Thailand doubles rubber subsidy, farmers yet to cancel weekend protest

BANGKOK Tue Sep 10, 2013 9:30am EDT

Rubber farmers rest at a road block where they spent the night during a protest in Surat Thani, early September 4, 2013. REUTERS/Athit Perawongmetha

Rubber farmers rest at a road block where they spent the night during a protest in Surat Thani, early September 4, 2013.

Credit: Reuters/Athit Perawongmetha

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BANGKOK (Reuters) - Thailand's government doubled its offer of subsidy to help rubber farmers on Tuesday but protesting growers insisted it should meet other demands before they consider cancelling demonstrations planned for the weekend.

Tens of thousands of rubber farmers, angered by steep falls in prices, have taken to the streets for two weeks, blocking roads and railways, in one of the biggest challenges faced by the populist government of Prime Minister Yingluck Shinawatra.

The most influential farmers' group, which had sought a higher price than that proposed by the state, agreed in principle to the offer after a meeting on Tuesday but its leaders sought further concessions including the freeing of detained demonstrators.

"We accept the price offered but the government must agree to our other demands," said Amnuay Yutitham, leader of a group representing farmers from 16 southern provinces, where most Thai rubber is produced.

"If the government agrees and signs a deal in writing by Friday, we will call off the protest planned for this weekend."

He said the group wanted the release of people accused of law breaking during last week's protests, financial assistance for those who had been injured and for the government to pay all rubber farmers including those lacking full documentation.

Yingluck has been under pressure to end a dispute that has led to delay in thousands of tons of shipments, as protesters shut down roads and clashed with police in southern provinces.

The subsidy of 21.2 billion baht ($659 million) approved by the cabinet will be paid to farmers based on the amount of land they hold, rather than used to buy rubber.

An earlier scheme based on purchases, as well as a similar rice buying plan have led to the build-up of stockpiles that the government has struggled to sell.

NO IMPACT ON GLOBAL PRICES

Analysts said the move away from stockpiling means there should be no impact on global rubber prices, as no supply will be taken off the market.

"I don't think it can support the price, it's just the government giving extra money to farmers because of their low income. It's different from the government buying rubber from farmers," said Gu Jiong, an analyst at Yutaka Shoji Co in Tokyo.

Thailand produces around one-third of the world's natural rubber and exports 90 percent of its output.

Each household would be given 2,520 baht per rai (0.16 hectare), said Chalitrat Chandarubeksa, a deputy government spokesman, adding that households would be able to claim for a maximum 25 rai. Previously the government had offered 1,260 baht.

The subsidy would be worth about 10 baht per kg of rubber, which on top of the current market price of 81 baht for raw rubber would give farmers the 90 baht per kg some have been demanding.

Some groups had called for 95 baht per kg.

After the drop in prices last year, the government spent 22 billion baht buying rubber from October 2012 to May 2013 and built up stocks of 210,000 metric tons of rubber sheet without making much impression on global prices.

That $690-million rubber subsidy program was axed after criticism it was costly and distorted the market. Similarly, a government rice intervention scheme has come under intense scrutiny after incurring losses of at least $4.46 billion since it was introduced in 2011.

Thailand has tried to enlist Indonesia and Malaysia, the next biggest exporters, in restricting shipments but has not had much success. Demand from companies in China and from tire makers has proved to be a bigger factor in setting prices.

The price of Thai unsmoked rubber sheet has picked up to 81 baht per kg from around 75 baht in late 2012, helped recently by the possibility of government intervention.

However, it remains far below the 180 baht touched in February 2011, when benchmark smoked rubber sheet (RSS3) hit a record $6.40 per kg.

($1 = 32.1650 Thai baht)

(Additional reporting by Amy Sawitta Lefevre and Lewa Pardomuan in Singapore; Editing by Alan Raybould and Anthony Barker)

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