Rubber support scheme may not affect market

Rubber support scheme may not affect market

BANGKOK (Reuters): The Southeast Asian rubber market is not
likely to be significantly affected by the agreement last Friday
on a rubber support scheme by officials from the world's top
three rubber exporters - Thailand, Indonesia and Malaysia.

The plan - of which a core feature is a minimum selling price
- still has to be approved by ministers and no date has been
announced yet for a ministerial meeting.

"I do not think the market would react much to the result of
the meeting even it is a positive one as practically speaking, it
is quite difficult to implement, and several issues still need to
be sorted out," said a trader.

Senior officials meeting in Batam, Indonesia, agreed on a
minimum selling price, stock withholding and forward sales, in a
bid to help lift natural rubber prices, which are near their
lowest for 30 years.

The top three rubber producing countries plan to set a minimum
dollar price that would be used as a benchmark for RSS or TSR
rubber or both. Each country would agree not to sell below the
price.

The three countries together produce around 4.5 million tons
of natural rubber, or around 80 percent of world output.

The ministerial meeting could be difficult to organize.

Indonesia says their minister is not available for the whole
of December, while Thailand prefers the meeting to be held this
month before the Thai election on January 6 on concerns the new
government might change the plan.

From a political viewpoint, many players in Southeast Asia
said the result of the officials meeting might benefit Thailand,
with its election approaching.

The Thai deputy agriculture minister Arkhom Engchuan welcomed
the decision by the senior officials of the three countries.

"It is a very, very good news, I am so pleased to know that
they can reach agreement. I will definitely tell rubber farmers
about the result of the meeting," Arkhom told Reuters by the
telephone from Krabi province, his southern hometown.

By asking exporters to hold their stocks, that means
additional storage costs for exporters, they said.

"Who will be responsible for our additional costs of holding
stocks if the government wants us to keep it by not selling it at
the price below the minimum selling price," said another exporter
in Surat Thani province, a main Thailand rubber growing area.

"We do need cash-flow to run the business, and we need to sell
some shipment in advance in order to get money to keep the
business running," said a medium-sized rubber-exporting firm
based in Phuket, Thailand.

The senior officials have yet to officially disclose the level
of the minimum selling price they have agreed, but some officials
from the meeting told Reuters that it would be up to one U.S.
dollar per kg for RSS.

For forward sales, Indonesia and Malaysia usually sell forward
contracts up to three months, which is different from Thai
exporters, who usually contract up to 6 months and some even sell
up to one year forward.