Thailand to Expand Rubber Estates 6% to Meet Surge in Demand

Thailand to Expand Rubber Estates 6% to Meet Surge in Demand
Jan. 14 (Bloomberg) -- Thailand, the world’s largest rubber producer and exporter, plans to expand the area planted to the crop by about 6 percent over the next three years to meet a projected increase in global demand.
Plantations will be expanded by 1 million rai (395,369 acres) from 17 million rai between this year and 2012, Apichart Jongskul, secretary-general of the Office of Agricultural Economics, said in an interview. The government plans to spend 11.4 billion baht ($346 million) on the program, he said.
Rubber more than doubled last year, the best performance since at least 1976, amid investor optimism that a recovery from the worst global recession since World War II will boost demand for tires. Yen-denominated futures in Tokyo climbed today to the highest level in 16 months.
“The expansion plan is driven by attractive global prices, coupled with increasing demand,” Apichart said late yesterday. The plantation plan, recently endorsed by the government’s Natural Rubber Policy Committee -- of which Apichart is a member -- also requires cabinet approval.
Futures on the Tokyo Commodity Exchange gained as much as 2.5 percent to 304.1 yen a kilogram ($3,327 a metric ton) today, boosted by a weaker yen. Prices have gained about 10 percent this year, extending 2009’s advance of 103 percent.
Global Growth
Global usage of natural and synthetic rubber is forecast to reach 30.4 million metric tons by 2019 from 23.9 million this year, according to the International Rubber Study Group. Worldwide natural-rubber output may total 14 million tons in 2019, from 10.4 million tons this year, the group said Dec. 18.
Thailand may produce 3.1 million tons this year, lower than the 3.3 million tons estimated earlier because of dry weather caused by an El Nino weather pattern. Exports this year may rise to 2.9 million tons from 2.7 million tons, according to a forecast from the Office of Agricultural Economics.
Natural-rubber demand is expected to increase as the price of its synthetic rival, which is made from naphtha, increases in tandem with the cost of crude oil, said Apichart. The mix of synthetic to natural rubber in tires may shift to a 50/50 share in future, from about 60/40 at present, he added.
The government will use the funds to provide farmers with rubber saplings and low-interest credit, Apichart said. Rubber trees typically take about eight years to mature and start producing latex.
About 70 percent of the expansion will be in the nation’s northeast, with an additional 20 percent in the north, Apichart said. Most of Thailand’s rubber is cultivated in the south at present. The spread may help distribution to neighboring countries, he said.