Thailand moves to support rubber farmers

BANGKOK: Thailand’s government has announced a series of measures to help rubber farmers reeling from a slump in global prices to five-year lows, helping push up futures in Tokyo and Shanghai by nearly 5%.

The steps include nearly a billion dollars in funds to finance rubber purchases by the state-run Rubber Estate OrganisationThe steps include nearly a billion dollars in funds to finance rubber purchases by the state-run Rubber Estate Organisation, which oversees Thailand’s stocks in the world’s biggest producer and exporter of the commodity. It is unclear if these are additional funds to those announced for rubber purchases in September.

The purchases would mark the first state-sponsored intervention in commodities markets by the military-led government that seized power on May 22. The military had said it is wanted to wean farmers off expensive subsidy schemes used by previous administrations that have left Thailand struggling to sell bloated stockpiles.

Disgruntled farmers have threatened protests, which would be a challenge to a government still running the country under martial law and with a ban on political gatherings.

“We believe (the steps) will increase rubber prices within the next couple of months so they do not fall below 60 baht per kg,” Deputy Prime Minister Pridiyathorn Devakula told reporters on Thursday.

Unsmoked rubber sheet, which farmers sell to factories, was quoted at 48 baht/kg yesterday.

Benchmark Japanese rubber futures rose as much as 4.7% to 191 yen (US$1.80) per kg yesterday, with Shanghai futures climbing 4.6% to 12,980 yuan (US$2,119) a tonne. Both were the highest in nearly a month, after falling more than 30% this year on worries over a slowing economy in top buyer China.

“We hear some voices questioning whether or not these new steps by the Thai government will really work, but the news is supporting the market at least today (yesterday) as prices had come down so much,” said Hiroyuki Kikukawa, general manager at Nihon Unicom Inc in Japan.

Pridiyathorn said the state agricultural bank would provide a fund of around 20 billion baht to the Rubber Estate Organisation (REO) to buy rubber from the market for resale.

A further 10 billion baht would be given to rubber co-operatives to buy rubber from farmers and then sell it to the REO, which oversees the country’s rubber stockpiles.

He played down the possibility that this could leave Thailand with stockpiles it would struggle to sell, stating that the government already had future sales orders into which it could sell the rubber.

“Once they start buying, farmers’ minds can be at ease as we already have sale orders for next month and every other month. I guarantee we will not have any left in our stocks,” Pridiyathorn said.

The government said it sold half of its existing 200,000 tonnes rubber stockpile last month, although domestic growers have said details of the sale remain murky. The sale of the remaining stocks has been delayed to the end of the year.

In addition, Pridiyathorn said small farmers would receive a direct subsidy of 1,000 baht (US$31) per rai (0.16ha), capped at 15,000 baht. The rai is commonly used to measure land area in Thailand.

Around 850,000 farmers would receive the handout, which would cost approximately 8.5 billion baht (US$262mil), he said.

Soft loans will also be made available to rubber companies and to farmers with smallholdings.

But Thai rubber farmers dismissed the measures, saying they will not address the imbalance between supply and demand in the market.

Farmers have lobbied the government for a minimum guaranteed price for their rubber, but their demands have been rejected by the administration.

“It’s nonsense,” Perk Lertwangpong, head of the Rubber Growers Cooperative Federation of Thailand told Reuters. “This does not work, it does not address the right issue.”

Soft loans were among measures announced to help rubber companies and co-operatives last month after farmers had threatened to stage protests because of the collapse in prices and a lack of government aid. — Reuters

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