Thailand, the world's biggest rubber producer, implemented a new progressive-rate rubber export tax on Friday but the impact on export prices was limited as exporters passed the cost on to farmers. Proceeds from the tax, known as the "cess money levy", will go into a fund to be used for intervening in the rubber market and for supporting farmers if domestic prices drop sharply.
The current export tax is 1.4 baht per kg, irrespective of price. Under the new regime, the tax will be 3 Thai baht per kg if rubber prices stay between 80 baht and 100 baht. If prices drop below the range, the tax will be 2 baht, and if prices go above the range, the tax will rise to 5 baht.
Offer prices on Friday for Thai benchmark smoked rubber sheet (RSS3) rose to $3.70 per kg (112.15 baht) from $3.60 Thursday. The rise was in line with offers for other grades from Indonesia and Malaysia, and supported by firmer Tokyo futures contract prices (TOCOM), which set the global trend.
Benchmark TOCOM rubber for March delivery rose to a new 5-month high of 317.3 yen per kg on Friday on firm oil prices, triggering a rise in physical rubber prices. "Exporters didn't add the higher tax costs to offer prices because that could push Thai prices to uncompetitive levels, compared to Indonesia and Malaysia, and would result in falling exports," a trader at Thailand's Hat Yai rubber centre said.
Exporters complain that the tax, which will be set by the government twice a month in line with prevailing prices, will create uncertainty about prices to set on forward deals. Buyers were waiting for prices to ease. "It's the nature of buyers," said a Singapore-based trader, adding there were some major tyre-makers that kept buying to maintain their operations.
FARMERS CALM FOR NOW Prices of unsmoked sheet (USS3) should rise to 107 baht ($3.53) per kg on Friday, in line with rising RSS3 prices, farmers said. But farmers could earn only 100 baht per kg as exporters passed on the 5 baht tax. "Farmers in some remote areas may get only as much as 96 baht," said Somdet Khemasuk, chairman of the Rubber Growers Co-operatives Federation of Thailand. "Farmers could stay calm. They can make profits from lower prices. But if prices go below 80 baht, it is unclear what will happen as that will mean losses for farmers and they will act."
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