The government will buy raw rubber sheets from the current crop directly from planters at 45 baht a kilogramme.
Eight ministries agreed to buy 100,000 tonnes of rubbers for use in their existing projects as the government saw it as the quickest way to help farmers without putting pressure on the central budget.
As recommended by the Budget Bureau, the Rubber Fund, whose money comes from the cess duty collected from rubber exporters, will advance the money for farmers on behalf of these ministries, which will pay it back after they disburse the budgets for the projects.
Prawit Wongsuwon, deputy prime minister who chaired a rubber problem-solving committee, said if the fund could not meet the demand, loans will also be extended by the Bank for Agriculture and Agricultural Cooperatives.
The Public Warehouse Organisation (PWO), the National Council for Peace and Order and the Rubber Authority of Thailand will act as the buyers for these ministries, he said.
The PWO estimated it would buy 100,000 tonnes of all types of rubber. The condition is that the output must come from the current crop ending in three months.
The products will not be kept in warehouses since the Agriculture and Agricultural Cooperatives Ministry will coordinate efforts to process and use it as much as possible.
"All sides agreed on the 45-baht price. For latex and cup lump, the prices will be lower.
"If the output is more than this [100,000 tonnes], we'll keep buying it. But this is an initial ground rule. Even though we haven't started buying yet, market prices have already risen," Gen Prawit said.
The price of raw sheets rose 0.86 baht to 36.05 baht a kg at the Songkhla market on Thursday while RSS3 climbed 1.61 baht to 39.39 baht and latex 0.50 baht to 33.50 baht respectively.
The deputy prime minister stressed the measures were just an immediate relief. In the longer term, the agriculture ministry will need to rethink and plan the plantation areas."
Rubber farmers have been hard hit by the global price slump in line with oil. Rubber prices have plummeted to 34 baht a kg while farmers claim their cost is 60 baht.
The rubber trade law, passed by junta-appointed legislators in 2014, allows the Rubber Fund to be used in the event of "market crises". The old law required the cess duty be used exclusively to support felling and replanting rubber trees.
The announcement drew lukewarm responses from some farmers' groups.
The price-setting was a cause for concern, Manas Boonpat, chairman of the Association of Tappers and Small Rubber Farmers, said in Phatthalung province.
"The price shouldn't have been announced. The government can lead by buying 1-2 baht a kg higher when buyers are reluctant," he said.
Besides, he thought the PWO was not as experienced as the Rubber Authority of Thailand.
"The government should let the Rubber Authority of Thailand buy rubber and have it set up sub-committees dominated by local farmers in each area since they are the ones who know whom to buy rubber from.
"We're concerned who the lucky sellers to the government would be. It's possible the rubber that trading groups bought at 19, 20 and 22 baht a kg earlier might end up in the government's hand. A precaution is needed to make sure the rubber really belongs to small farmers," he added.
Aid to operators
Finance Minister Apisak Tantivorawong also announced one-year financial measures aimed at easing the price slump on Thursday.
Two state banks - Government Savings Bank (GSB) and BAAC - will extend zero-rate loans to the PWO so it can buy rubber directly from farmers.
The GSB and SME Bank and Krungthai Bank will also extend soft loans to operators who have rubber purchase contracts with the eight ministries.
The ministry will also compensate interest to five commercial banks which have lent to operators who buy more rubber for their stocks.