WP 990049

The CGPRT Centre
The Regional Co-ordination Centre for Research and Development of Coarse Grains, Pulses,
Roots and Tuber Crops in the Humid Tropics of Asia and the Pacific (CGPRT Centre) was
established in 1981 as a subsidiary body of UN/ESCAP.
Objectives
In co-operation with ESCAP member countries, the Centre will initiate and promote research,
training and dissemination of information on socio-economic and related aspects of CGPRT
crops in Asia and the Pacific. In its activities, the Centre aims to serve the needs of
institutions concerned with planning, research, extension and development in relation to
CGPRT crop production, marketing and use.
Programmes
In pursuit of its objectives, the Centre has two interlinked programmes to be carried out in the
spirit of technical cooperation among developing countries:
1. Research and development which entails the preparation and implementation of

projects and studies covering production, utilization and trade of CGPRT crops in the
countries of Asia and the South Pacific.
2. Human resource development and collection, processing and dissemination of relevant
information for use by researchers, policy makers and extension workers.
CGPRT Centre Working Papers currently available:

Working Paper No. 34 Effects of Trade Liberalization on Agriculture in Malaysia: Institutional
and Structural Aspects
by Tengku Mohd Ariff Tengku Ahmad
Working Paper No. 35 Effects of Trade Liberalization on Agriculture in the Republic of Korea:
Institutional and Structural Aspects
by Myung-Hwan Sung
Working Paper No. 36 Effects of Trade Liberalization on Agriculture in Japan: Institutional

by Hiroaki Kobayashi
Working Paper No. 37 Effects of Trade Liberalization on Agriculture in the Philippines:

Institutional and Structural Aspects
by Minda C. Mangabat
Working Paper No. 38 Effects of Trade Liberalization on Agriculture in India: Institutional

by Ramesh Chand
Working Paper No. 39 Effects of Trade Liberalization on Agriculture in Thailand: Institutional and
Structural Aspects
by Kajonwan Itharattana
Working Paper No. 40 Effects of Trade Liberalization on Agriculture in Vietnam: Institutional

by Nguyen Trung Que
(Continued on inside back cover)

Effects of Trade Liberalization on
Agriculture in Thailand:
Commodity Aspects
The designations employed and the presentation of material in this publication do not
imply the expression of any opinion whatsoever on the part of the Secretariat of the United
Nations concerning the legal status of any country, territory, city or area of its authorities, or
concerning the delimitation of its frontiers or boundaries.
The opinions expressed in signed articles are those of the authors and do not necessarily
represent the opinion of the United Nations.
WORKING PAPER 49
Effects of Trade Liberalization on

Agriculture in Thailand:
Commodity Aspects
Kajonwan Itharattana
CGPRT Centre
Regional Co-ordination Centre for
Research and Development of Coarse Grains,
Pulses, Roots and Tuber Crops in the
Humid Tropics of Asia and the Pacific
CGPRT Centre
Jalan Merdeka 145, Bogor 16111
Indonesia
1999 by the CGPRT Centre
All rights reserved. Published 1999
Printed in Indonesia
National Library: Cataloguing in Publication
Itharattana, Kajonwan
Effects of Trade Liberalization on Agriculture in Thailand: Commodity
Aspects / Kajonwan Itharattana -- Bogor: CGPRT Centre, 1999.
xx, 99 pp.; 25.5 cm. -- (Working paper series; No. 49)
ISBN 979-9317-04-5
1. Thailand Trade, free and protected 2. Thailand Agriculture economic aspects

I. Title II. Series
382.710.959.3
Table of Contents
Page
List of Tables ........................................................................................................................... ix
List of Figures ......................................................................................................................... xii
Abbreviations .......................................................................................................................... xiii
Foreword .................................................................................................................................. xv
Acknowledgements ................................................................................................................. xvii
Executive Summary ................................................................................................................ xix
1. Introduction
1.1 Background ............................................................................................................... 1
1.2 Objectives of the study .............................................................................................. 4
1.3 Outline of the study .................................................................................................. 4
1.4 Summary of institutional and policy review ............................................................. 4
1.4.1 Trade laws and regulations .............................................................................. 4
1.4.2 Trade policies and measures in Thailand ......................................................... 5
1.5 Effects of the Asian financial crisis in Thailand ....................................................... 6
2. Effects of Trade Liberalization on Production, Marketing and Demand

of Selected Commodities
2.1 Selection of commodities and analysis methodology ............................................... 11
2.2 Rice ........................................................................................................................... 11
2.2.1 Production, area and yield ................................................................................ 12
2.2.2 Producing cost .................................................................................................. 14
2.2.3 Marketing ......................................................................................................... 14
2.2.4 Rice marketing channels .................................................................................. 18
2.2.5 Price of rice ...................................................................................................... 19
2.2.6 Domestic uses and trade ................................................................................... 21
2.1.7 Rice policies ..................................................................................................... 21
2.1.8 Impact of trade liberalization on rice ............................................................... 27
2.3 Maize ........................................................................................................................ 29
2.3.2 Cost of production of maize ............................................................................. 31
2.3.3 Marketing ......................................................................................................... 32
2.3.4 Marketing channels for maize .......................................................................... 33
2.3.5 Domestic utilization ......................................................................................... 33
2.3.6 Export ............................................................................................................... 33
2.3.7 Import ............................................................................................................... 33
2.3.8 Trade policies ................................................................................................... 37
2.3.9 Impact of trade liberalization on maize ............................................................ 37
2.4 Soybean .................................................................................................................... 39
2.4.1 Planted area, production and yield ................................................................... 40
2.4.2 Soybean cost of production .............................................................................. 40
2.4.3 Demand for soybean ........................................................................................ 43
2.4.4 Import ............................................................................................................... 43
2.4.5 Prices ................................................................................................................ 43
v
2.4.6 Soybean meal ................................................................................................... 43
2.4.7 Soybean marketing structure ............................................................................ 44
2.4.8 Marketing channels .......................................................................................... 44
2.4.9 Soybean marketing margins and returns .......................................................... 48
2.4.10 Soybean policies and measures ...................................................................... 49
2.4.11 Impact of trade liberalization on soybean ...................................................... 50
2.5 Milk and milk products ............................................................................................. 55
2.5.1 Dairy farms and herds ...................................................................................... 56
2.5.2 Raw milk production ........................................................................................ 57
2.5.3 Cost of production of fresh milk ...................................................................... 58
2.5.4 Raw milk marketing ......................................................................................... 59
2.5.5 Manufacturing ready-to-drink milk ................................................................. 61
2.5.6 Policies and measures ...................................................................................... 62
2.5.7 Impact of trade liberalization on the domestic dairy industry .......................... 65
3. Effects of Trade Liberalization at the Farm Level

3.1 Rice ........................................................................................................................... 69
3.1.1 Planted area production and yield .................................................................... 69
3.1.2 Regional cost of production of major rice ....................................................... 71
3.1.3 Regional cost of production of second rice ...................................................... 72
3.1.4 Impact of trade liberalization on paddy farmers by region .............................. 73
3.1.4.1 Impact on the production cost of major rice ........................................ 74
3.1.4.2 Impact on the production cost of second rice........................................ 75
3.2 Maize ........................................................................................................................ 76
3.2.2 Cost of production and returns ......................................................................... 77
3.2.3 Marketing and price ......................................................................................... 77
3.2.4 Marketing channels........................................................................................... 77
3.2.5 Marketing cost and margin of maize in zone 12 .............................................. 78
3.2.6 Impact of trade liberalization on farm prices received and production
cost in zone 12 ................................................................................................. 79
3.3 Soybean .................................................................................................................... 80
3.3.1 Planted area, production and yield ................................................................... 81
3.3.2 Soybean of cost production and returns ........................................................... 81
3.3.3 Marketing ......................................................................................................... 82
3.3.4 Hauling and bagging ........................................................................................ 83
3.3.5 Marketing channels of soybean originating in Sukothai .................................. 83
3.3.6 Cost structure and marketing margins .............................................................. 85
3.3.7 Soybean utilization in Sukothai province ........................................................ 85
3.3.8 Impact of trade liberalization of soybean and soy meal on Sukothai
soybean producers............................................................................................. 86
3.4.1 Dairy farms cooperative Nong Po, Ratchaburi Province ................................. 87
3.4.2 Cost of producing raw milk .............................................................................. 88
3.4.3 Impact of trade liberalization of dairy farmers under the Nong Po Dairy
Farm Cooperation ............................................................................................ 88
4. Conclusion and Strategies

4.1 Rice ........................................................................................................................... 91
4.2 Maize ........................................................................................................................ 91
vi
4.3 Soybean ..................................................................................................................... 92
4.5 Overall policy on trade liberalization ........................................................................ 94
5. References ............................................................................................................................... 95
Appendix Tables .............................................................................................................................. 97
vii
viii
List of Tables
Page
Chapter 1
Table 1.1 Value of exports, imports, their respective shares and trade
balance (million dollars) ...................................................................................... 2
Table 1.2 Export value of principal agricultural commodities and percentage
share of agricultural exports ................................................................................ 3
Chapter 2
Table 2.1 Planted area, production and yield of paddy ....................................................... 12
Table 2.2 Planted area, production and yield of major rice, 1978/79-1996/97 ................... 13
Table 2.3 Planted area, production and yield of second rice, 1978-1996 ............................ 13
Table 2.4 Production cost (US $/ha) of major rice, 1984/85-1996/97 ................................ 15
Table 2.5 Production cost (US $/ha) of second rice, 1984-1996 ......................................... 16
Table 2.6 Price of paddy and 5% milled rice (US $/ton) ..................................................... 20
Table 2.7 Balance sheet of Thai paddy (million tons), 1978/79-1996/97 ........................... 22
Table 2.8 Volume and value of milled rice export of Thailand ........................................... 23
Table 2.9 Export volume of milled rice and percentage share by importing country .......... 25
Table 2.10 Planted area (million ha) for maize by region, 1978-1996 .................................. 30
Table 2.11 Maize production (million tons) by region, 1978-1996 ....................................... 30
Table 2.12 Yield of maize (kg/ha) by region, 1978-1996 ..................................................... 31
Table 2.13 Cost of production of maize (dollars/hectare) by region, 1996/97 ...................... 31
Table 2.14 Balance sheet of maize (million tons) .................................................................. 35
Table 2.15 Export volume of maize and percentage share by importing country ................. 36
Table 2.16 Thailands import volume of maize by exporting country .................................. 36
Table 2.17 Planted area, production and yield of soybean .................................................... 41
Table 2.18 Production cost of soybean, 1982/83-1996/97 .................................................... 42
Table 2.19 Balance sheet of soybean grain (tons) ................................................................. 45
Table 2.20 Price of soybean and soybean products (US$/ton) .............................................. 46
Table 2.21 Balance sheet of soybean meal (tons) .................................................................. 47
Table 2.22 Soybean marketing cost and margin, 1991/92 ..................................................... 48
Table 2.23 Market access and actual import for soybeans, soybean meal and soybean oil ... 50
Table 2.24 Cost of oil production .......................................................................................... 54
Table 2.25 Impacts of reduction of the import tariffs ............................................................ 55
Table 2.26 Number of diary farms and herds ........................................................................ 57
Table 2.27 Regional share (%) of total dairy cows ................................................................ 57
Table 2.28 Raw milk production in Thailand ........................................................................ 58
Table 2.29 Average production cost of fresh milk in three major producing areas ............... 59
Table 2.30 Production cost of raw milk (dollars/ton) classified by sample farm size, 1996 . 59
Table 2.31 Price of various kinds of milk and milk products (dollars/ton) ........................... 60
Table 2.32 School milk program ........................................................................................... 61
Table 2.33 Production and demand for ready-to-drink-milk (tons) ....................................... 63
Table 2.34 Supply and demand of fresh milk for ready-to-drink factories (tons) ................. 63
Table 2.35 Demand for dairy cows ........................................................................................ 64
Table 2.36 WTO committed tariff rates for skim milk powder and liquid milk .................... 65
ix
Chapter 3
Table 3.1 Planted area, production and yield of paddy by region ....................................... 70
Table 3.2 Production cost of major rice in 1996/97 (dollars/hectare) ................................. 72
Table 3.3 Production cost second rice in 1996/97 (dollars/hectare) .................................... 73
Table 3.4 Farm price of major and second rice after trade liberalization (dollars/ton) ....... 74
Table 3.5 Impact of removing fertilizer subsidy on major rice at the farm level in terms
of major rice production cost (dollars/ha) ........................................................... 74
Table 3.6 Impact of removing fertilizer subsidy on the second rice at the farm level
in terms of the second rice production cost (dollars/ha) ...................................... 75
Table 3.7 Planted area, production and yield of maize in agricultural economic zone 12 .. 76
Table 3.8 Cost of production of maize in agricultural economic zone 12, crop year
1996/97 ................................................................................................................ 77
Table 3.9 Marketing cost and margin of maize in zone 12, 1996/1997 ............................... 79
Table 3.10 Impact of the Uruguay Round on maize prices in agricultural economic
zone 12 (dollars/ton) ............................................................................................ 80
Table 3.11 Impact of the Uruguay Round on production cost of maize in agricultural
economic zone 12 (dollars/ton) ............................................................................. 80
Table 3.12 Soybean planted area, production, and yield, Sukothai province ........................ 81
Table 3.13 Production cost of soybean, Sukothai province, 1995/96 .................................... 82
Table 3.14 Marketing cost and margin of soybeans, Sukothai province, 1995/96 ................ 85
Table 3.15 Farm level impact of removing fertilizer subsidy on soybean in terms of
the production cost in Sukothai (dollars/ha) ........................................................ 86
Table 3.16 Number of Nong Po Dairy Cooperative members and dairy cows,
production and prices .......................................................................................... 88
Table 3.17 Cost of producing raw milk of the Nong Po Dairy Cooperative, 1994-96
(dollars/100 kg) ................................................................................................... 88
Table 3.18 Cost of producing raw milk at the Nong Po Dairy Cooperative, 1996
(dollars/100 kg) ................................................................................................... 89
x
List of Figures
Page
Chapter 2
Figure 2.1 Marketing channels of rice, 1994 ........................................................................ 19
Figure 2.2 Maize marketing channels, 1987/88 .................................................................... 34
Figure 2.3 Soybean marketing channels ............................................................................... 47
Chapter 3
Figure 3.1 Marketing channels of maize in agricultural zone 12, 1996/97 ........................... 78
Figure 3.2 Soybean marketing channels in Sukothai, 1995/96 ............................................. 84
xi
xii
Abbreviations
BAAC Bank for Agriculture and Agricultural Cooperation

BKK Bangkok
C.I.F Cost insurance and freight
DPO Dairy Farming Promotion Organization of Thailand
F.O.B Free on board
GATT General Agreement on Trade and Tariffs
GDP Gross domestic product
MOAC Ministry of Agriculture and Cooperatives
MOF Market Organization for Farmers
OAE Office of Agricultural Economics
PWO Public Warehouse Organization
UNCTAD United Nations Conference on Trade and Development
USOM United States Operation Mission
WTO World Trade Organization
kg Kilogram
ha Hectare
1 US dollar 25 baht
xiii
xiv
Foreword
Responding to the growing concern for the effects of trade liberalization on regional
agriculture, the CGPRT Centre has implemented a three-year research project Effects of Trade
Liberalization on Agriculture in Selected Asian Countries with Special Focus on CGPRT Crops
(TradeLib) since March 1997, in collaboration with partners from ten countries: China, India,
Indonesia, Japan, Malaysia, Pakistan, the Philippines, the Republic of Korea, Thailand and Viet
Nam. In all these countries, important issues regarding trade liberalization were investigated
with an identical research framework by national experts.
The investigation covers major crops which might receive either favorable or
unfavorable effects of trade liberalization both in export and import. I believe that the project
will provide broad and practical knowledge on various aspects of the effects of trade
liberalization; moreover, the information will be useful for researchers and policy planners not
only in participating countries but also in other countries in the region. However, I would like to
note that, since this project was conceived and started before the current currency and economic
crisis began in the middle of 1997, the analysis handles basically the period before the crisis
with available current information.
I am pleased to publish Effects of Trade Liberalization on Agriculture in Thailand:

Commodity Aspects as the report of the second phase of the country study of Thailand. A
report of the first phase of the country study, which includes institutional and structural aspects
on the same subject, was published recently. I certainly hope these reports will be fully utilized
for the improvement of agricultural trade and the encouragement of regional agriculture.
I thank Dr. Kajonwan Itharattana of Thailand for her intensive research and the Office of
Agricultural Economics for allowing her to work with us and for providing continuous support.
I am very much obliged to Dr. Boonjit Titapiwatanakun for his devoted contribution to the
project as the regional advisor. I would also like to express appreciation to the Government of
Japan for funding the project.
Haruo Inagaki
Director
CGPRT Centre
xv
xvi
Acknowledgements
This country report is part of the second phase of the project on Effects of Trade
Liberalization on Agriculture in Selected Asian Countries with Special Focus on CGPRT Crops
(TradeLib). The study focuses on the effects of trade liberalization on agriculture in Thailand.
Financial assistance for this research project was provided by the ESCAP CGPRT
Centre. I am grateful to Dr. Haruo Inagaki, Director of the CGPRT Centre, and his staff for
organizing and supporting the project.
I would also like to thank Dr. Boonjit Titapiwatanakun, regional advisor of the project,
and Dr. Michio Kanai, project leader, CGPRT Centre, for their guidance and comments in the
preparation of this report, and also Mr. Douglas Stoltz for his editing.
Sincere appreciation is extended to the Office of Agricultural Economics, Ministry of
Agriculture and Cooperatives for assigning me and OAE staff to join the project. I also express
my thanks to Mr. Pairuch Seevayo for collecting data and for his computer work, Mr. Surat
Mudharasin for his English editing in the report and the OAE staff for their provision of
necessary data, information and technical documents. Everyone helped make this report
possible. I am grateful to them all.
The views in this technical paper are those of the author and do not necessarily represent
the policy of the organization for which the author works.
Bangkok, Thailand Kajonwan Itharattana

July 1999
xvii
xviii
Executive Summary
International trade has played a significant role in the Thai economy and agricultural
commodities have been taking the largest share of the total export of the country. However,
export statistics show that the value of export depends on a few traditional crops, namely rice,
rubber and cassava, although their importance has decreased. In contrast, Thailand has imported
maize since 1992 due to expansion of livestock industries. At the same time, frozen and chilled
chicken and shrimp products were added to list of major export items of Thailand.
In this globalization era free trade policies are favored by the world community. Thus,
the Agreement on Agriculture has committed WTO members to reduce their tariffs, internal
support and export subsidies. According to the agreement and commitments, member countries
including Thailand have to prepare and adjust themselves to a more liberalized trade system.
Therefore, this study on impacts of trade liberalization on major Thai exports and imports was
undertaken. It is expected that the findings will help planners and policy makers lay down
appropriate policies and measures to develop the agricultural sector to be able to cope with the
changing world trade situation.
The study presents an overview of trade policies, measures and institutions in Thailand
including the findings of the first phase of the projects. The analysis of trade liberalization
effects covers major export and import commodities, namely rice, maize, soybeans and dairy
products. The impacts on production, marketing and demand of the said commodities are
analyzed both at the national and the farm level.
The analysis of impacts on rice is based on the FAO study, which indicated that the
impact of the Uruguay Round would be to increase the world price of rice by 7%. It assumes
that the export price of 5% broken Thai rice is the world price. The results of the analysis show
a positive effect on the Thai rice economy with a net gain of 148.421 million dollars. The
analysis also included the impact of removal of the fertilizer subsidy, which caused a higher
farm production cost. However, the assessment of impacts does not include adjustment of other
rice producing countries, which might adapt themselves to the changing world market situation.
Therefore, Thailand needs to prepare itself by enhancing the efficiency of production, reducing
production costs, improving the quality of farm products in light of consumer demand, and
developing product research and an information network of production and marketing in
cooperation with the private sector.
The impact on maize of a 4% increase in the world price of maize due to the effect of the
Uruguay Round will be increased domestic prices. A positive effect is observed because the
domestic supply increases. There is a negative effect due to the expanding local livestock
industries, which utilize more maize as animal feed. The overall impact is a net gain to the
country. However, the boom of the livestock industries creates a shortfall of maize supply,
raising the need for more imports to compensate for the shortage. To prevent this problem, farm
technologies to enhance maize production are needed, including research and development with
a focus on seeds. In time of great demand for maize, an import measure is required with a
reduced tariff. In the meantime, maize exports need not be restricted in order to keep the market
share in the world market.
In the case of soybeans, the assessment of impact is based on a reduction of the soybean
grain import tariff from 5 to 0% and of soybean meal from 15 to 10 and 0%. It was found that
prices of domestic and imported soybeans were closely related. As the tariff was reduced from 5
to 0%, local soybean prices at both wholesale farm levels declined. This generates a loss in the
producers surplus of 3.302 million dollars and a gain in the consumers surplus of 1.768
xix
million dollars. Similarly, the reduction of soybean meal import tariffs from 15 to 10 and 0%
would bring down prices of domestically produced soybean meal and increase the demand for
the meal. This will create a consumers surplus gain of 19.336 million dollars at the 10% tariff
and 58.48 million dollars at no tariff.
However, local soybean production and imports show a close relationship with the use
of soybean meal and oil products. A sufficiency in producing the meal would create an oil
excess. To prevent this, an attempt to find the oil demand is made. With 10% reduction of
soybean meal tariff the soybean oil price fell and demand for the oil increased from 107,997 to
124,370 tons, which comes from 872,160 tons of grain. This amount of grain can produce
671,563 tons of meal. Therefore, the feed industry would need to import part of the demand for
the meal. However, production increase to 872,160 tons as required might not be attainable
because in the national plan an annual target of 440,000 tons is specified.
When the impact of removal of the fertilizer subsidy was investigated, it was found that
soybean farmers faced a higher cost of production and their gross income declined. Efforts to
enhance soybean productivity to reduce and cope with the domestic demand should focus on
zoning for suitable cultivation, seed improvement research and development, better transfer of
the production technologies and lastly, formation of soybean farmer groups.
With respect to the milk and milk products, free trade for the skim milk powder would
both give positive effects to the dairy processing industry, and, at the same time, a negative
effect to dairy producers at both the national and farm level. Therefore, assistance for dairy
farmers to compete with the cheaper skim milk powder is recommended such as enhancement
of production efficiency with quality improvement, designation of dairy farming zones with
technical suitability, and organization of dairy farmers groups.
Regarding overall policy, review, revision and rebuilding of the WTO commitments of
each country are recommended. The CGPRT Centre can play a role in this matter for the region.
Furthermore, findings from the study indicate that Thailand should adjust itself for
competitiveness. The guidelines for greater production and marketing potential should
emphasize enhancement of farm production efficiency and cost reduction through technological
initiatives, developments in commodity quality, processing and packaging and gear its
production toward the needs and requirements of the markets. Aspects of standardization of
commodities are great concern. Zoning for a best production and quality control in all stages of
production should be considered. Lastly, the development of human resources in the
agricultural sector should not be neglected in order to keep pace with changing world
conditions. However, agricultural production must be practiced with concern for environmental
sustainability.
xx
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The CGPRT Centre

1. Research and development which entails the preparation and implementation of

CGPRT Centre Working Papers currently available:

Working Paper No. 36 Effects of Trade Liberalization on Agriculture in Japan: Institutional

Working Paper No. 37 Effects of Trade Liberalization on Agriculture in the Philippines:

Working Paper No. 38 Effects of Trade Liberalization on Agriculture in India: Institutional

Working Paper No. 40 Effects of Trade Liberalization on Agriculture in Vietnam: Institutional

(Continued on inside back cover)

Effects of Trade Liberalization on

National Library: Cataloguing in Publication

1. Thailand Trade, free and protected 2. Thailand Agriculture economic aspects

2. Effects of Trade Liberalization on Production, Marketing and Demand

3. Effects of Trade Liberalization at the Farm Level

4. Conclusion and Strategies

Appendix Tables .............................................................................................................................. 97

BAAC Bank for Agriculture and Agricultural Cooperation

I am pleased to publish Effects of Trade Liberalization on Agriculture in Thailand:

Bangkok, Thailand Kajonwan Itharattana

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