Taking stock of rice woes
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Taking stock of rice woes

SPECIAL REPORT: Warehouse tour turns up sorry tale of pigeon droppings, grime and insect infestations

The rusted metal door rolls upward with a groan, as if reluctant to give up its secrets. The light rays entering the dark cavern flicker with haze and dust mites, and our nostrils wrinkle from the musky odours that assault our senses.

Photos, reports and rumours about conditions in rice warehouses have been common in the past few months, sparking fears of problems in the supply chain. (Bangkok Post file photo)

Before us is a giant mountain of rice sacks, akin to a dragon's hoard of gold beneath a mythical cavern. There is movement within the mountain, as loose rice grains roll here and there from the pull of gravity.

Looking closer, we see signs of life, as bugs and critters run to and fro in ever-shifting tunnels within the rice mountain. Pigeons coo from high up in the wooden ceiling, interspersed with the occasional splatter of fresh droppings on the rice sacks.

Nearby at another warehouse, the doors are filled not with sacks of polished rice, but rather rice paddy awaiting milling next door. Large nets stretch across the warehouse in an effort to deter pigeons, unsuccessfully it must be said, given the clear stains of bird droppings that can be seen across the piles of rice.

These two warehouses in Suphan Buri are like thousands of other rice warehouses across the country filled to the seams with government-purchased rice.

Some of this stockpiled rice - 150,000 tonnes of 5% white rice and 200,000 tonnes of broken milled rice - will be put up for auction by the government on Friday. Thai Rice Exporters Association honorary president Vichai Sriprasert has voiced fears over the quality of the rice, noting that exporters will not be given the chance to inspect it before bidding begins. He says the government risks destroying the global reputation of Thai rice if it floods the market with poor quality or rotten grain.

More than two years ago, the Yingluck Shinawatra government announced an audacious plan to boost global rice prices by controlling the country's supply with an offer to purchase every single grain of rice harvested in the country.

Pledging prices were set at more than 50% above market prices, giving farmers a huge incentive to boost production to benefit from the hundreds of billions of baht set aside for the scheme.

Rice exports on the other hand have nosedived, as the high pledging price has given Vietnam and other competitors a clear step up in the price-sensitive global rice trade.

Official rice stocks, meanwhile, have expanded massively to an estimated 17 million tonnes, compared with 7.8 million in 2011, as the Commerce Ministry has missed its targets in arranging buyers for the rice.

The delays and resulting spoilage not only mean greater costs for taxpayers, but has also raised questions among consumer groups about the safety, hygiene and freshness of local rice.

An inquiry led by Supa Piyajitti, a deputy permanent secretary for the Finance Ministry, into allegations of waste in the rice scheme found that consumers would do well to wash their rice more thoroughly, given the grime, dirt, mould and mildew that exists in many warehouses.

It may be that full accountability is near impossible, considering the scale and scope of the programme, two years and more than 500 billion baht in the making.

Ms Supa shakes her head. "The government and prime minister ordered the audit to be made at the same time at all warehouses, to help fast-track the audit and prevent problems of rice transfers during the inventory process," she said during a field trip to Suphan Buri.

"But the investigation isn't being done like that," she said.

Besides the fact that manpower issues have made simultaneous accounting impossible, officials themselves are failing to comply with the standards, either due to ignorance or bureaucratic inertia.

On this particular visit, a dispute erupted over basic geometry.

Ms Supa said the government ordered warehouses to maintain stockpiles in square lots, to ease volume calculations.

But instead, most warehouses maintain their rice stocks in the form of pyramids, including at this one particular warehouse under inspection during this visit.

Officials from the Public Warehouse Organisation and the Internal Trade Department, the two agencies directly responsible for caring for the country's public rice stocks, debated Ms Supa over the pyramid-versus-square storage rule.

Each inspection of the stockpiles, meanwhile, theoretically must have the signature of six officials, representing the Public Warehouse Organisation, the Royal Thai Police, the Bank for Agriculture and Agricultural Co-operatives, the Internal Trade Department, the Finance Ministry and an agricultural expert.

Here in Suphan Buri, one of the country's premier rice-growing provinces, 81 mills are participating in the programme, with more than 100 other privately-owned warehouses used to store public rice.

Ms Supa said an inspection of the public stocks was needed after the Commerce Ministry last month reported that 2.5 million tonnes worth of rice had yet to be fully accounted for under the programme.

Critics of the rice-pledging scheme have contended that in addition to the fundamental flaws of the programme, internal controls are so lax that fraud and corruption are rampant, whether it be through "churning" the same lot of rice for multiple pledges, the illegal pledge of cheaper imported rice or the illicit substitution of newly pledged rice in favour of older rice.

A committee chaired by Ms Supa estimates the rice scheme has incurred financial losses of 220 billion baht for the three rice crops from 2011-2013, with losses likely to be even higher once accounts for the second crop for this year are closed.

Losses, however, should ease after the government cuts pledging prices starting in September by 20% to 12,000 baht per tonne for paddy rice, with a limit of 500,000 baht per farmer.

Ms Supa said losses for the existing stockpile were calculated using a simple formula of multiplying inventory volume by current market prices or investment cost, whichever is lower. Revenues are averaged together from the prices received from different sales transactions.

But she said the committee would recalculate the costs of the scheme using a weighted average formula for revenues, to help reduce distortions.

For instance, under the previous formula, one lot of 1,000 tonnes of rice sold at 12,000 baht per tonne, together with a second lot of 2,000 tonnes sold at 8,000 baht per tonne would show an average price of 10,000 baht per tonne, calculated by adding the sales prices of the two transactions and dividing by two. A weighted average approach for the same two transactions, however, would result in an average price of 9,333 baht per tonne, calculated from taking the revenue proceeds of the two transactions and dividing by the total volume of rice sold.

Prof Somporn Isvilanonda, a senior fellow at the Knowledge Network Institute of Thailand, said Thailand now ranks third in the world in terms of the size of its rice stockpiles, after China at 90 million tonnes and India at 30-35 million tonnes.

''Given the volume of rice in government stocks, I think it's near impossible for the government to properly care for the total inventory, whether in terms of quality or quantity,'' Mr Somporn said. ''State officials simply cannot be everywhere all the time.''

''The quality of rice in storage drops each day. The question is how badly our image as the producer of the world's best rice, an image built up over many decades, will be damaged,'' Mr Somporn said.

Rice farmers work in a paddy field in Mukdahan’s Muang district. The government insists the farmers are benefiting from the controversial rice-pledging scheme. (Photo by Thiti Wannamontha)

This is the first report in a series exploring the strengths and weaknesses of Thai rice production.

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