Thailand hopes to form rice cartel with four nations

  • 02/05/2008

  • International Herald Tribune (Bangkok)

Thailand is reviving plans for a cartel of major rice producers, a move that could benefit farmers by maintaining soaring rice prices but propagate the food crisis for the poorest consumers in Asia. The Thai government is enlisting the support of Vietnam, the second-largest rice exporter after Thailand, as well as Cambodia, Myanmar and Laos to "help each other control the rice price," according to Thailand's prime minister, Samak Sundaravej. "We don't aspire to be like OPEC, but we hope to be just a group of five to help each other in trading rice on the world market," Samak was quoted as saying in the Nation newspaper Thursday. Previous Thai governments have toyed with the idea of using the country's dominant market position to influence the price of rice in the same way that the Organization of the Petroleum Exporting Countries tries to set crude oil prices. Comments from officials seem to indicate the plan is still in a nascent stage. "I think it's time to do it, probably within the term of this administration," Noppadon Pattama, Thailand's foreign minister, said Wednesday. If successful, a cartel could have far-reaching consequences for the rice market. "At first blush it looks like an OPEC-style move," said Robert Zeigler, director general of the International Rice Research Institute in the Philippines. "It does worry me a bit," he said, cautioning that he is a scientist, not an economist. The price of Thai B-grade rice, a benchmark variety, has nearly tripled in recent months and is now hovering around $1,000 a ton. Maintaining high prices would please large-scale rice farmers and traders in countries like Thailand and Vietnam but would likely anger the governments of the Philippines, Hong Kong, Nigeria and Saudi Arabia, which are among the world's largest rice importers. The ruling coalition in Thailand received the backbone of its support from rural areas and Samak appears eager to capitalize on the rice price increase. Thai farmers, he said in a recent interview, were "dying" before rice prices began their ascent. "Now they have an opportunity," he said of the farmers. Samak said he believed the spike in rice prices was nothing more than an inconvenience for consumers. A 100-gram serving of rice had increased from 5 to 10 cents, he said. "Yes it's 100 percent. But the scale is not much. People can afford," Samak said. This is probably true in Thailand, which is prosperous compared with its neighbors. But the increase in rice prices is potentially calamitous for the poorest tiers of society in Cambodia, the Philippines and other impoverished countries. In countries where the government controls or subsidizes the price of rice, such as Indonesia, China and Malaysia, higher international prices may encourage smuggling and could put increased pressure on government budgets. From a purely economic standpoint setting up an effective rice cartel appears feasible. Unlike corn, wheat and other grains, rice is very thinly traded because only a handful of countries export in large quantities. The largest rice producers, China, India and Indonesia, consume the vast majority of their rice crop domestically. Thin trading gives countries like Thailand and Vietnam potential leverage to set rice prices. Thanks to a vast, fertile delta, which allows farmers to harvest three or four times a year, Thailand exports about 10 million tons annually, twice as much as Vietnam and three times what the United States exports. Despite predictions by the Food and Agriculture Organization of a good harvest this year, prices rose sharply in March and April after exporting countries, including Brazil, Egypt and India announced that they were restricting exports to ensure domestic supplies. Keith Bradsher contributed reporting.