Thailand's rubber growers up in arms over govt sale of half its stockpile

Worker collecting rubber on a rubber plantation in Phunpin, Surat Thani, in this file picture taken on Sept 5, 2013. Thai rubber growers are calling for an investigation into government claims it sold half the country's stockpile of the commodity, as
Worker collecting rubber on a rubber plantation in Phunpin, Surat Thani, in this file picture taken on Sept 5, 2013. Thai rubber growers are calling for an investigation into government claims it sold half the country's stockpile of the commodity, as farmers grow increasingly disillusioned with what they see as a lack of state support. -- PHOTO: REUTERS

BANGKOK/SINGAPORE (Reuters) - Thai rubber growers are calling for an investigation into government claims it sold half the country's stockpile of the commodity, as farmers grow increasingly disillusioned with what they see as a lack of state support.

The nation's large rural population has a major influence on Thai politics, with governments keen to win its backing. Rubber farmers have a history of taking to the streets to protest, and formed a sizeable contingent in the demonstrations that undermined former Prime Minister Yingluck Shinawatra. The military toppled the remnants of Ms Yingluck's government in a bloodless coup in May. Since then, falling prices and a decision by the military not to extend costly agricultural subsidies have increasingly alienated rubber farmers.

The military government said in early September that it had struck a deal to sell half the 200,000 tonne national stockpile, built up when Ms Yingluck's government bought the rubber to support domestic prices and bolster farmer incomes.

The head of Thailand's rubber industry group said the published terms of the sale were unclear. The government did not name the buyer and gave a sales price above the spot market. "We are afraid that the deal could be just a political ploy to tell the market that the stocks have been slashed," Mr Perk Lertwangpong, head of the Rubber Growers Cooperative Federation of Thailand, said on Tuesday. "But the rubber may not have gone anywhere and could still keep pressuring prices, with the government still paying burdensome storage costs."

Senior officials in the Rubber Estate Organization (REO), which oversees the country's rubber stocks, declined to comment on the deal, as did officials from the agriculture ministry.

The government of the world's largest producer and exporter of rubber has said it would look to sell remaining stocks by month-end, seeking to cut expensive storage costs and recover some of the billions of dollars spent on agricultural subsidies by the administration it replaced.

Coup leader and Prime Minister General Prayuth Chan-ocha has promised fiscal discipline and an end to what he sees as the populist vote-buying policies of previous governments. He has offered soft loans and cheap fertilizer to farmers, who say that is not enough and are threatening to protest.

Prayuth says farmers demands for a guaranteed price for their rubber of 90 baht to 100 baht (S$3.50 to S$3.90) per kilogram, compared to existing market prices of around 45 baht to 49 baht per kg, are unrealistic.

"Who on earth can they sell this rubber to? I don't understand," General Prayuth said in a speech on Monday. "We have a large rubber stockpile in this country and farmers keep on growing more rubber trees. How about selling the produce on Mars in the future? Demand on this planet is no longer enough."

Unprotected by a government scheme, rubber farmers in Thailand have seen local prices slump nearly 30 per cent this year in tandem with Tokyo's regional benchmark as economic growth slows in key rubber consumer China.

Mr Perk said his group had asked the newly appointed agriculture minister to launch an investigation into the stock sale, and demanded the publication of documentation for the deal.

Sources at several major exporters told Reuters they had not bought the rubber. They did not want their companies to be identified due to the sensitivity of the matter.

Although the Thai stockpile only accounts for about 1.6 per cent of annual global rubber production, it has become a burden for the oversupplied global market.

Thai government officials said they are in talks with three potential buyers over selling the rest of the stockpile.

Asia accounts for about 90 per cent of the world's natural rubber output. The tyre-making industry makes up about 60 per cent of global rubber consumption, with the commodity also used to make gloves and condoms.