Rubber traders yesterday welcomed the planned Bt420-million "Rubber Fund" as a good start to ensure a brighter outlook for their industry, hoping that it could help shore up prices of the commodity.
Meanwhile, Finance Minister Sommai Phasee conceded that the government’s financial aid to rubber farmers was slower than expected because of a multiple-stage process in a bid to prevent corruption.
Currently, the price of rubber ranges between Bt36 and Bt37 a kilogram, the lowest in a few years, compared with the peak of Bt174.44 per kilo in 2011.
‘A good start’
“The fund is a good start to encourage more trade in the futures market, which will help shore up the rubber price in the long run,” said Luckchai Kitipol, honorary president of the Thai Rubber Association and chief executive of Thai Hua Rubber.
The Agricultural Futures Exchange of Thailand (Afet) will be widened and joined by more foreign traders. This should help promote more rubber trading, he said.
He expects trading on the futures market should exceed 1,000 lots a day from only a few hundred lots currently after the government supported the purchase of rubber on Afet.
Other measures including the encouragement of cooperatives to purchase rubber from the market should also increase prices soon.
Price likely to rise
Moreover, with expectations of lower rubber production in the North and Northeast, as well as in China, the price should increase in February.
However, Luckchai said he could not predict how high the price would climb next year as it depended on the world market.
With lower oil prices, Luckchai said the world economy should show a stronger recovery and that would increase consumer demand and drive up agricultural prices.
Aat Pisanwanich, director of the International Trade Studies Centre, said the government and private enterprise had the right moves to support market prices of rubber.
However, the Rubber Fund is too small to drive up rubber prices significantly.
“At least Bt10 billion would be needed to drive up the rubber price in the market. Moreover, the government needs to inject some money to encourage local enterprises and cooperatives to set up processing plants to absorb the supply of raw rubber,” he said.
He said that with serious action by the government in cooperation with private enterprise, the price of rubber should increase over the next two months.
However, it would be quite difficult to drive up the price to Bt80 per kilogram.
The price of rubber should be above Bt50-Bt60 per kilo in the first quarter of next year, he added.
According to a study by the centre, the cost of rubber production is Bt64 a kilo.
As chairman of Bank for Agriculture and Agricultural Cooperatives (BAAC) during his visit to the financial aid project for rubber farmers in Krabi, Sommai said about 4,000 farming households with a combined plantation area of 3.99 billion rai had been paid Bt39 million in compensation for low rubber prices.
The government had set a budget target of Bt8.2 billion to pay 850,000 households.
The payment was set at Bt1,000 per rai for not more than 15 rai and commenced on November 15.
He said the BAAC had streamlined the process so as to be able to pay the rubber farmers faster.