Applied Geography formerly Rural Training Center, Thailand

2008 Dec 15 Chasing the Market 2008: Small Farmers Lose

Dec 15, 2008

When small rural family farmers switch from subsistence farming to chasing the market as commercial farmers, they become big time gamblers. And just as in gambling, a few can hit it big once in a rare moment, but most tend to lose, and some lose everything.

Rice farmers seemed to be in line for a big win earlier this year. Rice harvest shortfalls led key rice exporting nations to announce they would limit or curtail exports to make have enough rice to feed their own people. Thailand, as the #1 rice exporter, reveled in the rapidly escalating price for rice. This was like the windfall profits of the oil companies. Farmers in Thailand rejoiced and planted even more rice. Some urban office workers left the city. They lamented that farmers were lucky as the office workers hadn?’t received any pay increases or bonuses this year. They returned to the family farm to ?“make it big?” selling rice. [Unfortunately, many farmers with high earnings also were burdened with large outstanding debts. How long will the profits remain in their hands?]

Some Thai leaders talked about starting a rice cartel ala OPEC to keep the price of rice high so they could rake in profits to offset the high cost of Thailand?’s oil imports. But the reaction was shock. With millions facing starvation and rice prices soaring, a rice cartel formed to keep high prices was not a welcomed idea. The plan drew little international support.

Meanwhile, the Thai government was buying rice from poor rural farmers are government guaranteed prices which had been increased based on the soaring international market rice price. At the same time, government to government rice contract deals were being struck to lessen the impact of soaring rice prices for key importers whose constituencies were less able to pay the inflated prices. The Thai government bought at higher prices and must now sell at lower prices. In the long run, the nation and the small farmers lose.

Food crops, unlike oil, do not have as finely tuned production statistics and mechanisms. There can be good times of bumper crops as well as crop failures. The annual production is not so easily predicted. Crop production cannot be turned on and off as can oil production. Crop production is more sensitive to weather conditions than oil production. Raw crops don?’t store for long periods as oil can be stored and held off the market until supply / demand conditions are more favorable. If the crops spoil as the farmers wait for good market conditions, the farmers lose.

Now, with the global economic crisis in progress, consumption in the West is slowing. Demand is decreasing, and the effects of the slow down are starting to trickle farther and farther down the line to more and more indirect levels. As car sales shrink, so does the need for tires. Less rubber is needed, and the world price dropped. For a while, many farmers in Thailand invested in planting rubber trees to make it rich. For a while, Thailand was the #1 natural rubber exporter. We had been approached with the idea of getting into planting rubber trees as a 7 year investment a few years ago. We stuck to our focus on food security for self-sufficiency rather than chasing after the money. Now, some rubber producers are cutting down rubber trees to reduce production to shorten the supply in the hopes of forcing the market price up. Indeed, rubber exporting countries met and agreed to try to limit production AND set a minimum price limit for selling rubber on the international market. But small farmers desperate to earn money may not hold the line. In the end, the farmers lose.

The rice price escalator also reversed itself when other exporting nations reported new harvests looked ample enough to resume exporting. As the supply increased, the prices dropped. Thai government stockpiles needed to be cleared from warehouses to make room for the new harvest. Caught in the middle, government agencies now have to sell rice bought at higher support prices in declining markets. The lower international price for rice makes it unreasonable to buy new rice at a higher government support price. But farmers are demanding to get paid a higher price for their crop. They see others getting rich at their expense and want a piece of the pie.

Corn is facing similar challenges. Modern food processing standards are difficult for small rural farmers to meet. Recently, buyers stipulated the corn must be dried to 10% moisture content. Most small rural farmers cannot meet this standard. But they must sell their corn in order to earn money and survive. Add to this the complicating factor of fluctuating market prices and the situation becomes a real headache. The debate about export driven economies and globalization vs. self-sufficient agriculture is fueled by these events. Social unrest, demonstrations, along with frustration and anger are mounting in many countries.

Chasing the money is driven by consumerism. Reduced to basic necessities vs. consumer wants/desires, the basics are similar to most living organisms: space, water, food, shelter. For a small rural farm family, space is having enough land to grow the food they need to survive. Water is needed for drinking, growing crops, washing, and cooking. Food can be plant or animal matter and is most often a mixture. Shelter can range from crude to elaborate, but Buddhism advocates the middle way. How you find an appropriately balanced life-style is challenging. For us, it was based on our monetary budget. So long as we lived BELOW our income, we seemed ok. The challenge is to resist spending more than you earn. That is hard to do in Western-style economies with easy credit and a steady deluge of advertising. It takes a lot of mental discipline and intestinal fortitude to resist. Most people in industrialized countries would be hard pressed to live a minimalist life-style.

A student once pointed out, ?“self-sufficiency and sustainability for small rural family farms is great for an individual or family located in the countryside. But it doesn?’t do much good for feeding people living in cities.?” The point is well-taken. We are not out to solve the problems of the entire world. But agri-businesses dominates the food production and supply to large cities, not small rural family farmers.

If and when small subsistence farmers have a surplus, and local market conditions are right, they could sell these surpluses to earn money. But this is where many of them lose out. They end up competing with other small farmers with similar surpluses. They all need to sell the surplus before it spoils, so the prices drop rapidly and soon no one earns enough to make it worthwhile. The quantities involved are often too small from any one farmer to attract commercial buyers.

However, if cooperation is fostered among small farmers rather than competition, the picture could change. Groups of small farmers pooling their surpluses and selling as a group in a timely manner could attract a commercial buyer. But cooperation among individuals has its challenges. It is not so easy to attain, hence the limited success of this model. In rural Thailand, the extended family mutual assistance social network is a potential that should be developed beyond the family to a village level. If they fail to do this, the small farmer loses.

In Thailand, the poorest 20% of the population earns 4% of the total national income. Urban workers fair better on the wage scale. And as in many countries, the cost of living in cities is significantly higher than rural areas. Modern mass media and advertising creates the desire for material possessions well beyond the basic necessities of life. Money seems to be the key to success and happiness. The tragic break-up of rural families begins as one member after another goes off to find work in the cities and sometimes overseas. Young females fall victim to some of the oldest tragedies of trafficking and prostitution.

The RTC-TH strives to create alternatives to this tragic scenario by empowering people to make effective choices toward self-sufficiency and sustainability. This is not a silver bullet magic solution. It is not a one size fits all. It probably won?’t work for everyone; nothing ever really does. Our focus is the family. It is the basic educational unit as well as the basic economic unit in our programs. The key components of a small rural family farm are simple: a small family and a small farm.

In prior times, high infant mortality was dealt with by having large numbers of offspring as a hedge to offset early death and assure the care of elders. Large numbers of survivors resulting in fragmenting family farms into smaller and smaller units incapable of providing for a family. This leads to clearing marginal lands which are more prone so soil erosion and poor crop yields. It is generally a downward spiral. The small farmer loses.

With modern health care, infant mortality has declined in Thailand. But generations of customs and ideas about family size and composition change more slowly, especially in the countryside. Education worldwide shows an inverse relationship: Increased education often leads to smaller family size. Industrialized nations offset reduced farm labor with machinery. This is an expensive path for Thai farmers. It requires spending more than they earn. The small farmer loses.

The RTC-TH advocates sustainable agricultural practices to improve soil and productivity. This makes it possible to increase crop yields without increasing the amount of cultivated land. A couple years ago we got 53% more rice from the same paddies on our demonstration family farm WITHOUT using synthetic agricultural chemicals (e.g. no commercially sold fertilizers, pesticides, or herbicides). This resulted in having about 15 bags (~30 kg / 66 lbs each) at the end of the year. Our family held this in reserve in case other extended family members ran short of rice. [It turn out 5 bags were needed for that cause. The bags were repaid the following year. And we still have a 15 bag reserve. Not all families are this fortunate.]

Many fragmented rural farm families only have elderly grandparents and very young grandchildren living in the village. They are not well suited to work the farm. They often sit waiting for family members to send money home from the city or from overseas jobs. The elderly grandparents bear the burden of tending to the fields as best they can. They rely on extended family relationships for mutual labor assistance at critical times of the farming cycle. But the yields are often insufficient to bring commercial success. Most rural families attempt to be commercial farmers. Thus, they focus on a key cash crop (e.g. corn or chilies in our area) for the dry season. The rice planted in the wet season is for family consumption. Commercial agriculture moves small rural family farms farther away from natural biodiversity. This is an unsound ecological path to follow. It will lead to further decline in soil quality which results in lower crop yields (now and in the future). Modern farm response is to use newer, and ever more expensive agricultural chemicals. Poor rural Thai farmers are expected to spend more while getting less in return. The handwriting is on the wall. The small farmer loses.

Those with enough land, money, and foresight planted teak as a long term investment. The Thai government banned teak logging in the forests about 2 decades ago. This created a shortage in supply and an increase in demand/price. But teak needs a minimum of 10 years (20 years is ideal) before it can be harvested. And now, the global economic decline has slowed the export market demand for teak furniture. The small farmer loses.

The RTC-TH sees commercial farming as unsuitable for small rural family farms. We believe it is better to keep the family together, on the farm, in the village. If families can be kept together, life is good. When families are together, villages have a better chance to survive and be viable social systems. When Thai villages are viable and stable, nations and governments, then Thailand can truly be a ?“Land of Smiles.?”