The Thai Chamber of Commerce has urged the government to reform the country's agricultural structure within five years in order to avoid further losses from the continued subsidisation of crop prices.

Given that the prices of farm crops tended to fluctuate, the government would continue to face huge losses if it always subsidised farmers during periods of falling prices, Pornsilp Patcharintanakul, vice chairman of the chamber, said yesterday.

The government needs to reform the agricultural structure by setting up a system to ensure sustainability and stable crop prices in the long run, he said.

The measures that need to be taken include the balancing of supply with future demand for each farm crop, reducing subsidisation and supporting farmers to grow other crops when faced with falling prices, he suggested.

"Price subsidies are only a short-term solution, but they require a huge amount of money. Developed countries will only subsidise farm crops to a small degree, and they employ the future market mechanism to do its work," he added.

Pornsilp's remarks follow subsidy schemes and plans to boost the prices of major crops such as rice and rubber, and growing calls for the government to subsidise farm crops with high guarantee prices.

He said the government should gradually reduce current price subsidies, while adopting other measures to stabilise crop prices. Using the future-market mechanism would help farmers draw up plans to increase efficiency in crop management and balance supply to meet expected future demand, he said.

Price subsidisation and pledging with a huge amount of money have distorted the market mechanism and affected export growth, Pornsilp added. Moreover, the government would have to shoulder massive stockpiles if it continued to pledge rice, and the Kingdom now has only a 7-per-cent share of the world's rice-trading volume. The country would be unable to ensure high prices and would face huge losses for releasing its stock to the market, he warned.

As to rubber, Pornsilp said the government should help reduce production costs, but it should also seek a long-term measure to ensure high prices by linking farmers with the industrial sector.

Isara Vongkusolkij, chairman of both the chamber and the Board of Trade of Thailand, said the country needed to modernise its agricultural structure and adopt new technology in the farming sector.

New technology would help lower production costs in the long run, as well as reducing losses, he said.

The chamber said the export of agricultural products had declined 8.8 per cent year on year in the first seven months of the year, mainly due to lower shipments of rubber, frozen food, and fruits and vegetables.

Lower exports were due to the global economic slowdown, which resulted in reduced demand for commodities. In July alone, the shipment of farm crops dropped 3.4 per cent year on year, to Bt584.27 billion.

Meanwhile, Prime Minister Yingluck Shinawatra said the planned spending of Bt270 billion on the upcoming rice-pledging project was limited under the overall budget of Bt500 billion for the scheme, which the Cabinet had approved last year.

Moreover, the PM explained that the rice-sales contract with China had resulted from her official visit to the country when she requested Beijing's cooperation in purchasing farm products, including rubber and rice, from Thailand. Details of the contract will be given by the commerce minister, she added.

Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong restated that the government would spend part of its income from the release of rice stocks on the next pledging project.

For the remaining expenditure not covered by such sales, the Finance Ministry will seek the Cabinet's approval for an additional loan. The borrowing amount should be below the limit of 20 per cent of annual budget disbursement, he said.

Boonthai Kaewkanti, deputy manager of the Bank of Agriculture and Agricultural Cooperatives, said the bank, the Public Debt Management Office and the Commerce Ministry would this week discuss a Bt170-billion loan for spending on the upcoming pledging project.

The remaining Bt100 billion required for the project will be met from the Commerce Ministry's rice sales, which bring in about Bt10 billion a month, he said.

Source: The Nation