Rising rice prices give Thai farmers hope of debt relief

After finishing the most recent rice crop, Sripai Kaeo-eam immediately moved on to the next crop, ignoring the advice of Thai officials to limit rice planting to save water.

“This harvest is our hope,” said the 58-year-old farmer in Chai Nat, a central Thai province. Sripai is more than 200,000 baht ($5,600) in debt, mostly from loans to finance her farming. So last month, Asian rice prices hit a 15-year high after India restricted exports.

India is currently the world's largest rice exporter, followed by Thailand.

Not only Sripai, farmers in other rice-growing areas in Thailand are also expected to benefit. However, the area of rice cultivation in the country in August decreased by 14.5% compared to the same period last year, according to government estimates. This figure has been continuously decreasing since 2020.

Government figures and experts say Thailand’s rice sector is under pressure from climate change, agricultural debt and a lack of innovation, despite tens of billions of dollars in government subsidies over the past decade.

Farmers harvest rice in a field in Chai Nat (Thailand). Photo: Reuters — Farmers harvest rice in a field in Chai Nat (Thailand). Photo: *Reuters*

Experts say that instead of promoting agricultural research, government spending is stifling productivity. Many families are heavily indebted because they borrowed money to farm. Debt can even extend across generations.

The shrinking area of rice-growing land could reduce Thailand’s rice output, exacerbating food inflation. Food prices have been pressured recently by drought in major producing countries, affecting billions of people who rely on the staple food, said agriculture expert Somporn Isvilanonda.

“The rice area has decreased due to lack of rainfall and irrigation water,” Somporn said. The water shortage is expected to worsen next year when El Nino strengthens, according to Thai government forecasts.

What millions of Thai farmers are seeing, however, is not just the current harvest, but a narrow window for them to escape a life of debt. If the harvest is good, they can earn double, even triple, their previous year's earnings. "I'm dreaming about that, because India has stopped exporting," Ms. Sripai said.

Thailand currently has one of the highest household debt rates in Asia. In 2021, 66.7% of farming families in the country were in debt, mainly due to farming-related activities, according to government data.

Sripai is paying back her debt at an annual interest rate of 6.87%. “We farmers are all in debt. We owe because of the drought, the floods and the pests,” she said.

Thai Prime Minister Srettha Thavisin said last week that the government would seek to improve farmers’ incomes. “There will be a unified policy on water management, innovation to increase productivity, and finding new markets for agricultural products,” he said. Some loans will also be repaid over time.

However, "the extreme weather caused by El Nino will pose many risks to farmers. Rainfall this year is 18% lower than normal and reservoirs are only 54% full," said the Office of National Water Resources. Experts predict this will reduce rice yields and cause fluctuations in production.

Half of Thailand's agricultural land is devoted to rice cultivation, with about 5 million households engaged in the activity, according to Krungsri Research.

Successive Thai governments have spent 1.2 trillion baht ($33.85 billion) to support rice prices and farmers’ incomes over the past decade, Somporn said. “But they haven’t done enough to boost productivity,” he said.

Despite high rice prices, “farmers have not been able to take advantage of the opportunity to grow rice,” Somporn said, estimating rice production could fall 30% in the next two seasons due to water shortages.

Nipon Poapongsakorn, an agriculture expert at the Thailand Research and Development Institute, said that over the past decade, the country has “stuck in the trap of rice farming success.” Investment in rice research has fallen from 300 million baht 10 years ago to 120 million baht this year.

“Our rice varieties are very old and low yielding,” he said. Nipon said that in 2018, Thai farmers produced 485 kg of rice per rai (a unit of area equivalent to 1,600 m2). The figures in Bangladesh and Nepal were 752 kg and 560 kg, respectively. Thai farmers are only allowed to grow rice varieties approved by the government.

Experts say that in recent years, countries like India and Vietnam have invested heavily in research, surpassing Thailand in productivity and increasing export market share. The average income of Thai farmers is also falling.

Sripai says the challenges have only increased over the years. But the current price point presents a rare opportunity.

“We just hope to get out of debt,” Sripai said.

Ha Thu (according to Reuters)

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