Bt420m fund to help shore up rubber prices

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PURCHASES IN FUTURES MARKET
Bt420m fund to help shore up rubber prices
Somchai Samart
The Nation
Songkhla


Suwit Rattanapong, adviser to the deputy agriculture minister, 2nd left, shakes hands with representatives of rubber farmers after a forum on rubber in Songkhla yesterday.

Govt and private sector to contribute for purchases in futures market

BANGKOK: -- The government and private rubber-business operators will jointly launch a Bt420-million fund, with the aim of tackling the tumbling price of rubber.

Pongsak Kerdvongbundit, honorary president of Thai Rubber Association, said private operators would contribute Bt30 million each to the fund, totalling Bt210 million, while the government would also contribute Bt210 million.

The fund will purchase rubber in the futures market. The fund is expected to be set up in the next two weeks, Pongsak, who is managing director of Von Bundit Co, a rubber exporter, said in an exclusive interview with Nation Multimedia Group chairman Suthichai Yoon yesterday on the sidelines of a seminar on the future of Thai rubber hosted by NOW digital TV channel of NMG.

He added that the purchase of rubber in the futures market would help shore up the sagging rubber price. It is possible that the price might surge to Bt60 per kilogram after the move. However, he was noncommittal on the possibility of the price rising to Bt80 per kilogram.

Boonsong Nubthong, president of Federation of Thai Rubber Farmers, said he wanted the government to promote greater use of rubber in locally.

The chief executive officer of International Rubber Consortium Limited (IRCo), Yium Tavarolit, said a meeting was held of Indonesia, Malaysia and Thailand to set up measures to maintain rubber price stability. One of the measures suggested was for the three countries to not expand their respective rubber plantation area for the time being in order to reduce supply. They will also slow down rubber exports. IRCo was founded by the three countries as part of their collaboration to collectively ensure fair and remunerative income for small rubber planters of the three countries.

Chayan Sangkapaitoon of Songkhla Farmers Council said it is difficult for rubber planters to make a living at the present price, given the production cost is Bt65 per kilogram.

Meanwhile, the National Legislative Assembly yesterday voted 174 to 1 to pass the Rubber Authority of Thailand bill in its first reading.

The bill seeks to establish an authority to manage rubber policies and carry out research on sustainable development for rubber products. This week, rubber farmers said they were giving the government a few more weeks to push the price of rubber up to at least Bt80 per kg or face massive rallies. The ultimatum was issued when farmers began protesting and the government said the price could not rise higher than Bt60 per kg.

Source: http://www.nationmultimedia.com/national/Bt420m-fund-to-help-shore-up-rubber-prices-30249655.html


-- The Nation 2014-12-12

[ChrisY1]

Another brilliant move.....more subsidies under a different name........this government's so scared of confrontation!

[selftaopath]

A Codependent nation.

[bangkokfrog]

Another brilliant move.....more subsidies under a different name........this government's so scared of confrontation!

Agreed. Is this another yet product where Thai farmers are less productive than other countries? Does anyone believe that Indonesia and Malaysia will limit production if their farmers can make a living at current prices? As for confrontation, the problem for the government is that if one large group begin a protest it is likely to snowball (rice farmers, students, etc.). And the army are not exactly known for being light handed in dealing with protesters.

[slapout]

Well at least this government is not throwing billions out for the farmers nor their cronies to dip into like a huge pot of gravy with all the bread you can carry.

This sum is a pittance by any countries standard, plus 1/2 is put up by the private sector, if it keeps the farmers off the streets, mission accomplished. The investment of the private sector to this fund is probably return of monies diverted from its intended use anyway. Then add that the fund will be used to buy futures, when you have more rubber in stock/storage than you can give away is confusing at best. You sell on the futures market when you have excess stock, you definetly do not want to buy more, and have to take delivery or lose monies you have invested.

Then no one has ever accused government plutocrats of being the sharpest knives in the block.

[LuckyLew]

supply and demand seems to be irrelevant in Thailand

falling prices due to over supply and low demand seems a concept foreign to Thais

how about they grow / produce crops that are in demand? also foreign to Thais

KABOOM

why bother doing the smart thing when you can just get free handouts

[RubbaJohnny]

This policy will rebound

[Ulic]

Chump change, not going to do anything to lift/shore up the price of rubber as the price of oil falls but if it keeps the

farmers off the streets for the time being it will have a token benefit.

[pedro01]

They are going to get hosed on the Futures markets.

[BSJ]

Why is it these rubber tree farmers can't be encouraged to put some land aside for cash crops. They could grow vegetables to sell in the market and that would provide cash flow. I am guessing most would have a rai they could use.

[theguyfromanotherforum]

That's like 12 million bucks. What is that going to do?

Even mighty Russia is unable to stop a rouble decline.

[HUAHIN62]

But I thought they are scrapping all agricultural subsidies/populist policies/vote buying schemes/scams. Must have read incorrectly what our dear great leader said. Another day another u-turn.

[Greenhill]

'Fighting' against the market - never works in the medium/long term!! Do they think they can manipulate everything?

[Thaddeus]

This policy will rebound

I bet the cheque is made of rubber.

[Bosse137]

Why is it these rubber tree farmers can't be encouraged to put some land aside for cash crops. They could grow vegetables to sell in the market and that would provide cash flow. I am guessing most would have a rai they could use.

What kind of crop do you suggest?Do you have some experience to tell us about? I mean,it is easy to say,and sounds smart;"plant anothet crop".I have personally tried different vegetables and other crops,but let me tell you,it is difficult at best! Most of them seems to be seasonal and even so,lots of problems.It is to much rain,they rotten,to much hot and dry weather,lots of crawling and flying things that love to eat the crop.You have to use tons of perticides,fertilisers and so on.Then,how much do you get when you try to sell it? The best I managed is to get some to use for our selves at some time of the year.But,wellcome to teach me something I don`t know! We have our living from rubber and I agree with all of them who says,that we have to take it as it comes,the bad with the good.It doesn`t work to manipulate the market.What I am opposed to though,is that IF the goverment subsidies,it should do so to ALL rubberfarmers;not only to landowners!

[kartman]

I know not only tyres are made from rubber but F1 tyres are now made from plastics won't happen tomorrow but what are the rubber farmers going to do once economical alternatives are found and companies don't have to piss about with them or the Government.

[Thai at Heart]

Another brilliant move.....more subsidies under a different name........this government's so scared of confrontation!

Agreed. Is this another yet product where Thai farmers are less productive than other countries? Does anyone believe that Indonesia and Malaysia will limit production if their farmers can make a living at current prices? As for confrontation, the problem for the government is that if one large group begin a protest it is likely to snowball (rice farmers, students, etc.). And the army are not exactly known for being light handed in dealing with protesters.

The Thai companies (so called) all have operations in all of these companies. They are just representative middle men who will export from any of these countries.

They are not in the business of helping any farmer of it costs them money.

[Thian]

They could make decent mattresses out of it, those hard thick spring mattresses are a pain in the a$$.

Quality tourists all want a soft mattress and now they have to be imported.

[rickirs]

Use of commodity futures is a financial strategy to hedge against an inflationary environment.

Rubber prices are in a deflationary environment wherein the market price has fallen so much that the cost of production (Bt65 per kilo) exceeds current gross revenues. What the NCPO is trying to do is create artificial inflation in the rubber price by offering rubber contracts higher than current market prices (no more than Bt60 per kilo) that are trending level at best and falling at worse. The presumption is that no rubber will be sold for less than the futures price (Bt80 per kilo) by the futures date or a 130%+ price increase!

This futures strategy works when a supplier controls the supply and buyers are captive to whatever price is demanded. It;s called a monopoly. But Thailand does not control the worldwide supply of rubber and the demand is falling. so Thailand cannot dictate market prices.

Deputy Agriculture Minister Amnuay Patise said it was not possible to approve the rate of Bt80 per kilo (sic). He said he did not expect the price to rise beyond Bt60 at around the end of this year, despite the many government measures. The Nation 2014-12-10

If by the futures date (not specified) rubber prices are less than the futures contract price, the Government will lose its entire Bt210 million bet - yes, futures are a form of gambing. Gen. Prayuth has fallen into a political trap and an economic deadend despite expert advice. If he is determined to buy off the farmers' loyalty, he would do better to simply grant a subsidy to the rubber farmers of Bt80 per kilo placed in storage. Or the government could purchase all the Thai rubber at Bt80 per kilo and hold it until the market reaches that price - a clone of the Yingluck rice pledge program with the forewarning of failure. NACC better staff up for more corruption investigations.

[RubbaJohnny]

They could make decent mattresses out of it, those hard thick spring mattresses are a pain in the <deleted>.

Quality tourists all want a soft mattress and now they have to be imported.

As the actress said to he Bishop Let us pray,latex play.

However this may be a little bit much for the curtain establishment who provide merely a small 2cm packed rubba

[DLock]

Use of commodity futures is a financial strategy to hedge against an inflationary environment.

Rubber prices are in a deflationary environment wherein the market price has fallen so much that the cost of production (Bt65 per kilo) exceeds current gross revenues. What the NCPO is trying to do is create artificial inflation in the rubber price by offering rubber contracts higher than current market prices (no more than Bt60 per kilo) that are trending level at best and falling at worse. The presumption is that no rubber will be sold for less than the futures price (Bt80 per kilo) by the futures date or a 130%+ price increase!

This futures strategy works when a supplier controls the supply and buyers are captive to whatever price is demanded. It;s called a monopoly. But Thailand does not control the worldwide supply of rubber and the demand is falling. so Thailand cannot dictate market prices.

Deputy Agriculture Minister Amnuay Patise said it was not possible to approve the rate of Bt80 per kilo (sic). He said he did not expect the price to rise beyond Bt60 at around the end of this year, despite the many government measures. The Nation 2014-12-10

If by the futures date (not specified) rubber prices are less than the futures contract price, the Government will lose its entire Bt210 million bet - yes, futures are a form of gambing. Gen. Prayuth has fallen into a political trap and an economic deadend despite expert advice. If he is determined to buy off the farmers' loyalty, he would do better to simply grant a subsidy to the rubber farmers of Bt80 per kilo placed in storage. Or the government could purchase all the Thai rubber at Bt80 per kilo and hold it until the market reaches that price - a clone of the Yingluck rice pledge program with the forewarning of failure. NACC better staff up for more corruption investigations.

Great post.

This was a bad bet.

China is the worlds biggest buyer of rubber, mostly for tyre production. Tyre production is down and sees no turnaround.

China also has a pretty big oversupply of rubber, meaning they won't be buying much new rubber in the short/medium term.

Lastly, Thailand (and other countries) planted a massive amount of rubber trees when the price was much higher, which are ready for tapping now, leading to a glut or oversupply of Thai rubber, which is around 32% of Asian rubber suppliers.

Fortunately rubber doesn't go bad like rice does, but for sure, the Government could be holding this futures bet for some time.

The rubber price is going nowhere but lower.

Sell.