Rubber JV may start functioning Nov. 15

Rubber JV may start functioning Nov. 15

Dow Jones, Bangkok

The joint venture rubber consortium set up by the world's top three rubber producers - Thailand, Indonesia and Malaysia - is expected to begin functioning Nov. 15, Thai Deputy Minister of Agriculture and Cooperatives Newin Chidchob said Tuesday.

Speaking after the weekly Cabinet meeting, Newin said the three founding countries of the consortium, the International Rubber Corp., are currently considering to appoint its chief executive officer.

The consortium was set up in August with the aim of purchasing and stockpiling rubber to help shore up prices.

Thailand's Prime Minister Thaksin Shinawatra said Monday that once the consortium is functional, it will start buying rubber whenever prices fall below a yet to be determined level and sell it directly to end-users. This will prevent international brokers from being involved in the transaction.

Rubber farmers have urged the Thai government to accelerate the operation of the consortium to help shore up rubber prices instead of conducting domestic price intervention.

The government had been intervening in the domestic rubber market by purchasing rubber from smallholders at intervention prices which were higher than market levels.

However, the government has incurred losses from the long- running intervention program while failing to sustain prices at profitable levels for farmers.

"The prime minister and myself agree that the price intervention (by purchasing rubber from farmers) would be the last measure to impose to help shore up prices," Newin said, adding that the government has been spending a huge amount of money to intervene in the rubber market.

He added that the ministry will meet with representatives of rubber farmers in Hat Yai, southern Thailand, Monday to discuss ways to help shore up rubber prices.

Last week, Newin said he would ask the Cabinet Tuesday to approve the intervention, under which around 4 billion baht from the budget is expected to be used to finance the program.

However, Thaksin said Monday that the government wants the intervention method to be improved to ensure its efficiency, otherwise it won't approve the program.

Newin said last week the ministry would improve the intervention method to ensure it brings full benefits to rubber farmers. It would be improved in terms of accounting, registering of farmers and the inspection process, he said.