Thailand to Purchase Rubber From Farmers as Prices Extend Slump

  • Government to buy 200,000 tons before tapping season ends
  • Thai export-price at lowest level since December 2008

Thailand’s government will buy natural rubber directly from growers as the world’s largest producer shores up efforts to stem a plunge in prices to the lowest since 2008.

The government will purchase 200,000 metric tons of the commodity used mostly in tires and gloves at not more than 60 baht ($1.65) a kilogram each before the current tree tapping season ends, it said in an e-mailed statement on Tuesday. Prime Minister Prayuth Chan-Ocha’s cabinet also approved setting up an eight-member board within the Rubber Authority of Thailand to oversee the sector, he said.

Rubber futures in Tokyo fell for a third straight year in 2015 as demand slowed from China, the world’s largest consumer, and a supply glut persisted. Global output will exceed use for two more years, with the surplus quadrupling in 2016, according to The Rubber Economist Ltd., a London-based industry researcher.

“The government will buy latex, rubber sheet and cup lump at prices above
market for farmers to be able to make a living,” said Prayuth. “After the
purchases, we will not sell rubber in to the market but will supply directly to
processing plants who can pay material costs after they sell finished goods.”

Sinochem Deal

Thailand has accumulated about 300,000 tons of rubber in stockpiles from state purchases in recent years. That has failed to arrest the slide in local prices, driving farmers away from the plantation to crops such as cassava or pineapple. Rubber Authority of Thailand last month signed a deal to sell 200,000 tons of rubber to China’s Sinochem Group.

The government has asked state agencies and ministries to increase the use of rubber to bolster domestic consumption. Thailand annually produces 4 million tons of rubber, of which 1.4 million tons is consumed locally, according to government data.

Futures fell 1.7 percent to 146.9 yen a kilogram ($1,248 a ton) on the Tokyo Commodity Exchange on Tuesday, the lowest settlement since March 2009. The export price of Thai ribbed smoked sheet was unchanged at 41.70 baht a kilogram, matching the lowest level since 2008 reached last week.

Global demand growth for natural rubber is estimated to slow to 1.3 percent to 12.6 million tons this year, while production expands 3.8 percent to 13 million tons, widening a glut to 411,000 tons, The Rubber Economist estimated last month. China’s imports fell 10 percent to 3.68 million tons in 2015 as consumption growth dropped to 2.4 percent from 13 percent a year earlier, the Association of Natural Rubber Producing Countries said on Jan. 11.

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