting how decisions made by one can significantly impact the other. The study concludes by emphasizing the importance of government support and the adoption of innovative farming techniques to ensure the long-term viability of the rice industry and the economic well-being of Thai farmers.

The Effects of Rice
Subsidies in Thailand
Name
Sarah AlBrahim

Executive Summary
The main aim of the paper is to discuss rice subsidies in Thailand. It was found that
rice was the most important crop in Thailand from which the farmers made their livelihoods.
However, in the paper it is quite evident that rice farming went through a series of ups and
downs in price change. The significant findings derived during this paper was that the rice
price scheme that was introduced in Thailand helped the farmers to gain a profit. Soon
government policies improved the state of the farmers. Later poor production of rice all over
the country helped the farmers to sell their rice at a higher rate thereby increasing the GDP of
the country as a whole. Furthermore, the paper also shows how the government and the
farmers are interrelated to each other and how the decision of one can affect the other. The
paper discusses how the government policies can improve the state of the workers and how a
wrong policy can lead to bad consequences that damage the overall economy in the long-
term. The pros and cons of the price support has been discussed in detail where advantages
and disadvantages of price rise has been enlisted. Lastly, the alternative methods for rice
farmers have been discussed that will help them to produce rice using different techniques.
The various techniques introduced for farming will help the rice farmers to grow their rice at
a speedy rate without facing much difficulty. Government measures help the farmers to rise
up and acquire different modes of technology. Thus, it is clear that farmers should be
supported and protected with government laws and new methods of farming.
.

Rice Price Scheme
Rice was the most important crop that was grown in Thailand as it provided income in
agriculture. The country was the largest exporter of rice beside India and Vietnam. In this
section, various price schemes for rice and the motives behind it will be discussed.
Thailand was ordered to export 1.5million tons of rice for free after the second world
war as it had supported Japan in the war against the west; at this point, the export of rice
began in Thailand. In 2006 the government introduced the price scheme where farmers
received a price lower than the market price that was prevailing in the world for selling rice
to the government. The central motive behind this decision was to encourage exports as well
as improve the well-being of the farmer by ensuring a guaranteed buyer for them. However,
between 2007-2008 the price of rice shot up to 198 percent. It came as a shock for the people.
The reason behind the price rise was slow production, and the price of chemical fertilizers
had increased due to an increase in the amount of oil. Further problems arose when the
exporters of rice declared that they would store rice for the consumptions of the locals rather
than export it to other countries. This step ensured to keep the price of rice affordable for
their citizens. Thailand, on the other hand, did not resist the export of rice. The framers
planned to store most of the rice and then sell it at a higher price to other countries. The
government too supported their farmers and provided loans for paddy fields where the
farmers could store their crops and sell it later. The motive behind this rice price scheme was
to increase the income of farmers and support the price scheme 1.
The outcome of this decision was that the supply of rice that was produced
domestically had increased as the farmers were now allowed to export their rice at a higher
price to the other countries. The farmers could now make more profit and increase the
production capacity for upcoming seasons along with that they could also improve their
infrastructure. On the other hand, the export quota countries drastically reduced the profit and
capability of the production of their farmers.
1 French, J., 2016. Effects of Rice Subsidy in Thailand. North American Case Research Journal, 36(2).

Farming a Political Issue
Farming has always been a political issue as it is considered to be the backbone of the
nation. The GDP of a country depends entirely on agriculture, and therefore, it is always the
focus of government support. The government supports farmers against price fluctuations and
revenues. It also tries to subsidize its conservation methods, marketing, insurance coverage,
research as well as export sales. Government policies affect framing and agriculture. This is
what happened in Thailand, where the export of rice decreased as the farmers sold rice at a
higher price to the government domestically. The government is also responsible for
increasing and reducing tariffs. Every decision taken by the government affects the farmers
and their production too. For instance, the production of rubber in Thailand was met with a
drastic drop in the world prices due to which the farmers protested. Therefore, the
government agreed on low tariffs with China, India and New Zealand to increase the export
of rubber and offer incentives to replace trees that were three decades old to increase the
output. The government also supported the decision of the farmers to make ethanol from
sugar as an alternative to fuel cars in Thailand that would reduce pollution. This would also
help the country to develop and rise over others. Therefore, farming is proportional to politics
as the country is benefitted and affected by it. The government supports the farming policies
and decisions to ensure stability and betterment.
There are advantages as well as disadvantages of price support. The market price of a
product changes drastically with time. Flood, shortage of water, expensive GMO seeds,
fertilisers are challenges faced by the farmers. The price support system of 2011 in Thailand
was initiated as the government thought that they would regulate the price of rising over the
world. The government was able to increase the amount of rice by restricting its export to the
global market that benefitted the country as well as the framers. On the other hand, the profit
of the farmers in other countries was decreased. Thus, price support reduces the price for the
consumers of that country, and farmers are provided subsidies that can benefit the
environment. However, it can affect the people of other countries and lead to low supply
where demand will increase.
Alternative methods for rice farmers
Rice was a crop that required a lot of water compared to other plants in Thailand. As
the farmers were given subsidies, they could now extend their framing fields beyond the
irrigation zones. Thailand always faced the problem of shortage of water; therefore, the
farmer had to compete for the limited supply of water that was available but was increasingly

becoming polluted. The government thought of an alternative for the rice farmers and
introduced a policy that would lead to an increase in the marginal cost.The user had to pay a
higher per-unit price when they reached higher usage. The rice farmers in Thailand can use
the method of laser leveling of fields, along with alternative irrigation, as well as drying
methods. The farmers can also use direct seeding as it is an alternative to the cultivation of
wet-rice. The farmers should be supported by the government for the long-term strategic
policies so that they become efficient and competitive like other international markets. The
rice farmers can opt for integrated farming that is based on multiple cropping systems.
Organic farming can also be used as an alternative. The method focuses on soil regeneration
with the help of inter-cropping as well as applying both green and organic manures2.
An alternative method will help in stabilizing society as well as support the
government to make effective decisions.
References
2 Van Bruggen, A.H.C. and Finckh, M.R., 2016. Plant diseases and management approaches in organic farming
systems. Annual review of phytopathology, 54, pp.25-54.

Coleman, A., 2019. Private and government support helps new farmer flourish:
livestock-new farmer. Farmer’s Weekly, 2019(19046), pp.36-38.
French, J., 2016. Effects of Rice Subsidy in Thailand. North American Case Research
Journal, 36(2).
Van Bruggen, A.H.C. and Finckh, M.R., 2016. Plant diseases and management
approaches in organic farming systems. Annual review of phytopathology, 54, pp.25-54.