Thailand, the world’s largest rubber producer and exporter, has launched a program to encourage farmers to cut down rubber trees earlier than the 25-year life cycle to reduce total annual output by 5 percent by the end of April, in a bid to support falling rubber prices.
To reach the target, the Thai government has earmarked 80 billion baht ($2.5 billion) to compensate those who participate in the program, which is not mandatory.
Thailand has previously used similar “cut-down” measures in coordination with Indonesia and Malaysia, the second- and third-biggest rubber producers in the world, respectively, but the policies were backed up only by verbal interventions, rather than specific action, and failed to have a major impact on prices.
Narongsak Jaisamut, director of the Rubber Authority of Thailand’s Production Development Department told the Nikkei Asian Review on Wednesday that the government will offer farmers 4,000 baht per rai (or 0.16 hectare) to rev up the plan to cut down rubber trees. “We target to cut as much as 50% of 400,000 rai a year by the first quarter of this year. That would help cut supply by 5% and should help support price,” Narongsak said.
An excessive supply of rubber at a time when global consumption has been weak has dragged down the price of benchmark export grade rubber sheet to around $1.70 a kilogram. The government also plans to spend an additional 3 billion baht to pay farmers to cut down rubbers trees covering an additional 300,000 rai, or 48,000 hectares, by the end of this year. However, that plan has yet to be approved by the Thai cabinet, according to an official at the Rubber Authority of Thailand. Narongsak said the additional measure is expected to cut rubber supply by 20 percent this year and help support prices.
Apart from the measure to cut down rubber trees, the government is promoting their use in other ways in order to help create added value.
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