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Global rubber output to drop as farmers curtail tapping

MUMBAI/JAKARTA - Global natural rubber output could drop for a second straight year in 2015 as prices near six-year lows have prompted Asian farmers to curtail tapping during their peak season. Lower production this year - which would be the firs...

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MUMBAI/JAKARTA - Global natural rubber output could drop for a second straight year in 2015 as prices near six-year lows have prompted Asian farmers to curtail tapping during their peak season.

Lower production this year - which would be the first time in at least a decade that output has fallen two years in a row - would help reduce stockpiles and allow prices to rebound after losing more than 25 percent so far in 2015.

"Lower prices during peak tapping period will have a negative impact on overall production," Sheela Thomas, secretary-general of the Association of Natural Rubber Producing Countries (ANRPC), told Reuters.

Production from the ANRPC members, which together account for about 92 percent of global output, is set to fall in 2015 from last year's 10.952 million tons, as farmers from Thailand, Indonesia, Malaysia and India suspend tapping, Thomas said. She did not say by how much the output would drop.

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Earlier this year the group was expecting a rise of more than 5 percent in 2015 production, but the poor price environment spoiled that estimate.

So far this year, over the January-October period, ANRPC members have produced 9 million tons of rubber, down 0.9 percent from the same period in 2014.

Total production from the ANRPC in 2014 was down 1.9 percent from the previous year.

Asia's peak rubber output usually comes in the December quarter, when cooler weather makes for good tapping conditions. Output normally moderates due to "wintering" in the first quarter, when trees shed leaves due to drier weather.

"Lower tapping (this year) is in accordance to the market. When prices fall, farmers choose not to tap rubber trees," said General Chatchai Sarikulya, agriculture minister of Thailand, the world's biggest natural rubber producer.

Rubber prices in Thailand have fallen 29 percent so far in 2015, in line with the global market.

Thai farmers' response to the weak prices will help to determine the overall drop in the world output, though recent government measures to support farmers there may limit any reduction in output, Thomas said.

The Thai government has approved measures worth 13 billion baht ($365 million) to assist rubber farmers hurt by the prices falling to multi-year lows.

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Disruption in tapping in Indonesia, the world's second biggest producing country, could lead to a 10 percent drop its rubber production in 2015, says Moenardji Soedargo, chairman of the Indonesian Rubber Association.

"The lower production is a result of several factors. First is the El Nino and haze that disturbed photosynthesis. Second, the price is too low and this doesn't justify farmers and privately owned plantations continuing production," he said.

Some Indonesian farmers have even chopped down productive trees to switch to other crops like cassava.

In India, the fifth-biggest producer, output is expected to drop 13.4 percent to 610,000 tons, estimates ANRPC.

Many Indian farmers are not covering labour costs at current prices and have been forced to suspend tapping, said George Valy, a rubber dealer in the southern Indian state of Kerala.

Still, despite a slowdown in its economy, China's rubber imports are rising and this should support prices, Thomas said.

China, the biggest consumer of rubber, has imported 3.64 million tons in first ten months of the current year, up 8.6 percent from a year ago.

Other ANRPC member countries include Cambodia, China, Papua New Guinea, the Philippines, Singapore, Sri Lanka and Vietnam.

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