UPDATE 2-Top three rubber producers remove export limits

* Rubber prices up 120 percent from a December low

* Export limits dropped since start of second half

* Concern about impact of drier weather on production

JAKARTA, Oct 21 - The world's top three rubber-producing countries -- Thailand, Indonesia and Malaysia -- have stopped setting export limits following a jump in prices, officials from the three countries said on Wednesday.

The three had agreed to the export curbs last December in a bid to boost prices, but since then physical prices have more than doubled.

"Although there is no official agreement to end the export cut, the three countries silently stopped the programme in the second half," Yamanah, an export director at Indonesia's trade ministry, told reporters.

"The reason is the price has gone up to $2.4 (per kg) now," added the official, who like many Indonesians uses one name.

Physical rubber prices have more than doubled from a low of around $1.10 per kg in December, the weakest in nearly seven years because of the global recession.

On Wednesday, benchmark Thai RSS3 was quoted at $2.42 per kg.

A senior Malaysian government official, who declined to be named, also said that export curbs had been informally removed.

"This has always been a flexible arrangement among the three top rubber producers. It at least shows that we are happy to let the market forces dictate our policies," the official said.

At a meeting in Bangkok in July, the International Tripartite Corporation (ITRC), which groups senior agricultural officials from the three Southeast Asian countries, had decided to maintain the export cuts.

In December last year, the three producers agreed to remove 915,000 tonnes of rubber from the export market in 2009.

The plan envisaged about 700,000 tonnes would be cut through an enforced quota system, known as the Agreed Export Tonnage Scheme (AETS), and the remaining 215,000 tonnes would be taken out from the market as a result of accelerated replanting.

The producers cut 270,000 tonnes in the first quarter of this year and then had proposed at a meeting in April to cut a combined 48,000 tonnes per month from the second quarter.

OUTPUT CONCERN

Asril Sutan Amir, chairman of the Rubber Association of Indonesia (Gapkindo), said that lower production was now a more important factor for prices than the removal of export limits.

"I think the main concern now is the impact of drier weather on production. Even without export cuts, exports could be lower because of smaller output," he said.

A senior Thai Agriculture Ministry official echoed this view, saying: "we practically can't meet that target because of unfavourable weather."

Exports from Thailand, the world's top producer, dropped in the January to June period to 1.268 million tonnes, down 9.2 percent from 1.397 million tonnes in the same period last year.

Natural rubber output in Thailand, Indonesia and Malaysia dropped 13 percent to 3.02 million tonnes in the first half of this year as fewer trees were tapped.

About 70 percent of the world's rubber output is used by the auto industry, which has scaled back production, cuts jobs and shut factories after being hit by global financial turmoil. (Additional reporting by Niluksi Koswanage in KUALA LUMPUR and Apornrath Phoonphongphiphat in BANGKOK)