Commodity prices have been more volatile in recent years. The volatility of prices widely impacts throughout the majority of stakeholder in commodity supply chains. Natural Rubber (NR) is one of the main exporting commodities in Thailand where millions of small farmers rely mainly on the NR producing to generate income for their living and children’s education. The existing literature relevant to commodity Price Risk Management (PRM) is dominated by developed countries in which markets have well-developed infrastructures. Although some research has been conducted in developing countries, most of it focuses on farmers or exporters whilst intermediaries who play a vital role as a middle tier in the supply chain are absent. In NR supply chains, the intermediaries are likely to be the ones who are exposed to the highest risk from price volatility. Their profit margins have diminished due to increasing market power of farmers and their greater accessibility to price information via the internet and mobile phone. Therefore, when NR prices become more fluctuated, the impact on Rubber Business Intermediary (RBI) businesses is even higher than beforehand. This research aims to explore the PRM strategies adopted, and to understand the PRM practiced by RBIs when it comes to managing their business in the south of Thailand. A qualitative method is used as a research approach in this study. 24 RBIs in seven provinces, including the three biggest NR producing provinces in Thailand, were targetted using semi-structured interview and pre-interview questionnaire methods. The interview data was analysed using the template analysis method and NVivo computer software. The findings highlight that the PRM strategies involved in the practices of RBIs are fragmented. This is due to the nature of the uncertainty in business circumstance, and the variety of the RBI’s personal profiles. The PRM strategies adopted by different types of RBIs are varied, as there are various supply chain structures. Moreover, there are even differences in their use amongst the same type of RBIs. This is mainly caused by the diversity in resources and PRM capability on the part of the RBIs. Furthermore, this research also reveals the lack of the advanced PRM tools in the industry for RBIs. They rely mainly upon informal methods provided by their business partners. It is worth noting that these tools, such as a forward contract, are selectively provided to RBIs depending on their relationships and market powers. The accessibility to available PRM tools has a strong linkage to PRM strategies adopted by RBIs. Eventually, adopted PRM strategies incorporated with decisions in risk taking and market channel selection help to determine their business performance. The research concludes by proposing a conceptual model of PRM in practice that is considered to be original and contributes to the industries involved with high-volume and low-margin trading. This research also has implications to novice or existing RBIs, other stakeholders in NR supply chains, such as producers or processors, and policymakers who require more understanding in PRM in practice.
|Publication status||In preparation - Jul 2016|