Thailand extends rubber intervention to end of 2010

BANGKOK, July 30 - The Thai government has extended its rubber intervention plan until the end of 2010 to help prices continue their recovery from the lowest level in nearly seven years, senior officials said on Thursday.

"Since the plan was delayed for several months, the cabinet agreed to extend it from the end of 2009 to the end of 2010," an official at the Ministry of Agriculture told Reuters.

In January the government approved an 8 billion baht ($235 million) plan to buy 200,000 tonnes of rubber from farmers and keep it in stockpiles to shore up prices.

However, implementation was delayed until June due to the protracted legislative process and paperwork, the official said.

In the meantime, prices have picked up sharply, leaving some traders wondering why government intervention was still thought necessary.

One trader said current prices seemed appropriate. Farmers could make a profit and buyers were not holding back.

"I don't think we need the intervention programme at this moment," the trader said, adding that the government might simply be trying to reassure farmers that it stood ready to help them.

Under the plan, the government buys unsmoked sheet (USS3) from farmers and transforms it into ribbed smoked sheet (RSS3), the export-grade rubber. It holds this in stock until it can sell at what it hopes to be a profit.

Domestic unsmoked sheet prices have doubled from the lowest in nearly seven years of 30 baht per kg in December to 60 baht per kg on Thursday.

The price of benchmark Thai RSS3 has also recovered to $1.90 per kg on Thursday from $1.10 per kg in December, traders said.

The rebound is largely due to strong demand from the auto industry in China, where the government has given tax incentives to car buyers to support the industry.

The Rubber Growers Cooperative Federation of Thailand, appointed by the government as its agent, would start buying rubber next week to build up stocks, said its chairman, Perk Lertwangpong.

"We could buy at least 10,000 tonnes of rubber to ensure that we will have enough rubber to run exports," Perk said, referring to its first venture into the market next week.

Thailand, the world's biggest rubber exporter, produces around 3 million tonnes of rubber annually, of which 90 percent is for export. ($1=34.07 Baht)