Thailand Raises Rubber Subsidy as Farmers Protest Price Drop

Thailand, the world’s largest rubber producer and exporter, decided to double the subsidy paid to farmers after they threatened to step up protests across the nation’s key plantation areas amid a plunge in prices.

The government will pay 21.2 billion baht ($659 million) directly to farmer’s bank accounts, more than the 10 billion baht approved last week, Deputy Government Spokesman Chalitrat Chandrubeksa said after a weekly meeting of the cabinet today. Each farmer will get 2,520 baht per rai (6.25 rai = 1 hectare) for up to 25 rai, which is equivalent to 12 baht per kilogram, according to the government.

Futures in Tokyo dropped 16 percent from an 11-month high in February as slowing growth in China and a recession in the European Union reduced demand. In Thailand, prices tumbled 16 percent to 86.15 baht a kilogram from this year’s peak of 102.7 baht, spurring protests in the southern provinces that account for 80 percent of the nation’s output. The government ruled out setting a minimum price and renewal of a purchase program, which ended in March with a price tag of 25 billion baht.

“Business should be back to normal,” said Bundit Kerdvongbundit, vice president of Von Bundit Co., Thailand’s largest rubber exporter. “The subsidy will have a minimal impact on market prices.”

Reducing Supplies

Thailand, Indonesia and Malaysia, which account for 70 of global output, discontinued attempts to reduce supplies after cutting 300,000 tons in exports in six months through March. Futures lost 1.3 percent to 282.4 yen a kilogram ($2,825 a ton) on the Tokyo Commodity Exchange today, down 6.6 percent this year. Prices reached 337.8 yen on Feb. 6, the highest since March 2012.

“We’re satisfied with the increase in subsidy,” Amnuay Yuttitham, who heads a group that represents rubber and palm oil farmers in 16 southern provinces, said by phone after a meeting with farmer groups today. Farmers plan to step up protests on Sept. 14 unless the government shows its commitment by signing an agreement on the subsidy increase and scrap legal charges against protesters, he said.

The government last week approved another budget of 20 billion baht to provide low-interest loans for farmer groups and factories that add value to rubber.

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