Market and product

Pongsak Kerdvongbundit, the president of the Thai Rubber Association, said prices had been volatile this year: They shot up to a record of nearly 200 baht per kilogramme, then nosedived to about 120 baht per kg now.

But Dr Pongsak says the current price is stable, with supply and demand seemingly in balance at this point.

He predicted a price for two months ahead of more than 100 baht, with a possible slight rise due to disappearance of supply from flood-affected plants and the rainy season’s arrival at southern plantations.

As for next year, a new supply of 200,000 tonnes from the Northeast will gradually enter the market.

Last year, Thailand shipped 3.2 million tonnes of rubber, or more than 30% of global output.

To balance supply and demand, Dr Pongsak said, farmers will cut their old rubber trees in a bid to prepare for a new crop, amounting to 400,000 rai or 120,000 tonnes of rubber output.

“Rubber farmers shouldn’t worry about price,” he said, “as the International Rubber Consortium Limited, the organisation that was a venture between Thailand, Indonesia and Malaysia, is set to maintain the rubber export price.

“So far, the target price is at least US$40 per kilogramme.”

Meanwhile, the Agricultural Futures Exchange of Thailand (AFET) plans to increase the number of contracts by asking the world’s leading tyre makers to trade 300,000 tonnes, or 10% of total exports per year, through the AFET, with incentives offered.

Thailand’s farm product futures trade has been thin from the start seven years ago, while Japan’s Tocom and the Shanghai market have secured most rubber futures trading.

Dr Pongsak said the AFET should have an aggressive development plan to increase market liquidity. He recommended a state agency be set up as a market maker to increase buying, with hedge funds to increase liquidity.

“The exchange should invite some big rubber users to join the market, such as Bridgestone and other tyre makers, to help increase trading volume,” he said.

The bourse should have a clear physical delivery process and quality control, instilling confidence if the product is needed for delivery.

Dr Pongsak also suggested the government reduce the fee levied on rubber exporters from 5 baht per kg to 3 baht to draw more traders.

Prasat Kesawapitak, the AFET chairman, said the exchange was considering easing some regulations to accommodate new traders, as well as increasing types of physical rubber in line with other exchanges. The proposal will go to the government soon.

Wanchai Palotaitakerng, the chairman of the Agricultural Futures Trading Commission, will meet soon with Vorapol Sokatiyanurak, the new Securities and Exchange Commission secretary-general, to seek advice on allowing securities companies that are members of the SET to become AFET brokers as well.

Brokerage members of the SET are prohibited from operating on the AFET.

The futures exchange has only five brokers at present, with average trade of 500-700 contracts per day. Rubber is the only item trading in substantial volume.

Under the SET Act, SET members cannot send trade orders to the other exchange, but if the SET is demutualised, a plan currently on hold, the regulations would be amended.