Thailand to Purchase Rubber from Farmers to Shore Up Prices

Thailand’s government will buy natural rubber directly from growers as the world’s largest producer shores up efforts to stem a plunge in prices to the lowest since 2008.

The government will purchase 200,000 metric tons of the commodity used mostly in tires and gloves at not more than 60 baht ($1.65) a kilogram each before the current tree tapping season ends, it said in an e-mailed statement on Tuesday. Prime Minister Prayuth Chan-Ocha’s cabinet also approved setting up an eight-member board within the Rubber Authority of Thailand to oversee the sector, he said.

Rubber futures in Tokyo fell for a third straight year in 2015 as demand slowed from China, the world’s largest consumer, and a supply glut persisted. Global output will exceed use for two more years, with the surplus quadrupling in 2016, according to The Rubber Economist Ltd., a London-based industry researcher.

Thailand has accumulated about 300,000 tons of rubber in stockpiles from state purchases in recent years. That has failed to arrest the slide in local prices, driving farmers away from the plantation to crops such as cassava or pineapple. Rubber Authority of Thailand last month signed a deal to sell 200,000 tons of rubber to China’s Sinochem Group.

China’s imports fell 10 percent to 3.68 million tons in 2015 as consumption growth dropped to 2.4 percent from 13 percent a year earlier, the Association of Natural Rubber Producing Countries said on Jan. 11.