While Thailand, the biggest producer, agreed to cut exports, it may have a harder time cutting production. With elections due on March 24, political parties have been seeking to win farmers’ votes with guaranteed crop prices, inexpensive loans and cheap health care, aiding an expansion in rubber output. Farmers make up more than half the country’s electorate.
For RCMA’s Coleman, demand isn’t particularly weak, and oversupply is the problem. The lower prices is the market’s way of dispelling higher cost producers, he says. “The job of the markets is to shut down the higher cost marginal production and in essence that’s what the market’s been trying to do,” Coleman said. ”It’s been trying to find what price hurts 10% of the producers.”
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