Rubber meeting proposes floor price, supply cuts

Rubber meeting proposes floor price, supply cuts

Dow Jones, Bali

Senior officials from the world's top natural rubber producers have proposed a floor price for the commodity at or near which reductions in output and exports will be enforced, an Indonesian official told Dow Jones Newswires Monday evening.

Restrictions to output and exports will be lifted only when physical prices recover to a "reasonable level," said Suharto Honggokusumo, executive director of the Rubber Association of Indonesia.

"We have proposed the reference prices, the price range...The objective is to reach a level that is remunerative for (rubber) farmers," said Suharto.

He refused to say what the price range was.

Suharto is part of a team of Indonesian rubber officials who attended a task force meeting in Bali Monday, to discuss plans to form an International Tripartite Rubber Council, or ITRC, to help shore up rubber prices at all-time lows. The other two parties involved are Thailand and Malaysia.

A senior officials meeting is taking place Tuesday to finalize details of the plans, prior to a ministerial meeting Wednesday that is expected to approve the plans.

Under the tripartite agreement, Thailand, Indonesia and Malaysia intend to cut rubber output by 4 percent and exports by 10 percent starting next year to help boost prices.

So far, Thai and Indonesian officials have announced intentions to replant rubber plantations in efforts to control output. As rubber trees can't yet be tapped in the seven years after replanting, stocks are expected to decline during that period.

Standard Indonesian rubber 20 grade is currently priced at 46.3 U.S. cents a kilogram, free-on-board for the January shipment, down from around 63 U.S. cents per kg at the same time last year and around 77 U.S. cents per kg two years ago.