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Thailand approves US$792 million in subsidies for rubber farmers

  • Thailand, the world’s largest rubber producer, has seen its exports plummet as the tariff war between Washington and Beijing rages on.
  • In addition to providing short-term income guarantees to farmers, the Thai government is also looking to widen its export markets to reduce reliance on China.
Yot Kongyarit, who is in his 60s, owns about 8,000 square metres – an area slightly larger than a football field – of rubber farming land in Thailand’s southern province of Songkhla.

This month, he registered with the government to get a price guarantee for his production, after the Thai cabinet on October 15 approved a 24-billion-baht (US$792 million) budget for the first phase of income-guarantee subsidy for rubber growers.

The scheme aims to ensure 1.4 million rubber farmers have a stable income for six months, until March next year. It comes as rubber farmers have been hard hit by the US-China trade war that has depressed global demand and pushed down prices.

Thailand is the world’s largest producer of rubber. Rubber tappers in the country, who harvest latex at night or before dawn, refer to the liquid that seeps out of trees as “white gold”.

But since Washington and Beijing began a series of tit-for-tat tariffs last year, Chinese demand for rubber has plummeted.

Rubber exports to China fell 15 per cent in the first nine months of this year compared with the previous year.

In 2018, the rubber export value to China was 62 billion baht, compared with 39 billion baht between January and September this year.

Thai rubber exports to China are mostly rubber blocks for tire manufacturing.

As mainland China car sales fell for the 15th straight month in September amid the trade war, Thai farmers are finding that the “white gold” can no longer guarantee livelihoods.

The government’s subsidy scheme guarantees the price of premium grade rubber sheets at 60 baht per kilogram, latex at 57 baht per kg, and cup lumps at 23 baht per kg. The maximum guaranteed amount will not exceed 240 baht per kg for each 1,600 sq m per year, and will be limited to 40,000 sq m per farmer.

While many see this measure as an attempt by the coalition government to fulfil its campaign promise, the short-term guarantee of income is one of only a few things that Thai rubber growers can count onSuranee, a rubber farmer in northeastern province of Srisaket, said many have “changed jobs or diversify income by growing other crops too”.

Suranee is one of the many people in Thailand’s northeast who began rubber farming in the mid-2000s following the government’s bid to tackle poverty by expanding rubber farms at a time rubber prices were flourishing, partly due to China joining the World Trade Organisation in 2001.

Before that, rubber farming was concentrated in southern Thailand for almost a century. Its warm climate and shorelines ensured Thailand’s competitiveness both in terms of quality and quantity of rubber produce.

In recent years, China has begun to directly source rubber in Southeast Asia, mostly through partnership with local producers in several countries.

“Thailand’s annual rubber production is five million tonnes a year,” said Chaiya Kongmanee, an economist at Thailand’s Prince of Songkla University.

“This makes Thailand the biggest rubber producer. Indonesia’s annual production figure is 3.5 million tonnes, and Vietnam’s is 1.1 million tonnes, China’s is 840,000 tonnes, India’s is 750,000 tonnes and Malaysia’s is 650,000 tonnes,” Chaiya said.“However China’s strategy to stabilise and source its rubber supply has changed during the years, and in recent years, it has begun to directly source rubber in Southeast Asia, mostly through partnership with local producers in several countries,” he added.

It is grim news for farmers like Yot in Songkhla.

“We have read that China has rented out large areas of land in Laos to grow rubber,” Yot said with concern.

Sunan Nuanpromsakul, acting head of the Rubber Authority of Thailand, said the government is working to find emerging markets for Thai rubber and expand existing export markets to places such as India, Europe, Japan and South Korea.But “rubber consumption in these places is still not very high, with Japan and South Korea’s demand at 600,000 to 700,000 tonnes a year”, he said.

“India’s demand is 800,000 tonnes and the country already produces about 700,000 tonnes of rubber annually,” Sunan added.

Thailand reopens free trade talks with EU to reduce reliance on China.

Other government measures to address plunging rubber prices include loan schemes, programmes to increase processed rubber manufacturing, and upcoming electronic auctions that will allow international traders to offer prices non-dependable on futures trading, according to Sunan. 

Once these measures are launched, “the situation should be more reliable by year’s end”, he said.

Meanwhile, Yot said he and other Songkhla farmers in the local rubber cooperative would hold out for as long as they could.He had earlier transferred some 16,000 sq m of land to each of his two children, so they could continue the trade that the family has been carrying out for at least a century.

Asked if he could sell the land if things went further downhill, Yot said no. “I can’t. It belonged to my father.”

The Week in Asia