Thai government to buy rubber to support prices

BANGKOK (Commodity Online): Plunging rubber prices caused by the earthquake and tsunami in Japan may force Thailand government to pump in a massive 8 billion baht ($263 million) this week to buy natural rubber from the domestic market.
Thailand is the largest rubber producer in the world. Rubber prices have crashed in the domestic market after the Japanese earthquake and tsunami have unleashed fears that demand for natural rubber might slump as the catastrophe has hit major car companies in Japan.
On Tuesday, the Thailand government is expected to announce steps to arrest rubber prices, officials said.
Deputy Agriculture Minister Supachai Phosu told Reuters that the government will intervene to buy and stock rubber from the domestic market to ensure that rubber prices do not fall further.
"The cabinet has approved money for intervention in the past few years and we could use that money to buy rubber again in a bid to support farmers," he said. The Thai government has allocated 8 billion baht ($263 million) fund in the budget for buying rubber.
The spot price for unsmoked rubber sheet (USS3) has almost plunged by half from the record high of 180 baht per kg in mid-February. It plunged to 95 baht per kg on Monday.
" We need to do something to support rubber prices; they should not fall below 100 baht ($3.29) per kg," Deputy Prime Minister Suthep Thaugsuban said.
Rubber traders and farmers hit by the crash in the natural rubber prices have appealed to the government to immediately take measures to ensure that prices do not fall below 100 baht.
According to the Association of Natural Rubber Producing Countries, Thailand's government intends to intervene in its domestic natural rubber market and support prices following their recent fall.
The earthquake and tsunami in Japan had a devastating effect on rubber prices across the world. In India, where rubber prices ruled at Rs 240 per kg, futures trading at the National Multi Commodity Exchange (NMCE) plunged to Rs 190 in the last few days.
Traders expect the rubber price fall as short-term and they said long-term rubber prices are in a bullish phase.