Thai and Indonesian rubber producers are being hailed for a joint plan to halt deliveries to the Singapore Commodity Exchange (Sicom) in a bid to raise prices of the commodity.
Aat Pisanwanich, director of the University of the Thai Chamber of Commerce's Center for International Trade Studies, called the plan a step in the right direction, saying rubber prices had been manipulated by not only Sicom but also the Tokyo Commodity Exchange and the Shanghai Futures Exchange.
The joint effort will kick off next month, and to make it more powerful, Mr Aat suggested rubber producers in Cambodia, Laos, Myanmar and Vietnam be asked to join.
Luckchai Kittipol, honorary president of the Thai Rubber Association, said TRA members had entered into a gentleman's agreement with Indonesia's private sector and rubber association to avoid selling their rubber via Sicom.
They will sell instead to direct end-users such as tyre companies and cut out intermediary dealers altogether, he said.
"Sicom prices no longer reflect the real cost of rubber production," Mr Luckchai said.
"We hope this method will help to boost rubber prices and farmers' incomes." He said Sicom offered a venue for speculators to manipulate rubber prices through futures papers without actual delivery, thus hurting rubber producers and growers. Global prices have been languishing near their lowest since 2009 due to a supply glut and weak Chinese demand.
Mr Luckchai said the prices of rubber block plunged last week to only 42 baht a kilogramme against 63 baht a year earlier.
Prices are much below farmers' production costs, which stand at 55-60 baht per kg.
Mr Aat said Thai rubber producers should also negotiate directly with global buyers such as China and India along with car makers to boost rubber prices.
The automobile industry is the largest rubber user, taking 70% of the rubber supply, followed by the medical industry at 13%, manufacturing at 9% and consumer products production at 8%.
China demands 3.5 million tonnes of rubber annually, representing 35% of global demand.
India is expected to require 1.2 million tonnes this year.
Global demand this year is estimated at 12 million tonnes, with supply expected to be slightly higher.