Farm output curb to avoid fall in prices

Written by Commodities Bureau | Agencies | New Delhi, Oct 29 | Updated: Oct 30 2008, 06:02am hrs
With global economy set to enter into a prolonged recession, major agriculture producers have started to curb their farm output to control prices from falling below manageable levels.

Already, there are indications that output of cash crops like cotton, rubber and tea, could take a beating if countries in the West head for downturn, as that would have an adverse impact on Asian exporters as cheap prices could act as a big disincentive for farmers. Rubber producers Malaysia and Indonesia and tea grower Sri Lanka have announced plans to curtail production to support growers.

Infact, Thailand, Indonesia and Malaysia met in Bangkok on Wednesday to discuss a Agreed Export Tonnage Scheme in order to co-ordinate the export marketing. They are seeking to boost prices as rubber futures plunged 52% from a 28-year high of 356.9 yen on June 30.

This year the Reuters/Jefferies CRB index of 19 raw materials has lost 45% since reaching a record in July as the credit crunch choked worldwide growth. Sri Lanka, the worlds fourth-biggest tea grower said it plans to curtail production and buy tea at auctions to support prices.

The state-run Sri Lanka Tea Board, responsible for promotion and development of the industry, has asked plantation companies to reduce production of cheaper grades by 20%, chairman Lalith Hettiarachchi told Bloomberg News in a phone interview from Colombo. The board will spend as much as 5 billion rupees ($46 million) to buy tea and support prices, he said.

Tea prices have fallen as much as 40% in the past month in Colombo as Russia and countries in the West Asia, Sri Lankas biggest buyers, reduced purchases because of slowing demand.

Malaysia, the worlds third-biggest rubber producer, plans to reduce supplies by chopping down old trees, the government said on Tuesday. Malaysia expects to remove as much as 38,000 tonne a year from the market by accelerating its replanting programme involving 32,000 hectare of existing rubber land, minister of plantation industries and commodities Peter Chin said in a statement. Indonesia, the worlds second-largest rubber exporter, will urge growers to reduce the frequency of tree tapping to curb production by as much as 30%, agriculture minister Anton Apriyantono said. The credit crunch also started impacting farmers abilities to access loans thereby raising the possibility of fall in output.

Philippines, the worlds biggest rice importer, cut its production target for next year after credit crunch made it difficult for farmers to secure loans. Rough rice harvests will probably yield 17.8 million metric tonne next year, lower than the 18.5 mt target set in the first quarter as higher fertilizer costs forced farmers to use less soil nutrients, state-run Philippine Rice Research Institute executive director Ronilo Beronio said. Demand for rough rice may rise to 20 million tonne, he said, without giving a comparison.