Farming rice - Not sure its a Dragons Den idea !

[FarangFarmer]

Hi. Im looking for help from expats married or supportive of thai wife who come from Issan and whose parents own or rent farm for rice, or you yourself own one. You may have helped financially in the past or now have experience of helping to run the farm.

Please don’t answer if you don’t have experience of this, or please don’t answer if you want to say things like ‘Oh here comes another sucker’. Let me be sucked, Im ok with the investment here and I am starting to find it very interesting.

So get on with it FarangFarmer– whats my question.?

How profitable can a 12 rai farm be for planting rice in Buriram ? – Please read on before answering.

My thai wife recently asked me for money to send to her parents in Buriram to buy seed/vitamins for this years Rice plantations. I gave her 3,600 baht. She sent to parents. Shortly after my wife asked me for money for machine to plough field to get ready for Rice plantation. I gave her 4,000 baht. My wife finished school and worked in office so she has some experience in Debits and Credits. Off her own bat, and before I was even thinking – here we go, they are just going to keep asking for money - She said she would talk with parents and ask them to keep account. Shortly after she finished phone call with her Mother, she showed me total estimated costs for the Rice business. (I should mention that this is parents first year at trying this. Up until now the field (owned by an older family member) was rented out and the grower paid last year with bags of rice. This year they want to try it for themselves.)

Here is the summary. Forgive my task descriptions, as our Business english together is not as good as our daily speak and I don’t understand the processes yet. The field is 12 Rai.

Summary of Costs
Buy seed & Vitamin – 3,000
Machine for plough field, get ready – 3,000
Machine for put rice in – 3,000
After put rice – Machine – 3,000
Begin grow – Vitamins – 7,200
Middle grow – Vitamins – 5,400
Maybe some workers wage help – 1,000
Total Costs 26,200
A neighbouring farmer also with 12 rai of land has costs of about 17,000. They use 1 machine less, and seem to get their vitamins for a bit less. Anyway the saving is not critical to my question.

Estimated no of bags harvested to be sold - 33 bags
Rent of land paid back to other family member – 6 bags
Net yield – 27 bags (My wife said 40 kilo bags, but they think they can get 1,100 baht per bag, so after she described size of bag, it might be an 80 kilo bag – sorry I don’t have this, as its fairly critical, but I will check in next few days).
Price per bag – 1,100 baht
Gross Sale – 29,700
Cost of Sales – 26,200
Profit – 3,500 Baht.

So my question is staring me (and you) in the face. If the variables (No of Bags harvested, Price per bag, (or price per kilo) is similar to estimates above, my poor in-laws after all the work from May to November stand to make 3,500 baht.

I have a couple of fears. If I continue to be the banker (interest free and no pay back required), then when they sell the bags, they will think – yippee – we made 29,700 (they will forget that I have bankrolled them with 26,200). Initially I’m thinking, I would be better just supporting them with about 15,000 or 20,000 baht, but actually if they sell as above, then they would prefer 29,700 baht. Maybe they don’t care about the Cost of Sale, because they got it free. (and I presume they keep some bags to eat during the year)

So, trying to put a business slant onto it. What if I tell them, my money is interest free, but they must pay it back. Now do they start to think about only making 3,500 baht for all that work. With me in the frame I am still better than the local money lender or local farmbank who will either look for interest or even bags of rice, (No bank is going to offer 26,200 and only wants 26,200 baht back.) In fact having browsed the web a bit tonight about farming in Issan, this bank lending is what has local farmers in debt problems. Without the money in the first place, they borrow the money to plant the rice and then when they harvest they pay back the bank and have nothing left. They actually are forced to take out the rice early (and get a poorer price because it is damp), as they have to start paying the bank. They end up still owing the bank money after the full cycle.

I’ve starting to ramble a bit, but I just want to get across that giving this money to my in-laws is not a problem. But the pointlessness of it is. What if no harvest. What if bad harvest.

Can anyone with experience tell me how many kilos can 12 rai of land likely produce. Maybe my in-laws estimates are slightly off, and if they can make 50 x 80kilo bags, then happy days, it’s a good investment.

What price per kilo did anyone get for rice last year (I think its Jasmine they are growing)
Does anyone with a similar size of land, have different costs, or more detail on costs.
Thank you for reading and hey - Its good to be in the farming business !. And I hope with so many people in the market that you don’t consider this type of information goldmine information. I hope you think that any information I glean is not going to make my in-laws 12 little rai threaten the sales of anyone elses rice to the local mill.

Thanks for helping.

[BingoBango]

Their are many varibles in the equation, too many to get your head around.

My wife had 5 rai and her dad harvests on average 20 - 25 bags at 40 kilo each.

In the end she sold them to her sister when she came to live in England,but its used as pension for their dad really, he knows what he is doing but after machine costs as opposed to doing the work manually their is little left in way of profit.

If you can afford it just give them the money especially if you are bankrolling the costs of the venture.

Maybe get them to write all costs and time spent on the project in this first year and then whet their profit is, then divide the profit by the time spent on it and show them that its not worth the hassle, then just give them the profit for next year and tell them to knock it on the head.

You will struggle to get a clear balance sheet to be honest as I struggled with the same before I told the wife to get shut, main reason behind that was that the evil eldest sister was wanting to use the deeds to the rice fields as guarantee for a loan.

hope this helps but good luck with it all

[STEVE G]

My partner has 19 rai of farmland in Buriram that she was given by her family and I can tell you that there is no real profit in small scale rice farming. We get family members to farm it and I’ve never done any sort of cost analyse of the exact figures but the biggest problem is that the amount of rice you actually harvest is massively dependent on weather conditions and having the right amount of rain at the right time.
Where the land is, we have two large water holes for irrigation but if there is no rain you have to buy diesel to pump the water into the paddy which further erodes your profit.
We carry on doing at as it provides work for the family and locals but I wouldn’t bother otherwise.
Another problem with trying to work out the profitability of these sort of ventures is that many of the figures are not fixed, the price of fertilizers vary with the price of oil and the price you get for the crop changes so it’s very hard to actually know if you going to make a profit until you’ve sold the crop.
To be honest, if you want to make any money out of land in Thailand, unless you have a large area with available irrigation, look for something other than rice to grow.

[H2ODunc]

As said. If you can afford it then agree to bankroll two years operating costs for the parents. This should give them a security cushion for future years and it also gives you some big brownie points which can be traded in with her indoors when you want something.
As said small time farming in Issan isn't big on profits. What I did was finance a half decent tractor for Pa and now he does the machine work around the local area. I'm now number 1 son and was given 6 Rai to build the retirement home on. Good luck whatever you decide to do.

[kendo]

The only real way of making money from rice is to buy it in, store it, sell it on six months later and get around another five baht a kilo.
I know a guy that does this and he also lends money against land.

This year their was a government subsidy so rice was making 19 baht a kilo in Surin, last year it was 13 baht a kilo, at harvest time.
It also rained so putting more moisture into the rice with the brown skin still on they test it with this little machine that spins around for moisture content then they will offer a smaller price.

Kendo.

[FarangFarmer]

Bingo Bongo, SteveG, H20Dunc, Kendo
thank you for your quick replies. They are a good help to understanding the situation.
Anyone else, even if your experience is the same as theirs or different, or you have any hard info on price per kilo from last year etc, then please add to this topic.

I like the idea of bankrolling for a set amount of time thus giving them all something to do, rather than just giving them money. Even if they make 1000 baht, then they are benefitting from my money and the 1000 baht profit in reality. The danger is if they lose money on my bankroll, then you are right, I would be better just giving them the money.

any more wouldbe farmers out there !

[STEVE G]

...or you have any hard info on price per kilo from last year

I'm pretty sure that it was around 14 bt a kilo after the harvest but it can vary a lot depending on local demand and the rice wholesaler. Also it's quite hard to produce 100% Hong Mali (Jasmine) that is required for a good price; when you go to sell, a small sample of your rice will be milled and inspected to see what it is and if there is too much of other varieties of rice in it, the price will go down. Up in Issan many older people just grow small crops of local type rice for food and it's hard to stop it spreading into your paddy fields.

[caller]

My wifes family have 10 rai 100kkm or so from Korat. They have given up selling it. Its used for personal consumption and bartering.

[FarangFarmer]

Thanks again SteveG.
At 14 baht per kilo, if they reach their target of 33 x 80kg bags, give 6 for the rent of the land and sell all at an average of 14 baht per kilo, then they would realise 30,000 baht for the single harvest. Ive reduced the cost of sale figure a bit since my original post, so this would be about 7,000 profit. I know, its pitiful, but its worth a shot. They have nothing else to do, and no other way of raising money I think.

My wife had 5 rai and her dad harvests on average 20 - 25 bags at 40 kilo each.

Bingo Bango - how many harvests does your Dad's wife get in a year. (ie is it 20 bags for 5 rai per year for 1 harvest or 10 bags per harvest if it fits two in. My wifes family can only get 1 harvest.

Somebody else mentioned buying and selling rice like a Stock option. Its not a bad idea. At 5 cent a kilo increase over say 4 months, if I wanted to invest in this with a larger sum, they could get the same return and give me my money back. Im not exactly helping with the production of Rice, but Im only looking for a better way for my Wifes family to sustain themselves better than they have been.

Somebody else (sorry I cant see the replies, while Im typing this), mentioned they bought a second hand tractor and is now the No.1 son while his wifes father can hire himself out. This is a good idea too, and may have merit, but on another quick browse of the net, I can see that their are dangers here with costs of repair etc. I could see this investment being one of those 'I need more money for this and that' type of investments.

[FarangFarmer]

and sorry, when I say investment, I really mean just giving money to my wifes family. Im not trying to make money here. My use of the word Investment sounds a bit crude in this context. But it would be nice if they thought a little outside of the box to everyone else in their neighbourhood and could sustain themselves a little better without depending on my hand outs or my wifes.

[kendo]

13-14 baht is about right it's all dependent on weather too little rain or to much affects when you can harvest also hand cut rice is worth more than machine cut rice.

Kendo.

[Winkie]

Sorry if I sound cynical, but 'thinking outside the box' is almost a rare as repaying private/family loans

[usual suspect]

FF..Kendo made a good point here..that is to BUY your rice at harvest when small farmers HAVE to sell to pay off debts, then store in the Issan-style rice-barns till the rice-price rises..& it will.
(My wife's family live off the profit from our businesses in HH, so we can leave all our rice stored for 11 months, then get top money).
IF you decide to still fund the farming of the land then look towards growing sugar-cane..this is the new top-earner in Issan..we are renting more & more land purely to grow sugar on a 3 yr deal..once planted it will produce for 3 years, before the need for rotation.
More and more Issan farmers are 'gambling' & planting sugar on rice-land (the gamble is if it rains to much the sugar will die..DOES NOT like excessive water)..paddy-fields are meant to HOLD water in.
Hope I'm not ramblin' on to much for ya..

[BingoBango]

just 1 harvest per year in surin

[kendo]

A big thing though Usual Suspect is you have to have some bloody rain when i was up there in March dry as a bone, our village water supply only switched on for 2 hours a day three times a week i was trucking water in to fill my 2000lt tank every 3 days at a cost of 400 baht.

To the open poster this year their has been government subsidies on rice, sugarcane, eucalyptus i would explore all the possibilities.

I would also consider purchasing a Rotitan a agricultural truck with a Kabota donkey engine that you don't need a license for, and provide transport you will make 200 baht a load i would also buy some water tanks and a pump and hoses and supply water.

Now that is a good little business up their.

My friend Ludo is doing all this to help his wife's family and he is a retired bank manager so is very careful with his money but he seams quite happy with the set up.

Kendo.