Thailand instituted a three-month program June 5 to buy 2.76 million tons of rice from farmers in an effort to allay the farmers' frustration over prices being driven down by brokers who deal with the country's rice millers. In response to the emergency program, the Thai Rice Farmers Association canceled plans to blockade four major Thai roads beginning June 6 — a threat with potentially disastrous consequences for the ruling People's Power Party (PPP). A struggle has broken out between farmers who produce rice and the middlemen who arrange for the milling and final sale of the rice to exporters or to the marketing branch of Thailand’s Ministry of Commerce, the Public Warehouse Organization (PWO).

The middlemen have long paid below-market rates to the farmers to maximize their profits and retain foreign markets. But this arrangement has angered farmers, whose food and production costs have risen dramatically in recent months, spurring them to protest. The new government rice-pledging scheme means the Finance Ministry's Bank for Agriculture and Agricultural Cooperatives of Thailand will buy the rice at a set price directly from farmers and pay to have it milled. The merchants who are getting cut out of the deal will lobby and complain, and possibly try to organize strikes of their own, but they are far less capable of causing disruptions than the combined force of all the nation's farmers, whose support is necessary for the current administration to rule. The major risk of the scheme lies in its dependence on high rice prices globally. The government, which has agreed to pay above-market prices to the farmers — hence, effectively subsidizing them — expects to pay for this move with profits from exporting 2.3 million tons of rice stockpiles while global prices are high. Further profits will cushion the PWO and provide the government with surplus revenue.

Global demand is soaring, and Thailand is well positioned to benefit as the world's leading rice exporter. If global prices suddenly fall, however, the government will be forced to sell at a loss and its subsidies will become an additional burden. Rice prices reached record highs in April; but since then, prices have abated. And some analysts predict further drops, judging by signs that the global rice supply is about to increase. For example, Japan is on the verge of exporting an additional 331,000 tons of rice. Vietnam's ban on new rice-exporting contracts will expire this month. If Hanoi does not immediately replace it with a new ban, Vietnam is capable of adding considerable volumes to world supply and driving down prices. But Hanoi remains in a protectionist mood. And as long as Vietnam, Cambodia, India and China persist in stalling rice exports — and producers of other grains such as Kazakhstan and Indonesia maintain their export restrictions — Thailand's prospects for capitalizing on high demand remain strong. Moreover, Bangkok's program has a three-month time limit. In that period, rice prices are likely to remain high enough to sustain the whole process. Furthermore, the Thai government is buying more than rice in this program: It is buying internal stability and security. Ongoing negotiations with the opposition People’s Alliance for Democracy (PAD) are about to bear fruit. The PAD is concluding its weeklong protest over the PPP's attempt to alter the Thai Constitution to save its leaders from criminal prosecution for election fraud.

Thai Prime Minister Samak Sundaravej and his Cabinet introduced the rice-buying program knowing that a massive farmers' strike could further strengthen the opposition and dash hopes for a settlement. Such a failure could lead to the exile of the PPP's top members and the collapse of the ruling coalition. So, for the government, maintaining stability is worth risking losses in the rice trade. Even should the Thai government end up losing money on the scheme, it will nevertheless strengthen former Prime Minister Thaksin Shinawatra's main base in the rural north and northeastern regions. This is because if the grain is not sold, it will likely be doled out to the poor there, solidifying popular support for Thaksin and the ruling coalition. The farmers are momentarily appeased, and they have given the government one week to implement the rice-buying program before they go ahead with the blockade. As long as Sundaravej moves fast, farmers will remain mollified, giving him the freedom to cut a deal with the PAD in time to save his party and the coalition it leads.