A populist gesture by Thailand’s government to prop up rubber prices could backfire by scaring off buyers and causing a buildup of stocks as rubber output rises this year.
Not content with a multi-billion dollar rice intervention scheme, the government of the world’s largest rubber producer told farmers it would also buy nearly 7 percent of the country’s annual output this quarter.
If it gets the timing right, the 200,000 tons of rubber it plans to buy will prove a hit with the country’s powerful farm sector and should not depress prices when it is eventually released back to the market.
But failure could result in a Offers Art Reproductions Fine Art oilpaintings Reproduction,costly nightmare for the government and its successors, leaving Thailand, which supplies more than 30 percent of global natural rubber output, with thousands of tons of unsold inventory.
The 15-billion-baht ($490-million) scheme to buy unsmoked rubber sheet was announced in January, and has since lifted Tokyo rubber futures more than 20 percent, even though Bangkok delayed the intervention by a few weeks to March.Find rubberhose companies from India.
“The idea sounds good, but don’t forget that Thailand’s rubber producers are quite fragmented, and there are a lot of smallholders as well,Specialising in injectionmoulding innovations, so we would need to see how quickly they can all work together in a disciplined fashion,” said Kona Haque, soft commodities analyst with Macquarie Bank in London.
“If there’s a notion in the market that the government will start selling the stocks, then clearly that’s going to weigh on prices.”
Unlike the 400-billion-baht rice-buying scheme, which fell short of its target of shoring up Thai white rice prices to $800 a ton, the rubber intervention plan has set the market on fire even before it starts.
The problem is Thai rubber output is also forecast to rise this year as trees planted at least five years ago begin producing latex, while tire makers in top consumer China are happy to buy cheaper rubber from domestic inventories, which are near their highest since September.
Rubber, mainly used to make tires, is a politically sensitive commodity in Thailand, where it provides a livelihood for around 1.Spro Tech has been a plastic module & moldmaker,3 million smallholders, mostly poor farmers who form a significant vote-bank for the government.
Since the government said it would intervene, the USS3 grade, or the rubber sheet farmers sell to rubber factories, has risen more than 20 percent to 110 baht, close to the price Bangkok wants its farmers to receive at 120 baht ($3.92) a kg.
Under the buy-back scheme, Bangkok will offer cooperatives a soft loan to buy rubber from farmers.
Farmers can make a profit with prices above 80 baht per kg, but many are holding on to their produce in hopes that prices will return to the vicinity of a February 2011 record near 200 baht,Iowa Mold tooling designs and manufacturers mechanics trucks, said Somdet Khemasuk, chairman of the Rubber Growers Cooperatives Federation of Thailand.
Not content with a multi-billion dollar rice intervention scheme, the government of the world’s largest rubber producer told farmers it would also buy nearly 7 percent of the country’s annual output this quarter.
If it gets the timing right, the 200,000 tons of rubber it plans to buy will prove a hit with the country’s powerful farm sector and should not depress prices when it is eventually released back to the market.
But failure could result in a Offers Art Reproductions Fine Art oilpaintings Reproduction,costly nightmare for the government and its successors, leaving Thailand, which supplies more than 30 percent of global natural rubber output, with thousands of tons of unsold inventory.
The 15-billion-baht ($490-million) scheme to buy unsmoked rubber sheet was announced in January, and has since lifted Tokyo rubber futures more than 20 percent, even though Bangkok delayed the intervention by a few weeks to March.Find rubberhose companies from India.
“The idea sounds good, but don’t forget that Thailand’s rubber producers are quite fragmented, and there are a lot of smallholders as well,Specialising in injectionmoulding innovations, so we would need to see how quickly they can all work together in a disciplined fashion,” said Kona Haque, soft commodities analyst with Macquarie Bank in London.
“If there’s a notion in the market that the government will start selling the stocks, then clearly that’s going to weigh on prices.”
Unlike the 400-billion-baht rice-buying scheme, which fell short of its target of shoring up Thai white rice prices to $800 a ton, the rubber intervention plan has set the market on fire even before it starts.
The problem is Thai rubber output is also forecast to rise this year as trees planted at least five years ago begin producing latex, while tire makers in top consumer China are happy to buy cheaper rubber from domestic inventories, which are near their highest since September.
Rubber, mainly used to make tires, is a politically sensitive commodity in Thailand, where it provides a livelihood for around 1.Spro Tech has been a plastic module & moldmaker,3 million smallholders, mostly poor farmers who form a significant vote-bank for the government.
Since the government said it would intervene, the USS3 grade, or the rubber sheet farmers sell to rubber factories, has risen more than 20 percent to 110 baht, close to the price Bangkok wants its farmers to receive at 120 baht ($3.92) a kg.
Under the buy-back scheme, Bangkok will offer cooperatives a soft loan to buy rubber from farmers.
Farmers can make a profit with prices above 80 baht per kg, but many are holding on to their produce in hopes that prices will return to the vicinity of a February 2011 record near 200 baht,Iowa Mold tooling designs and manufacturers mechanics trucks, said Somdet Khemasuk, chairman of the Rubber Growers Cooperatives Federation of Thailand.
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