Network gives govt 30 days

THE SOUTHERN rubber planters’ network covering 16 provinces has accepted the government’s three initial measures to tackle the sharp fall in latex prices, but has vowed to step up pressure if prices do not improve in the next 30 days.

The Cabinet yesterday ordered several ministries to buy latex from rubber planters in a bid to shore up prices, which have fallen to a 10-year low of Bt32 per kilogram whereas production cost is estimated to be more than Bt60 per kg.

Soonthorn Rukrong, chief coordinator of the southern rubber planters’ network, said the target price has to be Bt60 per kilo for planters to cover their production cost. He said the network would give the government another 30 days to shore up the price after which it will take further action if the situation does not improve.

“We believe the government could achieve the target price and if it cannot achieve Bt60, we want to know the reasons,” Soonthorn said.

Prime Minister Prayut Chan-o-cha said the government would buy latex at slightly higher than the prevailing market price but Bt60 was not possible, as the government’s aim is not to distort market forces.

He said the Public Warehouse Organisation would set the purchasing price for latex, which has dropped from around Bt60 per kg in January 2014 to around Bt45 per kg in January 2015 and the current price has gone down further to Bt32 per kg.

“The idea is to increase domestic consumption of rubber, as advanced economies are not buying at the moment and this should help increase rubber prices,” he added.

Various ministries will buy a combined 100,000 tonnes of latex, which will be converted into rubber sheets directly from farmers and they will use the raw materials right away instead of stocking them up.

Currently there are around 200,000-300,000 tonnes of rubber sheets in the government’s stocks, while the Kingdom has an annual output of 4.1 million tonnes of natural rubber, of which only 1.4 million tonnes are used domestically.

According to the Cabinet resolution, the Defence Ministry will spend Bt162 million to buy 933 tonnes of rubber to fix roads within military compounds; the Agriculture and Cooperatives Ministry will spend Bt9.8 billion for 25,580 tonnes of rubber sheets; the Tourism and Sport Ministry will spend Bt952 million for 3,600 tonnes of rubber to build sports fields; and the Transport Ministry will buy 57,713 tonnes of rubber for mixing with asphalt in road construction.

The Interior Ministry will spend Bt1.59 billion for 3,069 tonnes of rubber for local sports fields, playgrounds and roads; the Health Ministry will buy Bt1.05 billion to use rubber as raw material for production of medical and related products; the Education Ministry will buy rubber sheets for use in sports fields and playgrounds.

In addition, the Commerce Ministry has also proposed measures to attract foreign firms to buy more rubber from Thailand.

In addition to the 100,000-tonne purchase plan, the Cabinet yesterday agreed to spend Bt300 million to distribute 4 million bags of rice free of charge to affected rubber planters, while offering low-cost food and necessity products to these households in southern provinces and other regions where low rubber prices have caused economic hardship.

The Cabinet also approved General Chatchalerm Chalermsuk as chairman of the Rubber Board of Thailand.

Meanwhile, Aat Pisanwanich, director of the UTCC’s Centre for International Trade Studies, said the production cost of rubber in Thailand is about Bt64 per kilogram so the government should also introduce measures to help lower production cost as a longer-term solution.

In addition, Thailand has to develop upstream industries for rubber rather than only exporting the raw material, while there should be more investment in rubber processing.

“Thailand needs to draw investment to become a centre for rubber processing, as Thailand has relied too much on export of raw rubber, which yields low income to rubber farmers” Aat said. 

Of the total rubber production, about 87 per cent is exported overseas as rubber sheets while the balance is used for processing, which creates higher value-addition.

He added that with the slowing down of China’s economy, the price of rubber would not increase easily because China was a major rubber user and importer.

Of the total 12 million tonnes of rubber output in the world market, about 40 per cent used to be exported to China. China can produce 850,000 tonnes of rubber each year, but it needs 4.7 million tonnes of rubber a year.

Thailand is the world’s biggest rubber exporter.

Commerce Minister Apiradi Tantraporn said the Public Warehouse Organisation is currently meeting with rubber farmers in the South to seek their opinion and find measures to help them from the falling prices of farm crops.

In a boost for overseas rubber sales, buyers from 17 countries, including China, Russia, Taiwan, Turkey, and South Korea, have expressed interest in purchasing rubber and rubber products from Thailand.

Also, Cambodian importers will this month meet with Thai rubber products traders to buy contracts worth US$4 million. Products that Cambodian traders would like to purchase are rubber mattresses, gloves and other products made from rubber.