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A Composite Index of Market Access for the Export of Rice from Thailand

Report by Dechachete, Thawatchai/ICTSD, 2009

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This study of the Composite Index of Market Access (CIMA) of the rice industry of Thailand is part of the International Centre for Trade and Sustainable Development (ICTSD) pilot project on market access for three selected countries (Uruguay, the United States and Thailand). The objective of this project is to build an indicator of market access of main rice importing countries that would include not only tariffs but also other barriers affecting market access for agricultural product such as sanitary and phytosanitary (SPS) measures, technical barriers to trade (TBT), private standards, excise taxes in importing countries and other non-tariff barriers. This tool should be of assistance in trade negotiation and giving a clear indication of whether any particular negotiated outcome result in a real liberalization. In Thailand’s case the three import markets which are the US, the Philippines and South Africa have been selected. These countries are major markets for three major types of rice that Thailand exports to the International market.

A Composite Index of Market Access
for the export of rice from Thailand


Thawatchai Dechachete
Ministry of Agriculture and Cooperatives, Government of Thailand


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October 2009│ ICTSD Programme on Agricultural Trade and Sustainable Development




Table of Contents
1. Introduction ................................................................................................
1.1 Measurement Units used..........................................................................
1.2 Selected Period ........................................................................................
1.3 Data sources.............................................................................................
2.Thailand Rice Sector....................................................................................
2.1 Structure of the industry ...........................................................................
2.2 Nature of the commodity traded..............................................................
2.3 The process of exporting.........................................................................
2.4 The main barriers as seen by the industry .............................................
3.Price levels.................................................................................................
3.1 Price to the farmer (Farm Gate Price).....................................................
3.2 Price at the processor level.....................................................................
3.3 Export Price…………………....................................................................
3.4 Price in the importer market....................................................................
3.5 Exchange rates used in converting prices .............................................
4.Costs..........................................................................................................
4.1 Cost of production...................................................................................
4.2 Cost of transportation……………............................................................
4.3 Cost of processing...................................................................................
4.4 Cost of overseas shipping.......................................................................
4.5 Cost of compliance .................................................................................
5.Subsidies and taxes....................................................................................
5.1 Subsidies to domestic producers and to domestic processors…….........
5.2 Subsidies to firms conditional on exports.................................................
5.3 Taxes in exporting country.......................................................................
5.4 Taxes in importing country.......................................................................
6.Building Price ladders.................................................................................
7.Calculation of the CIMA..............................................................................
8.Summary ...................................................................................................
References.....................................................................................................


*Mr.Thawatchai Dechachete is an Economist working as a Chief of
Agricultural Negotiation related to WTO Sub – Division, Office of Agricultural
Economics.
The authors thank Economists and Plan and Policy Analysts, Office of
Agricultural Economics, for their collaboration in the elaboration of this study


Abbreviations and Acronyms
AFTA – ASEAN Free Trade Agreement
ASEAN – Association of South East Asian Nations
BMA – Barriers to market access


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CIF – Cost, insurance and freight
CIMA – Composite Index Market Access
EU – European Union
FOB – Free on board
GI – Geographical Identification
GMP – Good Manufacturing Practice
HACCP – Hazard Analysis Critical Control Point .
HS – Harmonised System Classification
ISO – International Organisation for Standardisation
MFN – Most Favoured Nation
OECD – Organisation for Economic and Co-operation and Development
OAE – Office of Agricultural Economics
SPS – Sanitary and phytosanitary
TBT – Technical barriers to trade
TRQs – Tariff rate quotas
US – United States
WTO – World Trade Organization


List of tables
Table 1 Cultivation areas, production and yield of major rice and second rice


in 2006 – 2009..................................................................................
Table 2 Rice export by Thailand in 2006 – 2008……………………………….
Table 3 Export market for high quality rice of Thailand in 2008………………
Table 4 Export market for medium and low quality rice of Thailand in 2008..
Table 5 Export market for parboiled and glutinous rice of Thailand in 2008...
Table 6 Tariff rates for rice imports by trading countries……………………..
Table 7 Paddy rice 5% humidity pledging scheme………………………….
Table 8 Farmers' selling price of milled rice, wholesale price and FOB
export price in 2006 – 2008……………………………………………..
Table 9 Farmers' selling price of Jasmine rice, wholesale price and FOB
export price in 2006 – 2008……………………………………………..
Table 10 Comparing prices between Farmers' selling price of paddy 5%
humidity and mortgage price in 2006 – 2008……...
…………………
Table 11 Production ladder costs comparisons among Jasmine rice,
white rice 25% and parboiled rice in 2006 – 2008…………………..
Table 12 Price ladder of Thai Jasmine Rice exports to the US
in 2006 – 2008………………………………………………………….
Table 13 Price ladder of white rice 25% exports to the Philippines
in 2006 – 2008…………………………………………………………..
Table 14 Price ladder of Parboiled Rice exports to South Africa
in 2006 – 2008…………………………………………………………..
Table 15 Jasmine rice exports to the US………………………………………..
Table 16 White rice 25% exports to the Philippines……………………………
Table 17 Parboiled rice exports to South Africa……………...…………………
Table 18 Summary of the BMAP and CIMA…………………………………….


List of Diagram


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Diagram 1 Rice production distribution..…………………………………………


Executive Summary


This study of the Composite Index of Market Access (CIMA) of the rice
industry of Thailand is part of the International Centre for Trade and


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Sustainable Development (ICTSD) pilot project on market access for three
selected countries (Uruguay, the United States and Thailand). The objective
of this project is to build an indicator of market access of main rice importing
countries that would include not only tariffs but also other barriers affecting
market access for agricultural product such as sanitary and phytosanitary
(SPS) measures, technical barriers to trade (TBT), private standards, excise
taxes in importing countries and other non-tariff barriers. This tool should be
of assistance in trade negotiation and giving a clear indication of whether any
particular negotiated outcome result in a real liberalization.


In Thailand’s case the three import markets which are the US, the Philippines
and South Africa have been selected. These countries are major markets for
three major types of rice that Thailand exports to the International market,
Thai Jasmine rice, white rice 25% and parboiled rice respectively.


All data used in this study are from official, private and international sources.
Mainly, official data are secondary data compiled by Office of Agricultural
Economics (OAE) under Ministry of Agriculture and Cooperatives and
Customs Department under Ministry of Finance. Private data are collected by
interviewing the rice business entrepreneurs both processors and exporters in
Thailand. And international data are from the WTO secretariat and
www.trademap.org.


This study comprised of 8 chapters as follows:


Chapter 1 describes the introduction of this study, including the data sources
used, the selected period and the unit of measurement.


Chapter 2 illustrates how Thai rice industry is important to Thailand due to 16
million Thai people holding farmland only 2.4 – 3.2 hectares per household
depending on this sector. Thailand has produces 29.61 – 32.09 million tonnes
of long grain rice (Indica type) annually with 9.18 – 9.24 million hectares of
cultivation areas.


Rice processing and exporting in Thailand are operated by private sector.
Regarding rice processing, there are more than 40,000 mill houses in
Thailand. A major type of rice exporting commodity of Thailand is white rice.
Around 45 percent of total rice productions are export worldwide.
Thailand has potential to export all rice qualities whether or not premium
quality like Jasmine rice, medium to low quality like white rice and parboiled
rice.


Barriers to trade for rice export perceived by Thailand are high level of applied
tariff rate, monopolised state – trading enterprises and domestic supports for
rice commodities by developed countries.
Chapter 3 describes price level of rice within market chain such as farmers’
selling price, Free on board (FOB) and Cost, insurance and freight (CIF).price.


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Chapter 4 gives an overview of cost stemming from export procedure
including cost of production, cost of processing, cost of domestic
transportation, cost of international transportation and other costs.


Chapter 5 highlights tax rate domestically applied to rice commodities,
domestic support. This chapter indicates that Thailand has no tax rate or
domestic support applied to rice commodities. In addition, it also describes
how major importing markets imposed import tariff and other fees and duties
to these commodities.


Chapter 6 and 7 illustrate the construction of the price ladders and the
calculation of CIMA in three selected markets. It reveals that the average
Barriers to Market Access (BMA) are 7.95, 25.8 and 0.13 percent for the US,
the Philippines and South Africa respectively. This also corresponds to the
average CIMA of the three markets of 92.05, 74.2, 99.87 percent accordingly.


Chapter 8 gives details about the summary of this study. It also shares the
constraints found by researchers such as the problem in estimation of cost of
export in each level. Moreover, it also indicates that the calculated CIMA lacks
of power to explain the trade barriers from tariff rate quotas (TRQs) policy,
import commodities specification and import licensing auction by some
importing countries.


1. Introduction


This study of the Composite Index of Market Access (CIMA) of the rice
industry of Thailand is part of the International Centre for Trade and
Sustainable Development (ICTSD) pilot project on market access for three
selected countries (Uruguay, the US and Thailand). The objective of the


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project is to build an indicator of market access of the main rice importing
countries that would include not just tariffs but other barriers that affect market
access for agricultural product as sanitary and phytosanitary (SPS) measures,
technical barriers to trade (TBT), private standards, excise taxes in importing
countries and other, non-tariff barriers. This tool should be of assistance in
trade negotiation, giving a clear indication of whether any particular negotiated
outcome result in a real liberalization.


In the case of Thailand, the three import market selected, the US, the
Philippines and South Africa. These countries are the major markets for the
three major types of rice that Thailand exports to the International market,
Thai Jasmine rice, white rice 25%, parboiled rice, respectively.


1.1 Measurement Unit Used
Rice volume on this study are mainly expressed in milled rice equivalent,
using the conversion rate provided by Office of Agricultural Economics (OAE),
Thailand, which is 1 ton of paddy rice equivalent to 0.66 ton of milled rice.


1.2 Selected Period
Calendar of the year 2006, 2007 and 2008 have been selected for this study.


1.3 Data Sources
All data used in this study are from official, private and international sources.
Mainly, official data are secondary data compiled by OAE under Ministry of
Agriculture and Cooperatives and Customs Department under Ministry of
Finance. Private data are collected by interviewing rice business
entrepreneurs both processors and exporters in Thailand. And international
data are from the WTO secretariat and www.trademap.org.


2. Thailand Rice sector
2.1 Structure of the industry


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Rice is the most important staple crop for Thailand because farmers around
3.72 million households (16 million people) or 65 percent of total agricultural
households (5.76 million households) are in this industry. Most of Them are
small-scaled with only farmland around 2.4 – 3.2 hectares (15 – 20 rai*) per
household.


Thai farmers cultivate rice twice a year: in rainy season, which is known as
major rice, and in summer, which is known as second rice. Total farmland for
major rice cultivation in 2006 – 2009 is around 10.82 – 11.23 million hectares
in average. The major rice is accounted for 9.18 – 9.24 million hectares or 84
percent of total cultivation areas. The rest is for the second rice which is
around 1.58 – 2.059 million hectares or 16 percent of total cultivation areas.
(See Table 1)


Thailand has produces 29.61 – 32.09 million tonnes of rice every year. Total
paddy production will be kept as seeds for next crop around 4 – 5 percent.
The rest will be sent directly to mill houses 40 percent, middlemen 30 percent,
agricultural institutes 8 percent and government mortgage scheme 17
percent. The rest of paddy production apart from seeds will be destined to mill
houses to process into milled rice. Private mill houses, co-operatives and
villages’ small – scaled mill houses will sell their product about 50 percent via
wholesalers to export. And 50 percent remaining which will be used for
domestic consumption and stock keeping will be selling via wholesalers and
retailers. (See Diagram 1)


According to the world export of rice over the last 30 years, Thailand remains
at the number one rank of rice exporting countries of the world. In the average
of the last three years (2006 – 2008), Thailand exports rice around 40 – 45
percent of total rice production. Thai rice export tends to increase from 7.494
to 10.216 million tonnes – milled equivalent or 36.32 percent increase from
the previous year. Rice in form of Thai Jasmine rice (Also known as Hom Mali
rice), white rice, parboiled rice and glutinous rice are annually exported in
average 2.7 4.0 2.0 and 0.3 million tonnes – milled equivalent respectively
(See Table 2). Most of rice exports from Thailand are in white milled form.


In 2006 – 2008 the Government of Thailand had launched the rice pledging
scheme aiming to resolve selling price deterioration facing by farmers during
harvesting period. Farmers was requested to bring their product to mortgage
with the concerned government agency with mortgage price that determined
mainly by average annual price in previous year. Farmers were able to
redeem their product when the market price was higher than the mortgage
price. It is found that both prices are not quite different. As a result, it may be
concluded that the rice pledging scheme are not categorised as a domestic
support scheme. (See Table 3)


*Rai is unit of land in Thailand: 1 hectare = 6.25 rai
2.2 Nature of the commodity traded


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Rice cultivated in Thailand is mainly Indica type (long grain). It is categorised
into:


• Non – glutinous rice: Thai Jasmine rice, in particular which is the
highest quality grade of Thai rice. It is soft and good taste. Its yield is
quite low. Thai Jasmine rice is possible to cultivate only in north –
eastern part of Thailand with only major rice cultivation.


• Glutinous rice: It has white or black colour. Mostly are for domestic
consumption with few exports. It also has a Geographical Identification
(GI) product for niche market such as Doi Saket rice and Keaw Ngoo
sticky rice.


Thai rice is a high quality grade and possible to process into non – glutinous
rice compliance to high international standards for all grades of products from
highest grade (100 percent of no broken rice), 5, 10 and 15 – 25 percent
broken rice and broken rice grade. It is due to the fact that Thailand has lots of
mill houses which are highly efficient in processing in accordance with Good
Manufacturing Practice (GMP), International Organisation for Standardisation
(ISO) and Hazard Analysis Critical Control Point (HACCP).


2.3 The process of exporting
Basic steps in the process of exporting Thai rice are:


Cultivation
Rice cultivation in Thailand is classified as follows:


• Major rice cultivation is defined for rice cultivated from May 1st to
October 31st except in the southern part of Thailand where rice is
cultivated from June 16th to February 28th. Farmer’s cultivation relies
mainly on rainfall up to 75 percent of total cultivated area. Only 25
percent of total cultivated areas are under the irrigation system. Major
rice could be planted in all provinces of Thailand. In the past 3 years
(2006 – 2008), the rice planted areas are declined from 9.24 to 9.18
million hectares in 2006 or declining at the rate of 0.34 percent
because rice cultivation was replaced by substitute energy plant
cultivation, for example oil palm and para rubber. The paddy production
reduced from 23.53 million tonnes in 2006 to 23.30 million tonnes in
2008 or reduced at the rate of 0.49 percent due to the rice cultivation
area reduction and the lower yield caused by drought in the cultivation
period and flood in the harvesting period. Yield dropped from 2.54 to
2.53 tonnes per hectare or 0.15 percent reduction rate. In 2009 the rice
cultivation area is 9.18 million hectares increased 1 million hectares or
accounted for 0.06 percent from 2008. However rice production and
yield tend to decline from 2008 around 0.31 and 0.38 percent
accordingly.


• Second rice cultivation is defined for rice cultivated from November
1st to April 30th except in the southern part of Thailand where rice is
cultivated from March 15th to June 15th. This kind of cultivation is in
irrigable area and depends mainly on water from irrigation system and


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swelling water canal. This helps farmers to cultivate 2 – 3 times a year
with considerately less risk from drought comparing to the major rice
cultivation. In the past 3 years (2006 – 2008), the rice planted areas,
rice product and yield tend to increase due to the increase in planted
areas from 1.58 to 2.04 million hectares, rice product increasing from
6.75 to 8.79 million tonnes and yield increasing from 4.26 to 4.29
tonnes per hectare or increasing 13.69, 14.09 and 0.35 percent
respectively. In 2009 the estimated rice cultivation areas, production
and yield are 1.98 million hectares, 8.41 million tonnes and 4.24 tonnes
per hectare respectively. They all decline from 2008 around 3.12, 4.28
and 1.2 percent accordingly due to brown plant hopper outbreak (See
Also Table 1).


Harvesting
Starting from the rice flowering period, farmers will check water level, insects
and other pests in the paddy field so as to plan for harvesting around 28 – 30
days after that. Once water is being drained out completely from the paddy
field, harvesting will be carried out in combination of labour around 40 percent
and machines, which are capable to harvest and thresh simultaneously,
around 60 percent. Harvesting periods are as follows:


• For major rice crop is through July to May of next year. About 95
percent of its production will be harvested between November and
December.


• For second rice crop is through February to November. About 60
percent of its production will be harvested from March to July.


Milling
There are more than 40,000 mill houses located in all areas of Thailand. Most
of non – glutinous rice mill houses are located in the north – eastern part of
Thailand. Their capacities are range from 3 – 5 tonnes per day to more than
1,000 tonnes per day. All mill houses in Thailand have total potential
capacities to mill total rice product only in 1 month since their capacities are
more than the amount of paddy rice which farmers can potentially produce in
one period. After being harvested, paddy rice will be transported to mill
houses. Then, milled rice will be distributed to sell domestically around 33
percent, export around 50 percent, process around 7 percent and keep as
stock around 10 percent.


Trade
Thai rice export in 2006 – 2008 is around 7.5 – 10.2 million tonnes or 50
percent of total rice production. Major Thai rice export markets classified by its
quality are:


• High quality rice export markets for Jasmine rice and white rice, are the
US, China, Malaysia and Singapore. (See Table 3)


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• High quality rice export markets for white rice are Iraq, Ivory Coast,
Mozambique and Japan. (See Table 3)


• Medium quality rice export markets are Malaysia, Indonesia, Australia
and Republic of Korea. (See Table 4)


• Low quality rice export markets are the Philippines, Senegal, Ivory
Coast and the Netherlands. (See Table 4)


• Parboiled rice export markets are Benin, South Africa, Russia and
Belgium. (See Table 5)


• Glutinous rice export markets are Indonesia, Malaysia, the US and
Taiwan. (See Table 5)


Domestic consumption
Rice products around 15 – 16 million tonnes paddy (9.9 – 11.0 million tonnes
equivalent milled) or 40 – 50 percent of total rice product are for domestic
utilisation in terms of consumption, seeds for next crop, raw material for
animal feed industry and processing products. The rest is for export and
keeping as stock for domestic food security.


2.4 The main barriers as seen by the industry
The main barriers as seen by Thailand are prioritised as follows:


• Tariff barriers
Rice is one of the most protected commodities besides sugar. Import
tariff rates implemented by trading countries, in particular developed
countries which consumers are affordable to buy high price food, are
set quite high. This becomes one of the most powerful barriers to rice
export by Thailand (See Table 6).


• Monopoly importers
One of trade barriers to rice imports is state trading enterprises which
are the government agencies monopolized rice import. Thailand’s
trading countries use this mechanism are Japan, Taiwan, China, South
Korea, Philippines, Indonesia and Malaysia. Measures which monopoly
importers use are categorised into 3 types:
(1) Quota restriction: Rice is a TRQs commodity in countries using


monopolised importers system. Mostly, rice import quantities are
restricted solely by monopoly importers. Out of quota imports are
hardly occurred due to high out of quota tariff rates.


(2) Rice import specification restriction: It is not allowed to import
rice according to real demand. Specified types of rice for import
mainly are not major rice types for domestic consumption, for
instance, Japan, Taiwan and South Korea limit rice imports only
used by food industry, not allow high quality rice import for
household consumption, meanwhile Philippines allows to import
only low quality rice 25 percent. This becomes a major constraint
for Thailand to export high quality rice to Philippines.


(3) Rice import auction: Rice imports require import license from rice
importers. It can be acquired by auction. Consequently, rice
importers will bear a higher cost from paying for the import license.


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This cost brings rice import price and domestic rice price nearly at
the same level.


• Domestic Subsidies by Developed Countries
Rice is one of agricultural commodities which are domestically
subsidised by developed countries. According to the study of
Organization for Economic and Cooperation and Development
(OECD), it is found that in 2002 – 2004 OECD member countries have
applied domestic subsidy to rice commodities up to 75 percent of total
agricultural income earned by these countries. The high level of
domestic subsidy to rice commodities by developed countries have
distorted international rice markets by encouraging rice producers in
developed countries to produce more than their potential capacity.
Additionally, this has affected rice prices in the world market to become
lower than normal situation.


3. Price levels
3.1 Price to farmers (Farm gate price)


Farm gate prices of paddy 5 percent and Jasmine paddy in 2006 –
2007 tend to increase as follows:


• Farm gate price of paddy 5% increases from 6,533 baht per tonne
(173 USD per tonne) to 9,848 baht (298 USD per tonne) in 2009 or
31.25 percent increase.


• Farm gate price of Jasmine paddy increases from 8,032 baht per
tonne to 12,536 baht/tonne (379 USD per tonne) in 2009 or 24.93
percent increase.
(See Table 7)


3.2 Price at the processor level in this research will use wholesale price in
Bangkok market for milled rice due to the fact that this price is normally set by
exporters on behalf of rice brokers who are a match – maker in trade between
millers and wholesalers in Bangkok and/or exporters. In addition, rice brokers
and millers have the same business owner. Rice brokers have the information
about buying prices of exporters and selling prices of millers. So, they can
facilitate them to make a deal between millers and exporters or millers and
Bangkok wholesalers. Also, they will estimate sale and service cost,
transportation cost and profit in order to set mill house price.


3.3 Export price is the price quoted by exporters. Normally, this price will be
posted in terms of FOB price at ports in Thailand. It will be determined by
demand and supply inside or outside Thailand, competition situation in the
world market and exchange rate, for instance, FOB price for milled rice 5%
increased from 11,583 baht per tonne (307 USD per tonne) in 2006 to 11,210
baht per tonne (327 USD per tonne) in 2007. Value in USD term was high but
low in baht term due to the baht appreciation. (See Table 8 – 10)


3.4 Price in importer markets


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• CIF prices are used in this research. The average unit value is
calculated from volume and value of import statistics from trademap
website.


• Excise taxes, value added taxes, other fees and duties are compiled
from “Country Trade Policy Review” by the US, the Philippines and
South Africa from WTO website.


• Profit margin is estimated around 30 percent according to normal
business profit which is composed of importer’s profit and other
expenses, for instance, custom fee and transportation cost to
distributors.


• Price premium for meeting private standard is not available according
to the interview with Thai rice exporters.


3.5 Exchange rates used in this research are annual reference rate from the
Bank of Thailand database. For the analyzed period, the USD – Baht
exchange rate used was 37.7296, 34.2813 and 33.0915 baht for 2006,
2007 and 2008 accordingly.


4. Costs
4.1 Cost of production will be categorised into 3 groups according to
cultivation methods:


• First method is labour intensive with highest cost compared to the rest
because farmers have to cultivate rice seedlings in advance and
transplant them into paddy field. It also requires water sources
proximity to cultivation areas so as to facilitate farmers to control water
level appropriately in their areas. Production yield by this method is
quite high.


• Second method is quite similar to the first one but requires germinated
seeds instead of rice seedlings. In order to prepare those seeds,
farmers have to soak them into water in covered storage to make it
ready to sow them in prepared cultivation areas. This method also
requires sufficient water. Most of farmers using this method are in
irrigation areas.


• Last method requires only rain as a source of water. Most of them are
used in high plateau or plain areas with limited water sources. Farmers
around 70 percent of total farmers in Thailand are using this method.
Farmers using this method exposed to risk from drought or flood,
seeds with low possibility to grow and pests. This method has a high
cost of production because of the lowest yield compared to other
methods. Although Thailand is the number one rice exporting country
in the world, they got lower average yield compared to other countries
due to cultivated areas prone to risk from inappropriate available water
quantity.


According to production factors such as organic fertilizers, pesticides,
herbicides, plant diseases and fuels used in water pumping machines, they
are varied depending on farmers’ budget. Moreover, household’s labours are


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often unavailable in harvesting period. As a result, farmers rely heavily on
harvesting machines with higher cost in substitution of labours. If paddy is
ready for harvest and harvesting machines are unavailable in that time, rice
production will be low quality. And farmers will gain low prices due to high
percentage of broken rice.


It is obvious to acknowledge that Thailand has various costs of production. In
this research will use farm gate prices or farmers’ selling prices compiled by
Office of Agricultural Economic of Thailand as criteria in calculation of cost of
production for milled rice in terms of Jasmine rice, white rice 25% and
parboiled rice as follows (See Table 11):


• Cost of production of Jasmine rice in 2006, 2007 and 2008, which
are farmers’ selling prices of milled rice, equal to 323, 392 and 574
USD per tonne respectively.


• Cost of production of white rice 25% and parboiled rice in 2006,
2007 and 2008 equal to 262, 291 and 542 USD per tonne respectively.


4.2 Cost of transportation
When millers sell products to exporters or importers, transportation cost which
depends on distance to wholesalers’ and exporters’ warehouses will be in
average 500 baht per tonne (15.11 USD per tonne).


4.3 Cost of processing
Due to unavailable confidential commercial information of private processors,
the estimation of processor cost which incurred processor selling price will be
as follows:


• When millers have received offer prices from exporters, they will set
their buying prices of paddy from farmers by excluding milling cost
according to rice conditions and their milling cost which varies
depending on their milling technology. Once paddy is milled, its main
products will be head rice and by – products such as husk ม grist and
bran.


When paddy passes milling process, the main product will be head
rice, for instance, rice 100% and 5%. In this system, there will be a
colour sorter to make rice clean and white so as to get premium grade
rice. When buying paddy, millers will take into account considerately
the head rice and paddy humidity which is not more than 15 percent.
The higher the paddy humidity, the lower buying price farmers
receive.


Moreover, there will be sales and services cost including required
profit and profit from by – products such as husk. When milling cost,
selling expenses, management cost and profit are summed up, it will
be processing price.


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Milling costs will be different between parboiled rice and white rice
due to the complicated process of the first type. Before milling,
parboiled rice will be passed a steaming process. Then it has to be
exposed to sunlight and steaming again to reduce humidity. When
paddy passing all process is milled, rice will not be broken. But there
will be less grist. Also, millers will take care of sales and services
expenses since they request middlemen to be responsible for sending
products directly to exporters. Parboiled rice is for export only since
Thai consumers do not consume this kind of rice.


4.4 Cost of overseas shipping
This cost is estimated from margin between CIF and FOB prices. The freight
cost to transporting ship is approximately 385 – 400 bath per tonne (11 – 12
USD per tonne).


4.5 Cost of compliance
This cost is a burdensome of exporters. It is separated into 2 parts which are:


• Cost to process according to importers’ specification. DNA inspection
cost in case of Jasmine rice will be included and charged 1,400 baht
per 21.5 tonnes of first shipment and 18 bath per tonne (0.54 USD per
tonne) for the rest.


• SPS cost such as fuming cost which will be charged 30 baht per
tonne (1.00 USD per tonne).


5. Subsidies and taxes


5.1 Taxes and subsidies in exporting country
Thailand has no domestic tax and no domestic subsidies for rice.


5.2 Taxes in importing country
In this research, 3 major rice export markets with one major rice commodity
each are the US – the number one export market for a premium quality rice,
Jasmine rice, the Philippines – the number one export market for low quality
rice, rice 25 percent broken and South Africa – the number two export market
for parboiled rice. Benin as the number one export market for parboiled rice is
not selected because Benin re – exports to Nigeria and data is unavailable for
research period.


• US
The US apply import tariff rate for Thai rice under HS 1006.30 – white rice
with 11.2 percent MFN rate. They do not impose excise tax for rice
commodities. Some states collect sale taxes with exemption for food
commodities.
• Philippines
Although Thailand and Philippines are ASEAN member countries,
Philippines still categorises rice commodities under highly sensitive list
which is not accordance with market access under AFTA. They apply
import tariff rate for Thai rice under 1006.30 – white rice with 50 percent
MFN rate. Moreover, they classify rice commodities under the minimum


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market access under Annex 5 of Agreement of Agreement on Agriculture
of Uruguay Round result. So, Philippines imports rice solely under quota
system. They do not impose excise tax for rice commodities.
• South Africa
South Africa applies import tariff rate of rice 0 percent. They impose a
value added tax at 14 percent goods and services.


6. Price ladders of Thai rice
(See Table 12 – 14)


7. Calculation of the CIMA
The Barriers to Market Access (BMA) identified by Thailand to export rice for
the three market analysis are:


BMA = EDT + MTD + (PLC - PLP) + SPC
Where
EDT: Excise tax importing countries;
MTD: Import duties and other charge;
PLC: Cost of meeting private standard for export;
PLP: Price premium for meeting private standard;
SPC: Cost of meeting health and safety standards;


The BMA as a percentage is calculated as:
BMAP = BMA/PRX * 100
Where
PRX: Final selling price for the exporter.


This allows the CIMA to be calculated as the degree of market access.
CIMA = 1 – BMAP


7.1 The CIMA of Thai Jasmine rice exports to the US are:
(See Table 15)


7.2 The CIMA of Thai white rice 25% exports to the Philippines are:
(See Table 16)


7.3 The CIMA of Thai parboiled rice exports to South Africa are:
(See Table 17)


The summary of the BMAP and CIMA are:
(See Table 18)


8. Conclusions
This research aims to demonstrate the CIMA calculation for three major types
of Thai rice which are Jasmine rice, white rice 25% and parboiled rice,
exporting to three major markets which are the US, the Philippines and South
Africa respectively.


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It is not so surprising that the estimated CIMA is quite high in free trade
market like South Africa (CIMA = 99.87 percent) following by the US which is
moderate degree of market access (CIMA = 92 percent). And the lowest
degree of market access is the Philippines with closed market policy (CIMA =
74 percent).


It is obvious to notice two constraints found in this research:
First is the estimation of processor and export cost. Due to the fact that Thai
rice exports are operated by private sector, they often give the estimated data
according to their opinions when interviewed. It is not possible to find
reference document for research.


Second is the estimation of cost of meeting standard for export and cost of
meeting health and safety standards. According to practical trade, most of
standards requirement are relevant to the international trade standards which
are acknowledged for years. So, Thai entrepreneurs are not recognised this
as cost burdensome. This cost might be easy to identify for some perishable
and easy to contaminate agricultural commodities such as meat, fresh
vegetable and fruits.


There are other constraints, for instance, prices and costs in importing
countries. All constraints might be occurred due to time constraint for this
research. So, it would be better to further research on this matter in the future.


However, it is found that CIMA is not relevant to explain the international trade
barriers to rice exports facing by Thailand in 2 cases:


First is CIMA is not relevant to explain trade barriers stemming from limited
quota policy and import product specification policy administered by State –
Trading Enterprises which are monopolised imports by importing countries.
The example in this case is the Philippines. They manage rice import system
under the Minimum Market Access (MMA). As a result, rice importers have to
import under limited quota and rice specification by the government of the
Philippines only. This constraint cannot be explained according to CIMA.


Second is the rice import licensing auction system utilised by importing
countries operating under monopoly state – enterprises. This auction cost will
be a burdensome to importers. However, they transmit this cost to Thai rice
exporters by request for low price. Consequently, Thailand as a rice producing
and exporting country gains lower price than normal. Once calculating CIMA
from price in importing market, it is irrelevant to explain this constraint facing
by exporters.
References


Bureau of Agricultural Economics Research, Office of Agricultural Economics
(1994). “Rice Production and Marketing” (in Thai). Office of Agricultural
Economics Journal 52/1994.


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Wongleelaset, T. (1998). “The Policy Implementation and Rice Trade of
Thailand” (in Thai). (published).


Centre for Applied Economics Research. Faculty of Economics, Kasetsart
University. (2003). “Research Report: Paddy Rice Distribution Channel in
Thailand” (in Thai)..


Centre for Applied Economics Research. Faculty of Economics, Kasetsart
University. (2003). “Research Project: New Options for Paddy Rice Mortgage
and Dried Longan” (in Thai)..


Centre for Agricultural Information. Office of Agricultural Economics. (2008).
“Trade Statistics of Agricultural Commodities with Foreign Countries” (in Thai).


Bureau of Agricultural Economics Research, Office of Agricultural Economics
(1999). “Jasmine Rice Production and Marketing” (in Thai). Office of
Agricultural Economics Journal 23/1999.


Bureau of Agricultural Economics Research, Office of Agricultural Economics
(2009). “Production and Marketing Data of Major Agricultural Commodities” (in
Thai). (published). Issue of March 2009.


Waiyarabutra, A. (2001). Graduate College, Kasetsart University. “The Study
of Marketing for Paddy Rice and Marketing Activities of Mill Houses in South
Eastern Region of Thailand” (in Thai).


Sayamwara, A. and Na Ranong, W. (1990). Thailand Development Research
Institute. “Compilation of Rice Knowledge” (in Thai).


Tragoonpondnimit, A. (2002). Graduate College, Kasetsart University. “the
Analysis of Price Transmission and Linkage of Price in Central Market in
Central Region of Thailand and Bangkok” (in Thai).


WTO Secretariat. (2005). “Trade Policy Review :The Philippines document
number WT/TPR/S/149/Rev.1. Geneva: World Trade Organisation.


WTO Secretariat. (2003). “Trade Policy Review: Southern African Customs
Union”. Document number WT/TPR/S/114. Geneva: World Trade
Organisation.


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WTO Secretariat. (2008). “Trade Policy Review: United States”. Document
number WT/TPR/S/200/Rev. 1. Geneva: World Trade Organisation.


www.trademap.org. (2009). “Trade statistics for international business
development”.


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