Thai Govt. undecided on extending rubber buying scheme

Monday, 21 January 2013 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Thailand’s government has yet to decide whether it will extend its rubber intervention scheme when it expires in March and stocks in the world’s biggest producer of the commodity are likely to rise until then, a senior official said last week.

Rubber stocks held by the Thai government are currently at 200,000 tons, up 18 per cent from November, Deputy Agriculture Minister Yuthapong Charassathien told Reuters, as the government continues to buy rubber from farmers to prop up prices.

“Although prices have rebounded substantially, we will continue to buy until the scheme expires at the end of March as we need to support farmers,” Yuthapong said. Asked if the government would extend the scheme, he said: “Let’s see what the situation will be in March then we will consider this issue.”

Rubber, mainly used to make tyres, is a politically sensitive commodity in Thailand, where it provides a livelihood for around 1.3 million smallholders, mostly poor farmers who form a significant vote-bank for the government. The government is also running a rice intervention scheme.

Last year, Thailand’s government approved 45 billion baht ($ 1.51 billion) to buy rubber from farmers in a bid to shore up prices which had more than halved since hitting record highs in 2011 as demand shrank alongside a faltering global economy.

Thailand also agreed in August with other major producers Indonesia and Malaysia to cut exports by 300,000 tons in total, helping lift prices. The three countries account for 70 per cent of global natural rubber output.

Benchmark Thai RSS3 prices are currently trading at $ 3.20 per kg, above the $ 2.80 per kg level in mid-2012 which prompted protests by disgruntled farmers, but still below the record high of $ 6.40 in February 2011.

The price of unsmoked rubber sheet (USS3), which farmers sell to factories, also rose in line with RSS3 to around 83 baht per kg on Thursday.

“These may be not a very high prices, but I am satisfied as there are no complaints from farmers,” Yuthapong said. “The measures are still necessary,” he said, referring to the export and output cuts agreed with Indonesia and Malaysia.

According to the deal, Thailand will cut exports by 150,000 tons from October 2012 to March 2013.

Indonesia would cut exports by 100,000 tons and Malaysia would reduce rubber shipments by 50,000 tons. It was not immediately clear how much the three countries have already reduced shipments.

In addition to cutting exports, Yuthapong said Thailand would scrap a 2010 plan to expand rubber plantations by 128,000 hectares (316,300 acres) as demand remained weak.

“The expansion plan is a bit outdated and not suitable to the current situation, as we are trying to cut supply,” he added.

Thailand exports 2.7-2.8 million tons of rubber annually.