Asia rubber: Thailand, Indonesian farmers hold back stocks as prices fall

Rubber farmers in two of Asia's biggest producing-nations held back stocks this week as prices dropped close to five-year lows, with many producers in Thailand pressing the government to shore up prices while those in Indonesia cut back on work shifts.
Prices have fallen due to a supply glut and weak demand, especially from top importer China. On Thursday, benchmark Japanese rubber futures declined to their lowest since October, when prices slumped to 2009 levels. A small group of rubber farmers gathered in Thailand's southern province of Surat Thani on Tuesday, demanding more support from the military-led government for rubber prices.
Rubber growers threatened to launch a massive protest if the government failed to increase prices to 80 baht per kg from about 40 baht currently within a month. Production cost in Thailand is about 65 baht per kg. "Some farmers are holding back stocks because they are hoping to sell in the central market where the government agency has been offering at rates better than market prices," said a rubber trader from the southern Thai city of Hat Yai.
"Others are forced to sell even at these low prices out of necessity." The Thai government said in October that state-run Rubber Estate Organisation, which oversees stockpiles in the world's biggest producer and exporter of the commodity, would buy some stocks from farmers. But only farmers who meet certain requirements on quality can sell to the government, the Hat Yai-based trader said.
"The government has already detailed what it can do to help the farmers. But how much of that will impact prices is very hard to tell," said another Thai trader. "Eventually prices are determined by supply and demand. Nothing can be done about that." Thai grade RSS3 was sold at $1.53-$1.56 per kg this week, down from $1.55-$1.59 last week. STR20, another Thai grade, changed hands at $1.46-$1.49, down from $1.45-$1.53.
In Indonesia, farmers were cutting back work shifts from three to two as they were not getting the prices they want, traders said. Producers were asking for $1.46-$1.48 per kg, less than the $1.50 they had sought earlier, a trader in Jakarta said, but market prices have slipped even further. In dealer-to-dealer trades, tyremakers Bridgestone Corp and Sumitomo Rubber Industries bought Indonesian grade SIR20 at about $1.44 per kg for February delivery. RSS3 was sold in Indonesia at $1.52 for February delivery and $1.54 for March, traders said.