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Transformation of the Thai agriculture in the last three decades

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Nipon Poapongsakorn, Thailand Development Research Institute
Presented at the ReSAKSS-Asia conference “Agriculture and Rural Transformation in Asia: Past Experiences and Future Opportunities”. An international conference jointly organized by ReSAKSS-Asia, IFPRI, TDRI, and TVSEP project of Leibniz Universit Hannover with support from USAID and Deutsche Forschungsgemeinschaft (DFG) at the Dusit Thani Hotel, Bangkok, Thailand December 12–14, 2017.

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Transformation of the Thai agriculture in the last three decades

  1. 1. Transformation of the Thai agriculture in the last three decades* Nipon Poapongsakorn Thailand Development Research Institute “Agriculture and Rural Transformation in Asia : Past Experiences and Future Opportunities” A regional conference organized by RESAKSS-Asia, RESAKSS-Asia, IFPRI,TDRI and TVSEP Project of Leibniz University Hannover, Bangkok. 12-14 December 2017 1 *Adapted from Ammar Siamwalla and Nipon Poapongsakorn, “Transformation of the Thai rice economy in the last two decades”, the Thai Studies International Conference. Chiangmai. 16 July 2017
  2. 2. Summary  The presentation describes the major structural transformation of Thai agriculture, including an emergence of modern food value chain in the last three decades using the historical approach • The transformation is induced by industrialization, export market opportunities, import pressure for safe food, increasing per capita income, government policies and institutional change  The evaluation of long-term agricultural development focuses on the sources of competitiveness of Thai agriculture, using the trade theory of economies of scale and clusters which is mostly neglected by agricultural economists.  Both internal and external challenges facing Thai agriculture are identified, with some policy implications focusing on boosting agricultural productivity for smallholders, accelerate agricultural growth, and reducing income inequality. 2
  3. 3. Topic of discussion 1. Preliminaries 2. Narrative history I 3. Narrative history II 4. Evaluation of the long-term development 5. Challenges to the future of Thai agriculture 3
  4. 4. 1. Preliminaries  Some Historically Unique Features of Thailand (relative to other countries of Monsoon Asia) • Favorable man/land ratio due to remaining forest between 1960s and early 1980s, yet most private lands did not have title deeds (see Appendix 1) • Population growth resulted in agricultural land expansion through forest clearance in the 1960s-1970s; • Relatively poor water resources; hence lower ratio of irrigated to total land area; • No policy urgency to provision the cities, except the rice premium (export tax)  Hence not suited to ‘classical’ Green Revolution in the 1970s and 1980s, also because that phase of Green Revolution did not pay attention to rice quality which is a major concern for the Thai rice market  Unlike other Asian countries, Thai governments have always adopted the laissez faire policy and invested heavily in rural infrastructure since the late 1950s • Rural road network, dams, rural electrification, rural schools and agricultural credit bank, ports and logistics, etc.  Therefore Thailand became regular exporter, and eventually the world major exporter of rice, rubber, cassava, shrimp, canned pineapple, etc. (Fig. 1-a and 1-b)
  5. 5. 2. Narrative History I: 1986-1998  Agriculture as a sunset industry because of several difficulties, particularly depressed world rice price in the 1980s, and loss of traditional comparative advantage (caused by Dutch disease) in the 1990s • The government was forced to cease its traditional rice export taxing policy which had adverse impact on rural-urban income disparity (Ammar and Suthad 1996). • Since then, Thai trade policy has been neutral (Warr). • Abolition of the fixed exchange rate in 1998 restored agricultural competitiveness
  6. 6. 2. Narrative History I: 1986-1998 (cont.)  Structural Transformation: The industrial boom in the late 198os caused an exodus of one generation of young rural workers resulted in labor scarcity. • Fig. 3: Agricultural workers by age groups 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 Millions 15-24 Years old 25-34 Years old 35-44 Years old 45-54 Years old >54 Years old crisis >54 45-54 35-44 25-34 15-24 Source: LFS, NSO.
  7. 7. 2. Narrative History I (cont.)  Structural Transformation (con.) • Emergence of labor scarcity leading to early mechanization (in land preparation); and later supplemented by other labor-saving machineries and agricultural practices (Fig. 3);  Mechanization is possible for small farms, thanks to the active market for hired farm machinery services  Fee for hiring combine harvester has remained constant for 10 years.
  8. 8. 0 5,000 10,000 15,000 20,000 25,000 30,000 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 x100000 Number of agricultural machinery Tractor (Left) Rice transplanter Combine Harvester Fig. 4: Agricultural machinery sales growth 30% Source: Brand new, Siam Kubota.
  9. 9. 2. Narrative History I (cont.)  Other structural transformation • Thai government began to do research and release new rice varieties based on quality  This establishes Thailand as a quality rice producer (Fig. 5 - Thai rice price is higher than Vietnam). • The emergence of contract farming, started in the mid 1970s by agribusiness firms in poultry, tomato and sugar cane, thanks to the adoption of contractual institutional arrangements for poultry & tomato from the US companies  Number of contract farms quickly surged during the 1980s and 1990s, thanks to the competition among contractors and almost no government intervention
  10. 10. 3. Narrative History II: winds of change between 2000-2016  Structural change stalled in the 2000s due to slower economic growth (Fig. 7-a) • After 1997, migration of workers to industrial employment slowed down, coinciding with a slowdown in labor supply stemming from a decline in fertility starting in 1975. (Fig 7-B). • Migration slightly reversed in the early 2010s.
  11. 11. Figure 7-a: Stall structural change after 2008 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 Millions 15-24 Years old 25-34 Years old 35-44 Years old 45-54 Years old >54 Years old Source: LFS, NSO. >54 45-54 35-44 25-34 15-24 crisis Slow-down migrants Fig. 7-B: Migration
  12. 12. 3. Narrative History II: winds of change between 2000-2016  The economic stagnation following the 1997 crisis led to a policy shift towards favoring high paddy prices for farmers, culminating in the great paddy pledging fiasco of 2013-2015 (Fig. 5);  Such interventions are different from previous interventions which are mostly at the border: governments became active traders, holding and then releasing large stocks of rice, and having impact on movements of international rice price (Fig. 5).  Government trading means decline in rice quality and rice export, huge fiscal loss (USD18.4 billion in 2.5 years) and corruption (particularly in the government rice sale- estimated at USD 3 billion) (Nipon and Kamphol 2016).  After the military coup in May 2014, the price mechanism has returned to guide agricultural resource allocation.
  13. 13. Figure 5: Paddy production and prices 1961-2016 0 5 10 15 20 25 30 35 40 45 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 Millionston Paddy production - Thailand Wet season Dry season Source: OAE. Paddypledgingscheme 0 100 200 300 400 500 600 700 800 900 1000 1960M01 1962M10 1965M07 1968M04 1971M01 1973M10 1976M07 1979M04 1982M01 1984M10 1987M07 1990M04 1993M01 1995M10 1998M07 2001M04 2004M01 2006M10 2009M07 2012M04 2015M01 Effective price of rice (white rice 5%) Pledging price@15000 B./mt, nominal$ Rice, Thailand, 5%, $/mt, nominal$ Paddy pledging
  14. 14. 3. Narrative History II (cont.)  Yet the 2000-2016 period was also a period of institutional transformation in food value chain • The demand for safe food imports by the EU and USA put pressure on the Thai exporters and government to jointly introduce new institution of safe food standards and traceability • Dietary change and demand for safe food as a result of rising middle class • The rise of foreign supermarket in the late 1990s and the organic farmer groups  Supermarkets use the central procurement system to impose food standards and stable supply price  Farmer groups producing organic products, thanks to IFOAM, OXFAM’s fair trade practices and NGOs (Figure 9).
  15. 15. Fig. 7: A declining share of households’ food expenditure Source: NSO, SES. 1400 2782 6350 8502 726.7 1301.72 3041.12 3878.92 51.9% 46.8% 47.9% 45.6% 42% 43% 44% 45% 46% 47% 48% 49% 50% 51% 52% 53% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 1990 2000 2011 2015 Household total and food expenditures (Baht/m) ค่าใช้จ่ายรวม ค่าใช้จ่ายด้านอาหาร สัดส่วนค่าอาหาร Total expenses Food expense 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Fig. 7-b: Dietary changes in Thailand meals eaten away from home prepared meals taken home fruits and vegtables
  16. 16. Figure 8-a: Supermarket penetration & share
  17. 17. Figure 9-a: Certified organic farm areas Source: Earth Net Foundation, Green Net 2015. 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 Ha Organic area Share of rice planted area in major crop
  18. 18. 4. Evaluation of long-term development and structural change  Competitiveness and revealed comparative advantage  Sources of competitiveness and trade theories 18
  19. 19. 4.1 Competitiveness and revealed comparative advantage index  Thailand moved from 24th largest exporter of agricultural and food products in the 1960’s to 15th largest in the mid 2010s (Fig. 12)  Major exports : rice, rubber products, cassava products and modified starch, canned pineapple, sugar, breast chicken and further products, shrimp, feeds, fruits, etc.  RCA of 989 products (6 HS digits) (Fig. 13) • 26 rising stars (RCA > 1 and increasing) : swine breeders, honey, cereals, duck meal, apple juice, stc • 156 hot list : rice, tuna, shrimp. Cassava flour, canned pineapple, animal feed • 56 drop out : sausage, fresh and chilled fish, melon seeds • 750 items with no/negligible trade 19
  20. 20. Fig. 13-a: Reveal Comparative Advantage 20 Export (mil baht) RCA > 1,000 m 100-1,000 < 100 RCA > 1 & + 45 lines 36 12 Thai higher 13-40 lines 2-27 1-8 Thai lesser 1-5 1-8 1-3 RCA > 1 & - 42 lines 36 12 Thai higher 14-40 3-31 1-7 Thai lesser 1-13 2-9 1-6 RCA < 1 & + 8 41 200 Thai higher 1-5 5-27 9-68 Thai lesser 1-7 2-20 10-89 RCA < 1 & - 6 39 238 Thai higher 1-4 9-24 2-70 Thai lesser 1-4 2-14 10-133 Source: UN, Com-Trade
  21. 21. 4.2 Sources of competitiveness : trade theory  Heckscher-Ohlin : resource endowment  Adam Smith : “Specialization is governed by the extent of market”  New trade theory: economies of scale – external & internal  Michael Porter’s diamond model : clusters generate agglomerations economies (part of external deconomies). 21
  22. 22.  A) Resource endowments • Larger farm per worker than other Asian farmers (Fig. 14-a) but scarce labor (used to have surplus labor until the mid 1990s) and low interest rate (due to financial liberalization)  Hence higher labor productivity and capital (than Vietnam) but lower land productivity (Fig. 14-b and Fig. 15-c) 22 .. Land/worker 0 5 10 15 20 25 - 20 40 60 80 100 120 140 0 1 2 3 4 5 6 7 8 9 196119621963196419651966196719681969197019711972197319741975197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008 Mil.Rai Rai / worker Planted Areas Source: 1. Office of Agricultural Economic, 2. National Statistical Office Labor Force Survey
  23. 23. Fig. 14-b: Agricultural Productivity Change in Southeast Asia, 1961-2010: land & labor productivity and land/worker 23 Source: Courtesy of Professor Phil Pardey, University of Minnesota. Cited by Peter Timmer
  24. 24.  B) Specialization vs diversification • At the household level: Farmers have become more specialized in one single crop as the number of crops grown by a farm household has declined over time (Fig. 15)  Lower average and marginal cost of production • At the national level, land use has become more diversified (Fig. 17) as more farmers switch to perennial crops, particularly fruit trees and rubber : higher or stable income 24
  25. 25. Figure 15: Farm households have become more specialized 25 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 197819931998200320082013 Share of farm households Cultivated single kind of crop Cultivated more then one kind of crop Source: NSO, Agr Census. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1978 1993 1998 2003 2008 2013 Share of crops Multicrop w/o rice Multicrop with rice Pasture (cultivated) Para rubber Permanent crop Vegetables and other Field crops Rice
  26. 26.  Diversification at the national level 26 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 1961 1970 1980 1990 2000 2010 2011 2012 2013 Crop Diversification Index Modified Entropy Index* Composite Entropy Index*
  27. 27.  C) Internal economies of scale and farm size: no clear trend • A trend of declining farm size has stop mainly because of the lower-than-replacement population growth since 1980s • Evidence from casual observations : Increasing number of large farms in the following production:  Rice farm in the Central Plains  sugar cane farms, orchard farms, and rubber farms  broiler farm and shrimp farm • Yet the change is still so small that cannot yet be captured by the national farm survey • Therefore no clear trend of increasing farm size (see David Dawe 2016) because  Legal constraints: tenant law and foreclosure law (high interest rate on loan for land purchase)  Social factors: land inheritance  Water shortage and management 27
  28. 28.  D) But food processing factories at the mid- and downstream of the food supply chain have become larger, thus enjoying larger internal scale economies • Increasing capacity of rice mills and sugar factories (Fig. 19), • Larger chicken slaughter and processing plants • A few large rice exporters dominate the export business, the top five largest capturing 55-60% of total export • Small local traders have been replaced by larger suppliers who have contractual arrangements with supermarkets and exporters • Three largest supermarkets dominating the retail business • Vertical integration in poultry, dairy and seafood business ensures that most agents – farms as well as input and output suppliers – have to be larger • Producers and distributers of farm inputs – machinery, seeds, fertilizer and pesticides – are larger, thanks to the network of efficient logistics, communication and digital technology 28
  29. 29. 29 0 5 10 15 20 25 30 35 40 0 2000 4000 6000 8000 10000 12000 14000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 tonnespermiller tonnes Accumulated and Average Capacity of small mills (< 60 t/day) 0 50 100 150 200 250 300 350 0 50000 100000 150000 200000 250000 300000 350000 400000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 tonnespermiller tonnes Accumulated and Average Capacity of large mills (> 60 t/day) Accumulated Capacity Average Capacity per miller All rice mills are getting bigger Large mills Small mills Fig. 19-b: Rice mill capacity
  30. 30. Fig 19-c: Only 1% of mills are large mills, but their electricity use is 17% < 1 Mill.Unit /Month 100% 1-5 Mill.Unit /Month 0% > 6 Mill.Unit /Month 0% Num of rice mill < 1 Mill.Unit /Month 83% 1-5 Mill.Unit /Month 8% > 6 Mill.Unit/Month… Electricity utilization of mills Blue: >6 mil units/month=0.05% Source: DIT, MEA, PEA
  31. 31. Fig. 19-d: Average daily production of sugar mills (tons/day) 0 0.2 0.4 0.6 0.8 1 1990 2000 2010 2016 MillionstonofSugarcane/Day Production of sugar per day: average whole kingdom Province Ton/Day 1Phetchabun 43,791 2Sa Kaeo 28,221 3Uttaradit 27,844 4Nong Bua Lamphu 26,305 5Khon Kaen 25,657 Source: OCSB.
  32. 32. E) Clusters and economies of scale : low input prices & specialized labor  Thanks to the agronomic & specific conditions, each geographical area (or cluster of provinces) is specialized in specific kinds of crops/products  Rice cluster in some provinces along the Chao Phraya river and the Northeast • Large rice mills (measured by electricity usage) are heavily concentrated in 6 provinces in the mid- Central Plains near Bangkok (Fig. 20-a) • More than 50 private ports that handle small vessels for export shipments are along the Chao Phraya river and Pasak River where vessels can off-load rice to larger ships in the deep seaport on Cholburi province 32
  33. 33. Fig. 20-a: Rice cluster in some provinces in the mid-Central, lower North and Northeast Production No. Rice Mill Electric consumptio Mill Capacity Source: Production from OAE, Rice mill data from DIT, Electric bill from PEA
  34. 34. Clusters of other major products  Sugar cane in the upland areas of the Lower North, Western and Northeastern provinces (Fig. 20-b)  Rubber and factories are concentrated in the Southern provinces (Fig. 20-c)  Chicken in the provinces near Bangkok (main market) and the sea port in Cholburi. (Fig 20-d) • The provinces must have adequate source of water and main area of feed production. • Lopburi becomes the largest production area  Shrimp farms are in the eastern seaboard and provinces with large mangrove areas, while factories concentrate in a few provinces near sea ports, Samut Sakorn in the Central Plains and Songkla in the South (Fig. 20-e)  Also clusters of suppliers of seeds, fertilizers and insecticides in provinces with large agricultural activities (Fig. 20-f) 34
  35. 35. Fig. 20-b: Sugar cluster Planted Area Sugar Plant Production Production Source: OCSB.
  36. 36. Fig. 20-c: Natural rubber cluster Planted Area Rubber PlantProduction Note: Exclude area that lower then 4,000 Ha Source: Area and production from OAE, Rubber plant from DOA.
  37. 37. Fig. 20-d: Broiler cluster Feeds Broiler Slaughter Capacity Source: DLD.
  38. 38. Fig. 20-f: Input cluster Fertilizer shop Pesticide shop Rice seed shop Note: Fertilizer and Pesticide license Zone 4 and 7 no data Source: Fertilizer and Pesticide from DOA, Rice seed form RD.
  39. 39. Evidence of efficient value chain in Thai agriculture  As a result of cluster of farm inputs, output and food processing factories, farmers have easy access to competitive supplies of inputs and market alternatives to sell their outputs.  Thus the input prices paid by Thai rice farmers are lower than that in CLMV  Thai farmers can also obtain higher “net” farm-gate price for their output since the market is highly competitive 39
  40. 40. Table 1: Value chain: Input Supply Efficiency Measure Indicator Cambodi a Laos Myanmar Thailand Vietnam Access to affordable fertilizers Urea price at farm gate, $/ton 425 450 460 426 357 Urea price to paddy price (in dry equivalent) 1.8 1.6 2.3 1.1 1.6 Availability of seeds % of demand met by supply of good seeds 10 9 0.4 117 100 Depth of seed market % of farmers using purchased seeds 20-80 10 9 60 53 Depth of fertilizer market % of rice farmers using NPK 80 20 30 90 100 40 Source: Sergiy Zorya and David Dawe, 2015.
  41. 41. V. Future challenges  The transformation (specialization, clustering & external economies of scale and structural change) has enabled Thailand to remains competitive until recently  Now the pressure is rising as agricultural growth and TFP growth has declined, thanks to • Stalled structural transformation • The increasing cost of non-traded inputs, esp. labor • The costs imposed by the policy responses to tackle the problems of IUU and illegal migrants (which have adverse impacts on the supplies of seafood, income of small fishermen, and labor cost in the food processing industries) 41
  42. 42. Growth of real GDP, agriculture & food processing value added (1961-2016) -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00 20.00 -15 -10 -5 0 5 10 15 20 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 % GDP growth GDP growth (annual %) AgGDP growth (annual %) Food processing GDP growth (annual %) growth Value (Bill.USD) 1961- 2016 1961 2016 GDP 6.0% 16.48406.39 AgGDP 3.2% 6.66 37.26 Food processing GDP (1980) 4.6% 0.03 17.81 Source: NESDB and The World Bank.
  43. 43. 4.1 Internal challenges facing Thailand’s agriculture  More important, Thailand is facing several challenges – internal as well as external ones. • This time the challenges are much more complex, if not more serious, and may be “different” from the past malaises  Four internal problems affecting agriculture • Too large a share of agricultural workers, causing low per-capita farm income and large income disparity • Rapidly aging farmers • Increasing costs of non-traded inputs • Decline in public investment in agric R&D and quality of research & extension services 43
  44. 44. Larger income gap between agricultural and non-agricultural 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Millionsbaht Real per capita income Agriculture Non-agricultural 44ที่มา: NESDB, LFS-NSO. และ World Bank, 2015. Agri income equal to 11% of non-Agri income (2013) 14% • High income disparity between agriculture and non- agriculture…a political pressure for price subsidy 3. Thailand’s agricultural challenges : internal and external
  45. 45. 45Source: Waleerat, 2009. 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 U.S. (Right bar) China India Philippines Thailand Concentration of Agricultural Research of Thailand are declining and lower then neighboring countries. • (c) Public research in agriculture declined (% of agricultural research expenses in agricultural GDP)
  46. 46. 5 disruptive forces Impact 1.Rapid urbanization emerging courtiers • Middle class เพิ่ม 2. Aging society • Ageing population • Ageing farmers 3. Technological change • Second green revolution 5. Globalization : trade, investment, politics, social/environmental concerns • Demand for food : diet change • Meat & processed food • Safe & healthy • Better quality • Supply of food • Labor shortage • Abundant land • New varieties; tolerances to drought, disease etc. • Form management water management etc. • Market • Foreign supermarkets: vertical coordination • NTBs • Laws and labels: IUU (human trafficking, over- fishing), animal welfare, carbon–water foot print 46 4. Climate change • Higher temperature • Extreme weather 4.2 External factors : 5 disruptive forces Source : extension of McKinsey Institute’s concept
  47. 47. 4.3 Policy implications  Policy objective is “productivity improvement”, particularly the adoption and adaptation of modern farm technology (e.g., precision agriculture)  3 high priority policies • 1) Proactive R&D&E policy  Adoption and adaptation of modern agricultural technology, including precision agriculture for smallholders  Reforming its public research system • 2) Facilitate agricultural transformation through the following policies • 3) Reforming the institution of agricultural policy determination process and implementation, e.g., contracting out the extension services, etc. 47
  48. 48. ammar@tdri.or.th nipon@tdri.or.th 48
  49. 49. Appendix 49
  50. 50. Fig. 1-a: Thai rice production and export 0 5 10 15 20 25 30 35 40 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Millionston Rice production & export (world largest, except 2012-13 and 2016) Production (Paddy) Export (Rice mailled) Source: FAO.
  51. 51. Fig. 1-b: Production and export of major exports 0 200 400 600 800 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Thousandston Shrimp – world largest until 2013 Shrimp Production Shrimp Export 0 10 20 30 40 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Millionston Cassava-world largest Cassava Production Cassava Export 0.0 2.0 4.0 6.0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Millionston Natural rubber-world largest Rubber, natural Production Rubber, natural Export Source: OAE, DOF and FAOSTAT.
  52. 52. 100 200 300 400 500 600 700 800 900 1000 1100 1995M8 1996M4 1996M12 1997M8 1998M4 1998M12 1999M8 2000M4 2000M12 2001M8 2002M4 2002M12 2003M8 2004M4 2004M12 2005M8 2006M4 2006M12 2007M8 2008M4 2008M12 2009M8 2010M4 2010M12 2011M8 2012M4 2012M12 2013M8 2014M4 2014M12 2015M8 2016M4 2016M12 ($/ton) Rice Price Comparison Thailand 100% Grade B Vietnam 5% Brokens USA long grain Source: Rice Outlook, USDA. Figure 5: Export prices of Thai, USA and Vietnamese rice Paddy pledging
  53. 53. Figure 7: Average capacity of rice mill, 2001-17 (ton/mill/day) 0 50 100 150 200 250 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Department of Internal Trade
  54. 54. Figure 8-b
  55. 55. Fig. 9-b: GAP certification for paddy farms Certified farms 36,529 Farms Certified area 51,401 Ha Share of Rice area 0.5% Source: RD 2014-2015.
  56. 56. Global Export Ranking of Food and agricultural products increased from 19-23 in the 1960s to 12-15 in the 2010s. But not so impressive as Germany, Spain, China Source: FAO 1961 1967 1977 1987 1997 2007 2013 United States of America 1 1 1 1 1 1 1 Netherlands 3 3 2 3 3 2 2 Brazil 7 8 4 7 8 5 3 Germany 21 14 5 4 4 4 4 France 6 4 3 2 2 3 5 China, mainland 33 12 21 10 13 11 6 Spain 22 20 18 13 11 8 7 Canada 5 6 7 11 10 9 8 Belgium #N/A #N/A #N/A #N/A #N/A 6 9 Italy 11 11 11 9 9 7 10 India 15 19 19 23 21 17 11 Argentina 9 7 9 19 12 10 12 Australia 2 2 6 8 7 13 13 Indonesia 16 35 22 21 20 16 14 Thailand 19 23 16 17 15 14 15
  57. 57. Fig. 12: Rank and share of Thai agricultural exports in world agric exports 22 22 24 19 16 16 15 15 15 15 15 15 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 0 5 10 15 20 25 30 Rank of agriculture export Share of total agriculture export Source: FAOSTAT. 1.17 Bil.$ 99.3 Bil.$21.5 Bil.$ Growth 1961-2013 = 8.4% , 2000-2013 = 13.1%
  58. 58. Fig. 13-b: Relative Comparative Advantage Rice RCA 2012 2013 2014 2015 Cambo dia 18.42 27.96 24.51 23.98 Thailan d 15.46 14.34 17.32 15.49 Vietna m 24.6 16.43 14.17 12.46 Myanm ar 20.02 9.81 5.52 6.77 Lao PDR. 3.36 2.64 2.15 5.54 Sugar RCA 2012 2013 2014 2015 Thailan d 9.18 7.33 8.39 9.08 Lao PDR. 5.51 5.03 4.08 5.32 Cambo dia 0.04 4.03 2.86 1.71 Malaysi a 0.4 0.43 0.42 0.38 Philippi nes 1.14 2.82 1.23 0.32 Durian Cooked chicken Vegetable Shrimp Source: TDRI, UN comtrade RCA 2012 2013 2014 2015 Myanm ar 31.75 23.12 13.46 21.71 Lao PDR. 3.02 2.45 2.52 4.11 Thailan d 1.9 1.99 2.23 2.13 Vietna m 1.93 1.15 1.87 0.88 Cambo dia 0.44 0.56 0.97 0.65 RCA 2012 2013 2014 2015 Vietna m 31.07 21.43 18.7 12.49 Indone sia 11.4 9.21 9.84 9.25 Myanm ar 23.02 13.47 6.18 7.62 Thailan d 14.57 5.66 4.11 3.46 Malaysi a 0 1.78 1.76 1.14 RCA 2012 2013 2014 2015 Thailan d 46.73 48.29 49.32 40.33 Vietna m 0.26 0.21 0.39 3.34 Malaysi a 2.4 2.31 1.26 1.82 Lao PDR. 0 0 0 0.44 Philippi nes 0.01 0.04 0.08 0.03 RCA 2012 2013 2014 2015 Thailan d 23.62 23.14 21.73 22.89 Philippi nes 0.5 0.14 0.29 0.2 Malaysi a 0.08 0.07 0.08 0.1 Singap ore 0.01 0.01 0.02 0.01 Vietna m 0.02 0.03 0.02 0.01
  59. 59. Fig. 14-c: Land productivity in Thailand is lower than Vietnam (output in tons and value) 0 500 1,000 1,500 2,000 0 5 10 Thailand Land productivity (Ton/Ha) Land productivity (USD@2010/Ha) 0 1,000 2,000 3,000 4,000 0 5 10 15 Vietnam Land productivity (Ton/Ha) Land productivity (USD@2010/Ha) Source: The World Bank and FAOSTAT.
  60. 60. Fig. 14-d: Labor productivity in Thailand is higher than Vietnam (output in tons and value) 0 1,000 2,000 3,000 0 5 10 15 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Thailand Labor productivity (Ton/worker) Labor productivity (USD@2010/worker) 0 500 1,000 1,500 0.0 0.5 1.0 1.5 2.0 2.5 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Vietnam Labor productivity (Ton/worker) Labor productivity (USD@2010/worker) Growth Thaila nd Vietna m Land productivity (Ton/Ha) 3.3% 2.9% Land productivity (USD@2010/Ha) 2.3% 2.1% Labor productivity (Ton/worker) 4.6% 3.9% Labor productivity (USD@2010/worker) 4.0% 4.0%Source: The World Bank and FAOSTAT.
  61. 61. 194,401.63 9,845.14 249,849.03 13,267.86 175,612.74 45,255.74 Per HH (Baht/Year) Per Unit of land (Baht/Year) Rice Mono Crop Rice and other crops Vegetables/Root Crops Growing rice and other crops give the highest payoff per household per year whilst growing growing vegetables and root crops give the highest payoff per unit of land per year. Fig. 16: Farmers who diversify enjoy higher net profit per unit of land
  62. 62.  Fig. 18: Rice farm in the Central Plains become marginally larger (Rai/ household) 62 24.1 21.7 23.4 23.8 24 15 16 17 18 19 20 21 22 23 24 25 Central Plains 1993 1998 2003 2008 2013 ที่มา: สามะโนการเกษตร 2536-2556 และการสารวจการเปลี่ยนแปลงทางการเกษตร 2541-2556, สานักงานสถิติแห่งชาติ
  63. 63. Fig. 20-e: Shrimp cluster Area Production Factory Source: Production from OAE and Factory from DIW.
  64. 64.  Sources of value added growth in agriculture: total factor productivity growth is the second largest 6464 Labou r 19% Land 6% Capita l 55% TFP 20% Agricultural Labour 7% Land 8% Capital 64% TFP 21% Crop Labour 77.77% Land -0.38% Capita l 4.50% TFP 17.36% Livestock Source: Waleerat, 2009. Lab our Land Capital TFP Agricultural 18.79 6.13 54.73 20.35 Crop 7.6 7.63 63.95 20.82 Livestock 78.35 -0.38 4.53 17.49
  65. 65. 65 (a) Thailand has an unusually large share of workers in agriculture (second highest share amongst middle income countries, after Albania) Source: World Bank, 2015 4.1 Internal challenges
  66. 66. 66 Source: World Bank, 2015 Decreasing additional earning outside agricultural sector Agricultural structure not change • Stalled structural change after 2004, which used to be a major source of agriculture growth – Very low growth of private investment in non-agricultural activities
  67. 67. Increase in Agriculture Employment since 2004 - What are the Factors behind? 67 Source: World Bank, 2015 • Distorted agricultural support policies may have stalled the structural change and resulted in an increase in agricultural employment after 2004
  68. 68. Share of agricultural income is about 12% (18% in rural and 6% in urban) of total household income in 2013. Declining trend of primary occupation in agriculture 68Source: World Bank, 2015  So farm income is very low, accounting for only 12% of household income • Smallholders’ farm income is not enough for farmers to have a decent living, e.g., can’t afford sending children to college. • Household members have jobs outside agriculture
  69. 69. Larger income gap between agricultural and non-agricultural 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Millionsbaht Real per capita income Agriculture Non-agricultural 69ที่มา: NESDB, LFS-NSO. และ World Bank, 2015. Agri income equal to 11% of non-Agri income (2013) 14% • High income disparity between agriculture and non- agriculture…a political pressure for price subsidy 3. Thailand’s agricultural challenges : internal and external
  70. 70. b) Aging farmers: Next 10 year there will be 5 million farmers retiring. Will farming be a promising career for the young generation? 7.2 6.5 2.3 1.1 4.2 7.6 2.7 1.81.9 6.9 2 2.11.8 6.7 2.5 2.5 0 2 4 6 8 15-29 30-49 50-59 60+ Millionfarmers Thai farmers by age groups 1986 1996 2006 2009 70ที่มา: LFS-NSO และ World Bank. 4.1. Thailand’s agricultural challenges : internal and external
  71. 71.  Increasing share of high value exports 71 0 1 2 3 4 5 6 7 8 9 10 ล้านตัน ข้าวขาว 100% ข้าวขาว 5% ข้าวนึ่ง ข้าวหอมมะลิ Source: Thailand Customs office Share 1991 1995 2000 2005 2010 2012 1. Tapioca products (Million $US) 978.9736.2513.3849.7 2,161 .40 2,825 .80 (1) Manioc (cassava) pellet, shredded or sliced (%) 79.7 56.3 38.1 37.7 37.7 38.7 (2) Manioc (cassava) flour (%) 13.1 27.3 30.4 27.6 35.9 35.3 (3) Dextrins and other modified starches (%) 6.9 15.8 30.8 31.6 23.4 22.1 (4) Other tapioca products 0.3 0.7 0.7 3.1 3 3.8 2. Poultry (Million $US) 404389.6614.6 696 1,653 .50 2,195 .80 (1) Chilled or frozen poultry cuts (%) 100 100 64.2 1.9 3.6 8.8 (2) Prepared poultry (%) 0 0 35.8 98.1 96.4 91.2 2. Other livestock (Million $US) 81.6241.1255.8 393628.7871.5
  72. 72. Higher area production shares of high value (Hom Mali) rice ทำเป็นอังกฤษ และ กรำฟ 2550/5 1 2551/5 2 2552/5 3 2553/5 4 2554/5 5 2555/5 6 2556/5 7 2557/5 8 2558/5 9F 2559/6 0F พื้นที่ (ล้านไร่) ข้าว 70.2 69.8 72.7 80.7 83.4 78.2 77.1 69.3 63.4 64.3 + ข้าวนาปี 82% 82% 79% 80% 78% 79% 80% 88% 90% 91% - ข้าวขาว 28% 28% 25% 24% 23% 24% 24% 26% 25% 25% - ข้าวหอมมะลิ 28% 28% 29% 30% 31% 31% 32% 35% 37% 37% - ข้าวเหนียว 26% 26% 25% 26% 25% 24% 25% 27% 29% 29% + ข้าวนาปรัง 18% 18% 21% 20% 22% 21% 20% 12% 10% 9% - ข้าวขาว 17% 17% 20% 19% 21% 20% 18% 11% 9% 9% - ข้าวเหนียว 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% มูลค่า (พันล้านบาท) ข้าว 317.3 321.4 341.7 400.2 461.6 451.1 387.7 317.1 274.9 285.9 ที่มา: สศก.
  73. 73. Agricultural GDP shares by 3 sub-sectors 1951-2013 : (%) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 Fisheries Livestock Crops Source: FAOSTAT.
  74. 74. Area shares by crops 1961-2014 (%) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Other Crops Maize Cassava Rubber, natural Sugar cane Rice, paddy Source: FAOSTAT.
  75. 75. Value added shares by crops 1961-2014 (%) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Other Maize Cassava Sugar cane Rubber, natural Rice, paddy Source: FAOSTAT.
  76. 76. Gross income and cost of farmers with different cropping patterns 319,016.06 15,668.52 124,401.63 6,183.38 396,763.33 20,864.09 146,914.31 7,596.23 262,100.88 68,079.30 86,488.15 22,823.55 Gross income (Baht/HH/year) Gross income per unit of land (Baht /Rai) Total production cost per HH (Baht/Year) Cost per unit of land (Baht/ Rai) Rice mono crop Rice and other crops Vegetables/ Roots crops Income Cost
  77. 77.  Farmers shift towards high value rice (แปลอังกฤษ) 77  Cropping year 2007/08  Cropping year 2012/13 ข้าวเจ้าหอม มะลิ 34% ข้าวเจ้าอื่นๆ 34% ข้าวเหนียว 32% Rice planting area ข้าวเจ้าหอม มะลิ 41% ข้าวเจ้าอื่นๆ 27% ข้าวเหนียว 32% Rice planting area ข้าวเจ้าหอม มะลิ 28% ข้าวเจ้าอื่นๆ 45% ข้าวเหนียว 27% Output (tons) ข้าวเจ้าหอม มะลิ 34% ข้าวเจ้าอื่นๆ 39% ข้าวเหนียว 27% Output (tons) Source: OAE
  78. 78. 0 1 2 3 4 5 6 7 8 9 10 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 ล้านล้านบาท ล้านล้านบาท Real GDP and growth (ref 2002) GDP (ขวา) Agriculture GDP (ซ้าย) Growth Agriculture GDP GDP 1960- 1980 7.0% 9.1% 1980- 2000 3.9% 8.3% 2000- 2014 2.0% 4.1% Source: NESDB.
  79. 79. Is there a future on the farm ?  Yes, Thai agriculture has some strength: abundant land per worker 79 0.00 1.00 2.00 3.00 4.00 5.00 6.00 0 0.2 0.4 0.6 0.8 1 1.2 1.4 Farm land per worker (ha/worker) Malaysia (right bar) Cambodia Indonesia Lao PDR Myanmar Philippines Thailand Vietnam
  80. 80. Transformation to cope with the 5 disruptive force 5 disruptive forces Impact Transformation 1.Rapid urbanization emerging courtiers • Middle class เพิ่ม 2. Aging society • Ageing population • Ageing farmers 3. Technological change • Second green revolution 5. Globalization : trade, investment, politics, social/environmental concerns • Demand for food : diet change • Meat & processed food • Safe & healthy • Better quality • Supply of food • Labor shortage • Abundant land • New varieties; tolerances to drought, disease etc. • Farm management water management etc. New production process New products • Functional foods • Large-scale farms • Effective cooperatives & producer association • New organizations for small holders in some product e.g., non-market coordination (contract farming, partnership between farmer group and agri-business /supermarket , CSO-led farmer groups) • New private standards/ labels • Cross-border investment • Resource conservation • Re-defining government role • New laws 80 4. Climate change • Higher temperature • Extreme weather • Market • Foreign supermarkets: vertical coordination • NTBs • Laws and labels: IUU (human trafficking, over-fishing), animal welfare, carbon–water foot print
  81. 81. Data collection Communication & Decision support data processing system Real time data for a site-specific farm satellite image + GPS…plot boundary Weather forecast DronLand leveling: GPS/ laser Farming4.0

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