The bill seeks to address the plight of farmers with low capital and little power to bargain when sealing contracts with agro business giants.
It’s also a positive sign that the ruling junta values social equity and justice, since a huge number of Thais in the agricultural sector are currently losing out in striking bargains with large firms.
Thai farmers having been working under contracts with Agro firms for almost five decades now. In return they are offered fixed prices for crops or livestock cultivated or reared in line with agreed production processes.
The practice spread across the country as globalisation took hold and end-consumers worldwide demanded that products in shops meet the same international standards.
Contract farming has potential to be a win-win situation, with companies getting a guaranteed quality and amount of produce to sell, and farmers receiving a guaranteed income as well as access to raw materials paid for on credit.
And indeed the practice has been a boon for some farmers, protecting them from harsh market realities of supply and demand. But too often in Thailand we see cases of farmers failing to meet the terms of their contracts after falling victim to factors such as inclement weather, outbreaks of disease, natural disasters, or even the poor quality of raw materials supplied by the contracting company.
A minority of contract farmers, however, are responsible for producing the majority of Thailand’s agricultural produce under just a handful of agro companies, leading to a level of market dominance.
The draft bill under consideration would regulate contract farming based on fairness, contract standards, registration of agricultural businesses, and dispute settlement.
Agricultural and Cooperatives Minister General Chatchai Sarikulya says that the bill would protect farmers against conglomerates and ensure fairness in contract farming, which would improve the country’s economy in the long term.
His words appear to be an admission that something has wrong in our society and that the government has had to step in to protect some of its most vulnerable members – farmers.
“If we support contract farming with a law to regulate the system for more fairness in line with international standards, it will increase our potential, make our agriculture more sustainable and give farmers financial stability,” Chatchai said.
The law is also aimed at protecting the rights of the contracting companies.
Firms and farmers who violate the new law will be punished with a fine of between Bt200,000 and Bt1 million and/or jailed for a maximum of two years.
If the bill is passed, the contract-farming system has potential to curb the huge public budget currently used to subsidise rice farming.