Fund is a first step in helping rubber prices rebound

Pongsak Kerdvongbundit, honorary president of the Thai Rubber Association, said last week that a Rubber Fund was created after the meeting in Songkhla’s Hat Yai district, hence it would the deal will be called the “Hat Yai Agreement”. 

All sides have joined hands to tackle the problem of the unusually low price of rubber. The agreement could possibly be in place in two weeks.

The fund will be open for everyone to purchase rubber so that the price is boosted to an acceptable level, possibly Bt60 per kilogram. After that, the normal market mechanism will take over. 

However all measures initiated to help rubber farmers have to be carefully considered, as foreign countries may assume that when the government subsidises the rubber industry, no matter by how much, the price would have to be lower. Care and caution will have to be exercised in providing any assistance.

“I believe that once the rubber price is up, all the problems will be gone,” he said.

Yiam Thavarorit, CEO of International Rubber Consortium Company (IRCo), said his office would try to stabilise the rubber price as much as possible. 

The government and private agencies have agreed to travel and hold talks with many countries, including Indonesia, Malaysia, Vietnam, Cambodia, Laos and Myanmar, to demonstrate their power as the seven major rubber producers to set the market’s direction and restore faith.

The resolutions from the latest meeting were that the three countries in the group would not expand rubber plantations and would delay exports to allow time for recovery. IRCo is responsible for monitoring rubber exports of the three countries, which reports their monthly export volumes.

“Today, all countries have to cooperate to build confidence that the situation will get better. In the first three months, there is a high possibility that the price could be higher,” he said.

Boonsong Nubthong, president of the Federation of Thai Rubber Planters, said the country was now experiencing a shortage of rubber, especially rubber sheets. This was due mainly to the fact that growers had stopped tapping trees, as it was not worth the effort when the price was falling, and also the rainy season led to a low level of latex being produced. 

The rubber supply in the next two months might not reach 400,000 tonnes unless there are serious measures.

“The government should have a clear measure to encourage more domestic consumption of rubber, more than the current 14 per cent of total supply,” he said.

The state agency should initiate as a pilot project the use of more processed rubber for the construction of roads, soccer fields and playgrounds in place of asphalt, he said.

Pongsak said it was believed that the government was serious about tackling the problems, however, the information it has may not be accurate, resulting in them believing that the private sector was responsible. 

However, now the government understands the situation and all sides have agreed to cooperate in solving the problems.

No one mentioned the reports that the US may stop importing rubber tyres from China and try to set up rubber production in the US instead, forcing China to scale back purchase of rubber from other countries. This has pushed down the prices.

Uthai Sonluksub, president of the Rubber Farming Industry Organisation, said this was also a good opportunity. The citizen’s reform forum has brought in all parties to discuss and find a solution for the future of the Thai rubber industry 

Many people said they were shocked to see the sharp drop in rubber price to Bt100 for 3kg. This should never happen, as there is a shortage of domestic rubber. Last year, there were 4.2 million tonnes of rubber, compared to this year’s 3.5 million tonnes. However, prices have become lower despite reduced supply.

“This is because we have never talked to each other clearly until the market was disrupted. However, talks have just restarted and that will be good for us. Otherwise, there will be no rubber exports because farmers will no longer grow rubber trees,” he said.

Traders should not push rubber prices in the futures market down. If farmers face suffering for too long and they quit their plantations, manufacturers might face a problem, as there would be insufficient supply for the production system.

The government would have to take clear action on what price among Bt60, Bt80 and Bt120 it would subsidise. Whatever price it chooses would be a market indicator. 

“Today, the possible price should be Bt60 per kilogram and it, after all, should be left to the market,” he added.

Suwit Ratanapong, an adviser to Deputy Agriculture Minister Amnuay Patise, said the government has attempted to raise rubber prices this month.

The goal was to help increase market prices to be compatible with rubber prices in the futures market.

“Now we have the money and the plan ready. Rubber business operators are ready to take part in the project and help implement it. I am confident that this project will succeed in finally boosting rubber prices,” he said.

Chayan Sangkapaitoon, a member of the Farmers Council in Songkhla, said rubber prices now range between Bt32 and Bt36 a kilogram, compared to the cost of about Bt65 a kilogram.

The government’s suggested price of Bt60 was “barely acceptable”, judging by the current market situation. A more appropriate price range should be Bt70-Bt80, he said.