International Rubber Consortium Limited (IRCo) has been engaged in judicious management of global natural rubber supply (NR) ever since the organization was founded by the governments of Indonesia, Malaysia and Thailand, with is headquarters in Bangkok in 2004.
The main objectives of IRCo are to achieves table and sustainable long-term price trend which is remunerative for rubber smallholders, maintain a supply-demand balance and to ensure adequate supply of natural rubber (NR) in the market at fair prices for the rubber industry.
To achieve these objectives, IRCo has been working with International Tripartite Rubber Council (ITRC), which comprises the ministries and national private organisations concerned of the three member countries, to implement three specific schemes (mechanisms).
The schemes
Supply Management Scheme (SMS) : This is a long-term measure aiming to manage NR supply among the three member countries not to expand NR plantations exceeding agreed production quotas, which are allocated to the three member countries, in order to avoid NR oversupply and falls in NR prices.
Agreed Export Tonnage Scheme (AETS) : This is a short-term measure aiming to stop a sharp fall in NR prices by withholding NR exports when there is a NR surplus in the market.
Strategic Market Operations (SMOs) : IRCo will trade in rubber futures or physical rubber markets if-and-when NR prices stay below target levels caused by any rubber market distortions.
"Since the beginning of establishment of ITRC in 2001 and IRCo in 2004, they have set target plans among themselves for the SMS within the agreed quotas of expanded areas until the present," says Yium Tavarolit, Chief Secretary and Economist and Acting Chief Executive Officer IRCo. For the AETS, ITRC withheld 715,000 tonnes of NR in 2009 and agreed not to sell NR below 135 US cents/kg, fob price, after the global financial burst in September 2008.
National NR funds
Currently IRCo and ITRC are conducting a feasibility study on how to formulate national NR funds for price stabilisation. "The proposed national NR funds will be used to assist NR smallholders when NR farm-gate prices fall below their cost of living (not cost of NR production)" Tavarolit says adding that when NR fob prices rise above certain levels, the member governments will collect NR export taxes for national NR funds.
Moreover, IRCo and ITRC are conducting another feasibility study on establishment of a regional NR market. The objective is to have a market place for real NR deliveries and to have NR prices that reflect market forces and demand and supply of NR.
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