A dark future for Isaan’s ‘white gold’ despite new rubber subsidies?


Credit: iStock.com/teetuey

Guest contribution by Jitsiree Thongnoi

BUENG KAN – In 1989, Narongchai Radabutr, a farmer in Bueng Kan province, made the bold decision to switch to a new crop—rubber—at a time when most farmers in the Northeast were growing more labour-intensive crops like rice, cassava, and sugarcane.

Local government officials handed out rubber saplings in trials to test whether the “white gold,” a highly sought-after industrial commodity, could become the region’s crop of the future. At the time, the government was looking for new crops to boost northeastern farmers’ income and improve their livelihoods.

Narongchai’s entrepreneurship paid off. He started with 15 rai (2.4 hectares) before expanding to 40 rai in 2013 and making a good yearly profit. But today, the 50-year-old rubber grower fears he might go broke.

“I’m short now. A few days ago, I sold cup lumps for 17.60 baht ($0.58 USD) per kilogram,” he said. “I don’t know how to adapt to this low price. I have bills to pay.”

A “cup lump” is a unit of solidified raw latex, a major ingredient used in the production of rubber blocks that makes tires.

Narongchai sold the lumps just days before the Ministry of Agriculture kicked off its 24-billion-baht price guarantee scheme on 1 November. In 2012, he used to sell cup lumps for a price as high as 80-90 baht per kilogram.

“Last year, the price per kilo was above 20 baht. This year it never passed that price mark,” Narongchai said.

Growers across the Northeast who cultivate a total of 5.2 million rai of rubber trees have all faced the plunge of the rubber price. Most of them are concentrated in Bueng Kan, a province located by the Mekong River that has some 800,000 rai of rubber farms. The second and third largest rubber-growing areas in Isaan are in the provinces of Loei and Udon Thani, with 700,000 and 500,000 rai of rubber farms respectively.

The Northeast contributes a significant portion to Thailand’s annual rubber production capacity of five million tons. Forty percent of this produce is exported to China, supporting its tire and automotive industry. Since the price hike in the mid-2000s, the country has become the biggest export market for Thai rubber.

But Thailand, the world’s largest producer and exporter of rubber, is struggling with the fallout of the US-China trade conflict. The US tariffs on China’s automotive sector saw car sales on the mainland fall for 15th straight month in September.

Rubber farmers used make up to 80-90 baht per kilogram ($2.64-$2.97 USD) for a cup lump, the coagulated latex collected from rubber tree. But in recent years prices have plunged. In October, rubber farmer Narongchai Radabutr sold his cup lump for 17.60 baht ($0.58 USD). Credit: iStock.com/Docter_K

Global economic risks, the slowdown of China’s economy, and the strong baht have all affected the rubber price, said Witsanu Attavanich, an economist at Kasetsart University. As the situation might not change in the coming months, or years, he believes that Isaan rubber farmers will be hit the hardest, especially when compared to farmers in the south, Thailand’s traditional and largest rubber-growing region.

“Isaan rubber farmers have for years dealt with higher costs and lower output than their southern counterparts,” said Witsanu. “The [average] output per rai is 221 kilos in Isaan compared to 267 kilos in the South. There are also 7 to 8 baht higher costs per rai in Isaan.”

“Combined with other global economic factors which make it more challenging for rubber to be sold in the next few years, Isaan rubber farmers stand to hurt the most,” Witsanu said.

Suranee Sutthiwatthananiti, a farmer from Sisaket, began rubber farming in 2004 under the government policy, “A Million Rai of Rubber Trees.” The 64-year-old was aware that farmers in South enjoy the advantage of regular rainfall and the sea climate while Isaan rubber farmers have to struggle with frequent droughts. But rubber still seemed like a good choice as the trees can be tapped for nine to ten months while other crops can only be harvested a few times per year.

Narongchai of Bueng Kan has come to agree. Compared to rice farming, he said, the labor costs for the harvest is much lower. “My brothers and I tap the trees ourselves all year round with only a three-month break,” he said.

“We switched from rice farming to rubber because the price was tempting. There were also high costs for rice farming. You have to hire workers for 350-400 baht per person [a day] during the harvest,” he said.

“There’s no profit if you grow rice for sale, unless you grow it for domestic consumption,” Narongchai said. “You can invest 30,000 – 40,000 baht for 14 rai of rice planting and you end up getting 20 sacks [= 2,000 kg] and it’s not worth it.

Chaiya Kongmanee, a rubber researcher at Prince of Songkla University, believes that Thailand’s rubber industry is heading towards a cliff. He urges the government to promote diversification of income and other adaptive measures on a household level as well as a sound national policy on managing the rubber supply. With China’s economy slowing down, Thai rubber farmers are also in need for new export markets.

He adds that the 2004 “A Million Rai of Rubber Trees” policy that encouraged the expansion of rubber farms in the North and Northeast is partly to blame for the oversupply of rubber as it was implemented with no zoning regulations.

“Since the project’s initiation, rubber farms in Isaan expanded by 17 percent a year,” he says. “But the expansion went on without a clear management and understanding of global supply and demand of rubber.”

Compared to other common crops in the Northeast like rice and sugarcane, rubber farming is less labor intensive and the trees can be tapped for nine to ten months. Credit: iStock.com/PeskyMonkey

Suranee and Narongchai have no plans to grow other crops on their rubber farms. Narongchai said it is difficult for other crops to grow because the “rubber trees are tall and they block out sunlight.”

Suranee, who also heads the local rubber farmers’ cooperative, said the group is manufacturing products from latex such as pillows and profits from the sales support small-scale farmers in the area.

She is aware of the growing competition from rubber farmers in Laos, Vietnam, or Cambodia, where vast areas have been rented out by Chinese operators to grow rubber. But she is confident that the quality is not as good as Thai-grown rubber.

Suranee, who signed up for the price guarantee scheme, sees the policy as “the government trying to fulfil its campaign promise, helping to sustain the rubber price and helping the farmers with household expenses.” But, she said, “it is only a short term measure.”

“Rubber is about politics. It’s up to what those in power think,” Suranee said. “This government doesn’t understand. They think solving the rubber issue is easy. [But] they are wrong.”


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