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Nelson Graves
Kuala Lumpur, July 2: The price of natural rubber dropped through a key threshold on Friday, prompting the International Natural Rubber Organisation (INRO) to renew its call for support to enable it to drive prices from 30-year lows.
INRO's five-day average price dropped to 156.93 Malaysian/Singapore cents a kg from 157.63 on Thursday.
The latest price was below the 157-cent level which marks INRO's floor price -- only the second time in INRO's history the price has fallen through the floor.
INRO officials said rubber prices, squeezed by over-supply and flat demand, were now close to the cost of production.
INRO is bound by the international rubber agreement to defend the price of rubber once it falls below the floor price by buying rubber on the open market.
But the Kuala Lumpur-based organisation has all but run out of funds for intervening since two of its biggest producer members, Thailand and Malaysia, decided in frustration to withdraw and start their own intervention schemes.
``INRO cannotbe effective if we don't have any money,'' INRO buffer stock manager Arch Roberts told Reuters.
INRO's five-day average price had pierced the floor price level once before in March when it fell to 153 cents. The organisation was able to intervene in May, pushing up INRO's daily price indicator by 7.5 per cent in one day.
But INRO's funds have since dwindled.
``This has never happened before,'' Roberts said. ``This is all because of a lack of funds.''
Malaysia, the third biggest producer, is set to leave INRO on October 15 and Thailand, the biggest, on March 26, 2000. They argue that INRO has been unable to prevent prices from falling.
Although rubber consuming nations have paid their contributions to a cash call-up aimed at giving INRO the funds to intervene, several producer nations have withheld money.
INRO officials said intervention by the organisation would immediately drive up prices as dealers were holding large short positions believed to total about 200,000 tonnes.
``Otherwise priceswill remain flat for three to five years,'' Roberts said.
Industry officials said INRO was expected soon to receive the green light from members to raise its reference price by some nine per cent. Members put forward the proposal at a meeting in April, and ballots have been arriving at INRO headquarters.
But without funds to intervene, INRO would be powerless.
INRO officials said support schemes in Thailand and Malaysia had failed to prevent the prices paid to farmers from dropping.
``We believe we are the only people who can do it and we proved it in May,'' Roberts said. ``Unilateral measures don't work. Why they would want to do this alone and bear the full cost is an utter mystery to me.''
INRO said that with the decline in prices, the value of its buffer stock -- owned by its members -- had fallen by 10 per cent.
Industry officials said Japan, the biggest importer of Thai rubber, has pressed Bangkok to reconsider its decision to quit.
They said there was a possibility of a cabinet reshufflein Thailand if deputy prime minister Supachai Panitchpakdi goes to the World Trade Organisation as part of a deal to resolve a leadership crisis at the Geneva-based body.
That could lead to the departure of INRO opponents from the cabinet, increasing the chances of Thailand staying in.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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