Thailand Approved $151 Million Budget To Buy Rubber From Farmers

19 January 2016, 19:09 SEAST

Thailand has allocated the budget to purchase rubber at a premium, in a bid to help farmers hurt by the commodity’s falling price.

Government spokesman Maj. Gen. Sunsern Kaewkumnerd said Tuesday the cabinet has approved the allocation of 5.47 billion baht ($151 million) from the state budget to buy up to 100,000 metric tons of rubber directly from local farmers for 45 baht ($1.24) a kilogram.

The military-installed government’s latest decision followed last week’s report that it planned to purchase around 200,000 tons of rubber at no more than 60 baht a kilogram, a move rubber business operators said has contributed to a reversal in prices. At the time of the announcement, Thai rubber prices traded between 35.19 baht and 35.52 baht a kilogram, according to the Thai Rubber Association.

The initiative resulted in prices moving “from 41.70 baht per kilogram for RSS3 [ribbed smoked sheet rubber no. 3] at the Songkhla Central Rubber Market on 12 January 2016 to 44.70 baht per kilogram on 14 January 2016,” International Rubber Consortium Ltd. said on its website.

Rubber prices across Asia have rallied since the Thai government’s purchase proposal, as it eased investors’ concerns about how the slowdown in China would affect demand for the commodity. China is the world’s largest consumer of rubber, which is used to produce products ranging from tires to latex gloves.

The Tokyo Commodity Exchange benchmark six-month rubber contract has risen more than 9% since news of the plan on Jan. 12.