Govt to step up rubber scheme

Govt to step up rubber scheme

Thailand, the world's biggest rubber producer, will expand a state-buying programme by more than doubling purchases from farmers to support prices, according to Deputy Agriculture and Cooperatives Minister Yuttapong Charasathien.

The government will purchase a further 250,000 metric tonnes by March after buying 170,000 tonnes since May, Mr Yuttapong said in an interview in Bangkok on Wednesday. The country will also proceed with plans agreed with Indonesia and Malaysia in August to cut its shipments by 150,000 tonnes, he said.

Rubber in Tokyo has entered a bull market, rebounding from a near three-year low in August, after the three countries agreed to cut exports by a combined 300,000 tonnes. The rally, also driven by prospects for increased demand as China and the United States recover, may raise farmers’ incomes, while lifting costs for tyre makers such as Tokyo-based Bridgestone Corp.

"The Thai programme will absorb surplus from the physical market," Takaki Shigemoto, an analyst at research company JSC Corp in Tokyo, said by phone. "The programme will help bolster rubber prices."

Futures rose 24% from the year's lowest close on Aug 14 to Thursday, exceeding the 20% gain commonly seen as defining a bull market. The April-delivery contract climbed 2% to 261.7 yen a kilogramme (98,000 baht a tonne) on the Tokyo Commodity Exchange on Thursday, the highest finish since Oct 18.

'Move Forward'

"We will seriously move forward," said Mr Yuttapong, who has overseen rubber policy since Nov 5. 

"We will focus on managing supplies to boost prices,” he said, without giving a target.

The total of 420,000 tonnes that Thailand may now buy from growers equals 12% of last year’s output, according to Bloomberg calculations based on figures from the Association of Natural Rubber Producing Countries. Thai production was 3.57 million tonnes in 2011, and 2.1 million tonnes in the first eight months of this year, according to data from the ANRPC.

"Prices have been on an upward trend," Mr Yuttapong said. The gains have been driven by the export-cut measures as well as increased optimism that growth in China and the US will continue, improving rubber demand, he said.

More Americans this month said the world's largest economy will improve than at any time in the past decade, according to a survey accompanying the Bloomberg Consumer Comfort Index. Growth in China may accelerate to 8.1% next year, according to the median estimate of 56 economists' forecasts. China is the world's largest rubber user, according to the ANRPC.

The top exporters, including ministers, senior officials and representatives from exporters' associations, will meet in Thailand next month to discuss measures to bolster prices, Mr Yuttapong said. These include plans to form a regional futures market and discuss the so-called appropriate rubber price that allows farmers to make a living and promotes usage, he said.

In the longer term, Thailand will seek to boost domestic demand, encouraging overseas tiremakers to set up local facilities, he said. The government will focus more on prices and demand than planting expansion, Mr Yuttapong said.

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