Thailand doubles rubber subsidy to appease farmers

Reuters News
Posted: Sep 10, 2013 4:35 AM
Thailand doubles rubber subsidy to appease farmers

By Pracha Hariraksapitak and Apornrath Phoonphongphiphat

BANGKOK (Reuters) - Thailand's government doubled its offer of help to rubber farmers on Tuesday, but it was not clear if it would be enough to head off fresh protests planned for the weekend.

Prime Minister Yingluck Shinawatra has been under pressure to end a dispute that has seen thousands of tons of shipments delayed, as protesters demanding government help to cope with low prices shut down roads and clashed with police in the southern provinces.

The subsidy of 21.2 billion baht ($659 million) approved by the cabinet will be paid to farmers based on the amount of land they hold, rather than used to buy rubber. Both an earlier purchase scheme and a similar rice plan have led to the build-up of stocks that the government has struggled to sell.

Analysts said the move away from stockpiling means there should be no impact on global rubber prices as no supply will be taken off the market. Thailand produces around one-third of the world's natural rubber and exports 90 percent of its output.

Each household would be given 2,520 baht per rai (0.16 hectare), Chalitrat Chandarubeksa, a deputy government spokesman, told Reuters, adding that households would be able to claim for a maximum 25 rai.

The subsidy would be worth about 10 baht per kg of rubber, which on top of the current market price of 81 baht for raw rubber would give farmers the 90 baht per kg some have been demanding.

However, some groups have called for 95 baht per kg.

"We'll meet this afternoon. If we don't all support the latest scheme, there could be a protest again this weekend," said Amnuay Yutitham, leader of a group representing farmers from 16 southern provinces where most Thai rubber is produced.

He said the farmers' demands now went beyond intervention over prices. For example, they wanted the release of people accused of breaking the law during last week's protests.

After the drop in prices last year, the government spent 22 billion baht ($690 million) buying rubber from October 2012 to May 2013 and built up stocks of 210,000 tons of rubber sheet without making much impression on global prices.

It has tried to enlist the help of Indonesia and Malaysia, the next biggest exporters, in restricting shipments but has not had much success in recent years. Demand from companies in China and from tire manufacturers has proved to be a bigger factor in setting prices.

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"I don't think it can support the price, it's just the government giving extra money to farmers because of their low income. It's different from the government buying rubber from farmers," said Gu Jiong, an analyst at Yutaka Shoji Co in Tokyo.

The price of Thai unsmoked rubber sheet has picked up to 81 baht per kg from around 75 baht in late 2012, helped recently by the possibility of government intervention.

However, it remains far below the 180 baht touched in February 2011, when benchmark smoked rubber sheet (RSS3) hit a record $6.40 per kg.

($1 = 32.1650 Thai baht)

(Additional reporting by Lewa Pardomuan in Singapore; Editing by Alan Raybould)