Rubber planters rally as prices slide 40%
More than 400 rubber planters converged on Songkhla City Hall yesterday demanding the government urgently step in to reverse tumbling rubber prices after they shed more than 40% in the space of a year, and as tensions with regional rivals starts to boil over.
A smaller number rallied f or the same cause in neighbouring Nakhon Si Thammarat.
They also urged the administration to hold talks with Malaysia and Indonesia to find ways of pushing the price of rubber latex up to 70 baht per kg, considered the break-even point for rubber production. They have plummeted to about 40 baht per kg over the last year.
This comes after representatives from the three nations met at the International Tripartite Rubber Council (ITRC) in Malaysia on July 6-7 to air grievances and discuss pressing concerns.
Prime Minister Prayut Chan-o-cha earlier assigned the Rubber Authority of Thailand (RAOT) to seek cooperation from the two major rubber-producing nations in helping push prices back up, said Chaiwut Phongphaew, a former Democrat MP for Songkhla.
However, the agency returned with the news that the two countries blame Thai rubber farmers for the fall, Mr Chaiwut, who also leads the federation of Songkhla farmers, told the Bangkok Post.
“The RAOT’s message has disturbed rubber farmers, who ask why they are being blamed,” he said. “The agriculture and cooperatives minister must come forward to explain this.”
“We are not trying to turn rubber into a political tool. The falling prices have nothing to do with politics, but the government does have the power to influence them,” he added.
He said he found it hard to believe Malaysia would make such accusations.
Mr Chaiwut, who also owns a rubber plantation, said state authorities estimate the average cost of rubber production to be 50 baht a kg whereas 70 baht is more accurate.
This is because they fail to account for rising production costs, including labour, fertilisers and pesticides, he said.
Meanwhile, the federation of Songkhla farmers has called on the Department of Special Investigation (DSI) to examine the rubber trade in futures markets to determine whether attempts have been made to distort rubber prices.
Federation secretary-general Preecha Kasemsuk said many Thai nationals were involved in rubber trading in overseas futures markets.
It also demanded the DSI or National Anti-Corruption Commission check the government’s rubber stocks to determine whether any of the stored materials have been smuggled out to be sold, which could influence prices.
The federation called to establish an organisation monitoring rubber prices featuring experts from the Thailand Development Research Institute, university lecturers and representatives from rubber farmers.
According to Mr Chaiwut, Thai rubber farmers have also asked the government to come up with measures to make more use of rubber, especially domestically produced latex, in state projects.
At present the state relies on imports from Malaysia, he said.
Manufacturers tend to rely more on Malaysian latex even though Thai latex is reputed to be the best in the world, he said.
“This information about imports has never been disclosed. We only know because we found out about it ourselves,” he said, asking the government to explain itself.
He said more cooperation should also be sought from transnational manufacturers to use Thai rubber, which would help restore flagging prices.
Referring to state projects, he said the mixture of asphalt used to pave roads should include 50% latex but many agencies ignore this to save costs, making roads less durable.
The Prayut Chan-o-cha government has faced a rubber price crisis now each year for the past three years, with no lasting solution to this perennial problem in sight. This year, the price of latex has fallen from 50 baht per kilogramme to 38 baht/kg, and last week was close to 33 baht/kg. It’s a sharp contrast to the past peaks when the price hit more than 100 baht/kg.
As usual, rubber farmers have threatened protests seeking state assistance which has come largely in the form of loan packages.
The Rubber Authority of Thailand said the government last month approved a budget of 10 billion baht to be lent to rubber traders at low interest rates to help improve their cash flow, enabling them to purchase rubber at higher prices.
In addition, a fund worth 1.2 billion baht, aimed at stabilising rubber prices, had been set up by the Rubber Authority and five key smoked rubber traders in Thailand to buy large volumes of smoked rubber.
We have seen this before. In April 2016, the Prayut administration approved a loan of six billion baht from the Bank for Agriculture and Agricultural Cooperatives to the Rubber Authority to buy rubber products to shore up prices.
The amount of money is different, but it’s the same goal: to bolster rubber prices. It’s known the fund is just a temporary measure to boost dwindling prices.
Like other commodities, rubber is subject to the law of demand and supply. When supply floods the global market, like this year, prices automatically tumble.
This year’s crisis is aggravated by a slowdown in imports by big consumers such as China and a move by some investors to suspend purchases in the hope of suppressing prices further.
In past years, the authorities have discussed many solutions to the rubber issue, including the need to add value to basic rubber products and increase local consumption, instead of depending solely on the export market.
A number of agencies have come up with noble plans to boost local consumption.
Among them is a plan to set up a rubber city in Songkhla province.
Under the plan, there will be further investments in projects to add value to products such as tyres, medical equipment and auto and aircraft parts.
One immediate use to which rubber can be put is including rubber latex in asphalt paving for roads.
It’s unfortunate that when the prices recover, those involved just return to business as usual which typically results in an annual price slump.
This has prompted desperate rubber growers to urge Prime Minister Prayut, who is head of the National Council for Peace and Order, to invoke the powerful Section 44 of the interim charter to mobilise state projects making use of rubber to combat the tumbling price of the commodity.
The latest crisis shows those involved just talk the talk and resort to the same solutions as they have in the past, which is not very helpful.
Indonesia, the world’s second-largest rubber producer, seems less worried about the price slump because, as the Indonesian Rubber Association (Gapkindo) recently put it, the country’s market fundamentals remain strong.
State agencies must be aware of a change in the world export scenario. China has invested in rubber plantations in some Asian countries which means the country will depend less on imports, a factor that will affect Thailand.
What is needed is good planning and area zoning to ensure a balance in demand and supply.
As one of the three biggest rubber-producing countries, we need more than a knee-jerk reaction to this price crisis.
What is needed is good planning and area zoning to ensure a balance in demand and supply.