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PP RUEHCN RUEHDT RUEHGH RUEHHM RUEHVC
DE RUEHCHI #0100/01 1951011
ZNR UUUUU ZZH
P 141011Z JUL 09
FM AMCONSUL CHIANG MAI
TO RUEHC/SECSTATE WASHDC PRIORITY 1101
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHOO/CHINA POSTS COLLECTIVE
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEHCHI/AMCONSUL CHIANG MAI 1183

UNCLAS SECTION 01 OF 03 CHIANG MAI 000100 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAGR ECON PGOV PTER TH
SUBJECT: RUBBER GROWS INTO NEW CASH CROP IN THAILAND'S NORTH 
 
CHIANG MAI 00000100  001.2 OF 003 
 
 
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Summary and Comment 
 
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¶1. As southern China's appetite for raw materials continues to 
grow, northern Thailand's agricultural sector is adapting by 
expanding rubber production, which is a traditional sector of 
southern Thailand.  After a significant effort to expand the 
area of rubber-producing land in the north under former Prime 
Minister Thaksin Shinawatra, the RTG continues to support 
farmers that wish to grow this new northern cash crop through 
subsidies and technical assistance.  Both small and large 
farmers are seeing the financial benefits of changing their 
northern rice paddies to rubber plantations, and some southern 
Thai farmers are even relocating to the north where religious 
violence is not a looming threat. 
 
 
 
¶2. Comment:  It is noteworthy that despite the RTG's habit of 
providing price guarantees and support to more traditional crops 
(such as rice and corn), it is, above all, market forces that 
are pushing farmers toward rubber production.  Although 
government support to expand rubber production was significant 
during the Thaksin era, present levels of support focus on 
sustainability of the sector rather than its expansion, with 
much of the funds being used coming from taxes on rubber 
exporters.  If this policy process -- where more profitable 
parts of the rubber sector (exporters) support the less 
profitable (farmers) -- proves successful, it could serve as a 
new, more market-based model for government support of 
Thailand's agricultural sector.  End Summary and Comment. 
 
 
 
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Background: Land of a Million Rubber Fields 
 
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¶3. Known historically as Lanna (meaning "Land of a Million Rice 
Fields"), northern Thailand is gradually adopting rubber as a 
new major cash crop.  Since the era of former Prime Minister 
Thaksin Shinawatra, the RTG has had a policy to support the 
expansion of rubber production outside of its traditional base 
in Thailand's south, a policy initiative fueled by southern 
China's growing demand for rubber.  Phayao province, located on 
the northern Thai-Lao border, became the birthplace of former PM 
Thaksin's "One Million Rai" policy, which sought to cultivate 
one million rais of land (approximately 400,000 acres) as rubber 
plantations. 
 
 
 
¶4. Traditionally, northern Thai laborers have served as 
temporary workers harvesting liquid rubber at southern Thai 
plantations.  By the early 1990s, many of these farmers, 
particularly in Phayao province, who saw the economic benefit of 
producing this raw material, began to carry young rubber trees 
from the south to the north to grow on their own land.  As this 
trend continued, local government officials observed how rubber 
was expanding incomes in their province; and those officials 
passed the message on to Phayao's Member of Parliament (MP). 
Finally the MP told former PM Thaksin about this success story, 
and the One Million Rai program became a national policy. 
 
 
 
¶5. While Phayao is considered the birthplace of rubber 
production in Thailand's north, farmers from across the northern 
region are gradually turning their rice paddy fields into rubber 
plantations.  In Chiang Rai province alone, about 40,000 acres 
of land now grow rubber trees, with an estimated 1,000 to 4,000 
new acres cultivated each year, according to the Chiang Rai 
Rubber Planting Aid Fund.  Presently, another 40,000 acres are 
estimated to be rubber plantation land in Phayao province. 
Across the northern region, an estimated 120,000 acres of land 
are growing rubber, according to the Phayao Rubber Planting Aid 
Fund.  The same office estimates the northern Thai rubber 
plantation's productivity to be about 1,700 lbs/acre per year, 
meaning annual regional yield of about 100,000 tons. 
 
 
 
 
CHIANG MAI 00000100  002.2 OF 003 
 
 
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Northern Provinces Promote Rubber Production 
 
-------------------------------------------- 
 
 
 
¶6. While market forces, specifically growing demand for rubber 
resources in nearby southern China's Yunnan province, seem to be 
the main driving force behind this new cash crop, government 
support has helped to sweeten the deal for northern Thai 
farmers.  Currently, over 90 percent of northern Thailand's 
rubber plantations receive some form of government support. 
Government support is issued through provincial level Rubber 
Planting Aid Fund offices, which are under the RTG's Ministry of 
Agriculture and which together function as a nation-wide 
state-owned enterprise.  Support from the Fund comes in two 
forms: direct subsidies and harvest training. 
 
 
 
¶7. RTG subsidization for rubber production has been either to 
promote new land to grow rubber or to support land already under 
rubber cultivation.  Government support that expands the area of 
land under rubber cultivation was first administered under the 
Thaksin-era One Million Rai program, which ended two years ago. 
Between 2003 and 2007, across Thailand, the RTG freely offered 
to farmers 225 young rubber trees per acre of land under new 
cultivation via provincial Rubber Fund offices.  In Chiang Rai 
province, for example, the One Million Rai program added about 
3,000 acres per year of rubber plantation during its 
implementation, a contrast to the less than 600 acres per year 
added over the previous decade. 
 
 
 
¶8. Since 2007, the Ministry of Agriculture has shifted away from 
promoting the expansion of land growing rubber trees (a trend 
continues anyway due to market forces) to supporting land 
already under rubber production.  One way is grants from the 
provincial Rubber Replanting Aid Funds to subsidize the 
replacement of old rubber trees with young ones.  The fund will 
issue "small" farmers (those who only farm three to five acres 
of land) a payment of $820 per acre to replace old trees. 
(Note: The provincial rubber replanting funds are made up of 
rubber export tariffs collected nation-wide.)  Large rubber 
plantations are not eligible for this replanting support. 
 
 
 
¶9. Another Rubber Replanting Aid Fund initiative to support 
rubber planters is harvest training.  The fund will finance 
regular courses where farmers learn how to harvest and prepare 
raw liquid rubber from trees.  Econ staff observed one such 
training course at the Phayao Rubber Replanting Aid Fund office, 
which hosted 40 students, all of whom own or work on small 
rubber farms.  According to the course trainers, one person 
should be able to tap 400 to 500 trees per day; and the course 
helps farmers and their working family members to reach this 
productivity level.  With each farm containing about 800 to 
1,000 trees, maximizing harvesting productivity means that the 
farm owners do not need to hire outside labor, keeping costs low. 
 
 
 
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Big Farm, Little Farm 
 
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¶10. Although government support for northern Thai rubber 
production is limited to the small farms, high rubber demand 
from southern China is attracting big companies to invest in 
northern rubber production as well.  In Chiang Rai province, 
three major companies have invested in rubber plantations, two 
of which are major Thai beer manufacturers.  The Singha Company 
developed a 1,000 acre rubber plantation in Chiang Rai last 
year.  The Terrago Company, a subsidiary of the Chang Beer 
Company, started an 800 acre plantation last year.  And, the 
Thai Rubber Latex Company has invested in over 2,500 acres of 
land over 2007 and 2008. 
 
 
 
¶11. Similarly, it is market forces - rather than government 
support - that is attracting small farmers to the rubber sector 
as well.  Though small farmers certainly welcome the free 
 
CHIANG MAI 00000100  003.2 OF 003 
 
 
training and subsidized tree replacement, these are not their 
main motivations for switching to rubber growing.  One newly 
converted Phayao rubber farmer said that he used to grow corn, 
but switched because he noticed that other farmers were growing 
rubber and were earning more revenue for less work.  He noted 
that he cannot use all of his 2.5 acres for rubber; he has to 
grow some rice to keep steady income while he waits seven years 
for the trees to mature.  The son of another Phayao rubber 
farmer said that he is helping his father grow and harvest 
rubber on their 3 acre farm.  He said that because rubber trees 
do not require the regular attention of other crops such as rice 
and corn, he has time to also run a small internet cafe in the 
nearest town.  So, for this farmer, not only does the crop have 
a higher market value, but it also provides more time for other 
income-generating activities. 
 
 
 
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Southern Farmers in Northern Farms 
 
---------------------------------- 
 
 
 
¶12. In addition to northern farmers switching from traditional 
crops to rubber, southern Thai farmers are moving their rubber 
plantations from the south to the north because they are growing 
tired of the threat of violence in their home provinces.  One 
Phayao village leader told us that his province has "rubber 
fever" because so many southern Thais have relocated there to 
start rubber plantations.  This village leader said that about 
30 to 40 southern Thai families have moved to his district of 
Phayao in recent years to start rubber plantations.  He said 
that local farmers will sell their land for $800 to $1,400 per 
acre to southerners who buy from several small northern farmers 
to create large rubber plantations.  He said that one recent 
arrival from the south already owns 800 acres of agricultural 
land in his district and that about 4,000 acres of the district 
are growing rubber trees.  He said, "This region is turning into 
a rubber economy. 
ANDERSON