Rapidly Rising Rice Subsidies Show Importance of U.S. Farm Programs

September 16, 2013
By Rene Pastor
 
It is called the Thai rice paddy pledging program.
 
The government in Bangkok pays farmers above market prices for their rice – about $4.4 billion above market prices in the 2011/2012 crop year alone. It put the program in place to win farmer votes during parliamentary elections, and despite blowing a hole in the national budget, the Thais will keep the program to ensure farmer support.
 
This is merely the latest example of a heavily subsidized global rice market.
 
“Rice is one of the most highly subsidized crops in global agriculture.  Whether in developed countries like Japan or Korea, advanced developing countries like Thailand, China and Brazil or developing countries like Vietnam, governments provide support to rice production either through substantial price support programs or by strictly limiting imports to support domestic prices,” Robert Cummings, chief operating officer of the USA Rice Federation, said in an interview with Farm Policy Facts.
 
While foreign subsidies have been rapidly climbing in recent years, Cummings said that the level of support in the United States has been going the opposite direction.
 
U.S. spending on farm policy is down sharply over the past decade and the versions of the Farm Bill that recently passed the House and Senate both tightened budgets further by agreeing to eliminate direct payments to U.S. farmers.
 
“In 2010/2011, for example, the support price for rice in Brazil, Thailand, India, China, and Turkey ranged anywhere from 10 percent to 2.7 times higher than the U.S. target price for long grain rice. This trend has continued, with implications for global rice trade and for U.S. producers and marketers,” he said. 
 
To Cummings, it seems illogical why some groups in the United States would be lobbying Congress to remove even more supports in the U.S. Farm Bill, unilaterally disarming American farmers when the rest of the world is bulking up on farm subsidies and manipulating global markets with schemes like Thailand’s.
 
“Since the current paddy pledging program was announced in October 2011, Thai rice exports have fallen substantially because intervention prices exceed market prices,” Cummings explained.
 
The result is growing government-owned stocks – estimated in the media at 10 million to 12 million tons currently – followed by periodic releases by the Thai government to the market at prices that are less than its cost of acquisition.  This creates whipsaws in the market for legitimate players like U.S. growers and millers.
 
And selling government stocks onto the global market below purchase prices could hold World Trade Organization (WTO) implications for Thailand, Cummings said, since the country agreed not to subsidize exports.
 
Thailand is not alone.  Cummings said China’s rice program also raises major concerns from the U.S. rice industry.
 
He said Chinese rice production has “gone up steadily each year since 2005, in large part because of favorable domestic support programs involving direct payments, input subsidies and price supports.  The value of these three types of support was estimated at approximately $22 billion last year.”
 
Cummings added: “To the extent that the estimates for China’s support of rice production, as well as for several other crops and livestock products, are accurate, China is in violation of its WTO commitments.”
 
As for agricultural power Brazil, Cummings said the government uses a variety of programs to support its farmers.
  
Given what these countries and others are doing, American farmers feel it makes little sense for the U.S. to dismantle its own farm safety.
 
“Now is not the time to weaken support for U.S. production agriculture in the face of very aggressive support programs in other countries that are likely in violation of their WTO obligations,” concluded Cummings.