THAILAND: Steady rubber prices sought

A benefit-sharing model would see the need to strike agreements with manufacturers to buy the output at a set price even when the market price is higher or lower, Amnuay Patise said.

He called the model a win-win solution, as rubber farmers can sell their product at a higher price when the global price is sagging, while manufacturers can purchase rubber at a lower price when the market price is climbing.

The targeted manufacturers would include automotive companies and glove makers.

Thailand's natural rubber output has fallen to 3 million tonnes this year from 4 million last year as a selling spree in the rubber futures market weighs on prices.

The global rubber supply averages 11 million tonnes a year, with 7 million futures contracts trading daily on the Shanghai Futures Exchange alone.

The market price for rubber has rebounded to 52 baht a kilogramme from a multiyear low of 43.50 baht.

The region's main rubber exporters — Thailand, Vietnam, Malaysia and Cambodia — recently agreed not to sell rubber below the current level in a bid to prop up sagging prices.

Moreover, the Thai government has unveiled measures to keep the market price at about 60 baht per kg.

The measures include soft loans to encourage the Rubber Estate Organization (REO) to buy rubber and process the product to withhold some supply from the market, plus cash payouts of 1,000 baht a rai to farmers with a maximum of 15,000 baht per farm household.

To avoid repeating the disaster of the now-defunct rice-pledging scheme, officials have resorted to indirectly subsidising the rubber industry by absorbing the glut to balance supply and demand.

The REO can draw down the soft loans from November-April as a fund to purchase smoked rubber sheet No.3 from planters.

"Rubber farmers are encountering price attacks by global speculators, like what happened with the baht ahead of the 1997 financial crisis," Mr Amnuay said.

He said rubber-growing countries must flex their muscle in order to create bargaining power and counter the sell-off in rubber futures.

Source: Daily "Bangkok Post", Bangkok; 8 Nov 2014
(Syed Rashid Ali, Karachi, Pakistan)