Rubber exports this year from Thailand, the world's biggest producer, will probably rise at the fastest pace in five years as production outpaces local demand.
The country plans to ship 3.1 million tonnes of the commodity this year, 12% more than in 2006, said Somjate Pratummintra, a senior rubber policy adviser at the Agriculture Ministry. Shipments would probably rise to 3.5 million tonnes in 2008, he said.
Increased shipments may extend losses in rubber prices in Tokyo, the global benchmark. Futures prices yesterday in Tokyo were near eight-month lows as a strengthening yen and the global equity rout spurred investors to sell riskier assets such as commodities to raise cash. Falling prices may help tyre makers such as Bridgestone Corp and Goodyear Tire & Rubber Co.
Higher exports are ''certainly not positive news'' for prices, said Takaki Shigemoto, an analyst at the Tokyo commodities brokerage Okachi & Co. Farmers in Thailand had increased rubber planting and output in recent years to profit from rising prices, he added.
Rubber for January delivery on the Tokyo Commodity Exchange (Tocom) lost 9.4 yen, or 3.9%, to 234.2 yen a kilogramme ($2,071 a tonne) yesterday, after falling to 233.7 yen, the lowest since Dec 25. Thailand's production will probably climb 11% to 3.5 million tonnes this year from 3.14 million last year, and reach 3.9 million tonnes in 2008, Mr Somjate said.
Ousted prime minister Thaksin Shinawatra promoted the expansion of rubber plantations by around 8% from 2004 to 2006 as prices rose. Thailand is now trying to keep plantation areas to 2.24 million hectares.
China bought more than a quarter of Thai rubber exports last year when the country increased purchases by 30%.
''China will remain Thailand's most important market,'' said Mr Somjate. ''If anything happens to its demand, the effect on us will be severe.''
The country's domestic demand accounts for 10% of rubber output, so gains in production lead to rising exports.
Expanding output could exacerbate oversupply in the domestic market where vehicle sales have decreased this year. Sales rose in July for the first time in seven months because of low interest rates and easing political concerns.''We still can't come up with ways to stimulate domestic demand,'' Mr Somjate said.