Thai govt offers soft loans for rubber purchases to prop up prices

Thailand's government has approved 30 billion baht ($931 million) in soft loans to help cooperatives and local firms buy rubber from farmers in a bid to prop up prices of the commodity, which are at multi-year lows because of weak global demand.

However, Friday's announcement made little impression on prices and farmers said they were not happy, leaving open the prospect of protests to try to force the government to do more to help them.

Pridiyathorn Devakula, the deputy prime minister who oversees economic issues, said the first tranche of 15 billion baht would be made available for local cooperatives to buy latex and unsmoked rubber sheet from farmers and process it into export-grade sheet and blocked rubber.

The other 15 billion baht was for companies that use rubber as a major raw material, mostly glove and condom makers, to help them take up more rubber from farmers, he said after a meeting of the National Rubber Committee.

"We expect this measure would help absorb rising supply from the market and boost prices eventually," Pridiyathorn told reporters.

Thailand is the world's biggest producer and exporter of rubber. It produced 4.2 million tonnes in 2013, of which around 86 percent was exported.

But demand is slack at the moment because of a slowing Chinese economy and lacklustre growth in the developed world.

Tokyo rubber futures, which set the global price trend, have fallen more than 30 percent this year.

That has helped drag physical rubber prices down by 28 percent this year, with the benchmark Thai smoked rubber sheet (RSS3) offered at $1.75 per kg, down from $2.45 in January.

It touched a record high of $6.40 per kg in 2011 when demand from China was strong.

Despite the Thai announcement, Shanghai rubber futures traded more than 3 percent lower on Friday due to poor demand for commodities in China. Tokyo rubber futures for February delivery were down 0.1 yen at 189.1 yen per kg by 0651 GMT, near a five-year low.

The price of Thai unsmoked rubber sheet (USS3), which farmers sell to factories, was quoted at 48 baht per kg, which farmers say is far below their production costs of 65 baht.

"This measure is worth nothing and we will still suffer losses. Farmers' groups will meet again early next month to see what more we can do to put pressure on the government to do something," said Amnuay Yutitham, one of the leaders of farmers who threatened this month to stage protests due to low prices.

The government called in farmers' leaders for talks on Wednesday and promised measures to help them. The announcement of the soft loans was one of the outcomes.