Thai rubber will never bounce back

I fully support Prime Minister Prayut Chan-o-cha when he says that, instead of throwing cash away by supporting rubber prices, the government should help restructure and better manage the rubber-farming sector.

Natural-rubber prices have fallen by half over the past year. This is because artificial rubber, made from oil, is an almost perfect substitute for the natural product. The days of $100-per-barrel crude are long gone; the “new normal” is $40, and maybe less, for the foreseeable future. 

In short, natural rubber is a sunset industry. No government can fight or corner the world market. If the government supports rubber at its year-ago price, as the farmers wish, we’ll end up with high-priced stock that we can’t even break even on – as with Thaksin and Yingluck Shinawatra’s rice plan. 

Using rubber in asphalt roads would inflate costs – and besides, we can’t build enough roads to use all our rubber year after year.

Premier Prayut should follow through on his proposal to restructure the rubber industry. Subsidise planters to get out of rubber-tree cultivation, especially in high-cost areas. Put the land to other uses, and move up the value chain in rubber manufacturing. If necessary, absorb half of the losses for this crop – with a low cap per plantation – then quarter for the next crop, and then zero subsidy, to give them time to get out.

Throw brainpower at the problem, not cash.

Burin Kantabutra