Shortage of seedlings, rising costs of farmers push up rubber prices
By Achara Pongvutitham
The Nation
The price of natural rubber is skyrocketing against the backdrop of a shortage of rubber-tree seedlings, blamed by some on the effects of global warming, and an increase in farmers' costs. Further complicating the picture is a recent drive by farmers to expand rubber-plantation areas to capitalise on the high price.
The price of natural rubber recently hit Bt110 per kilogram: its highest level since the first plantations were launched in Thailand more than 100 years ago. This has created a shortage of rubber seedlings, for which prices have roughly tripled from Bt12-Bt14 to Bt35-Bt50 per tree, depending on quality.
The lucrative rubber price has led many farmers - not just existing rubber growers - to expand their plantation areas or switch crops altogether.
The Natural Rubber Policy Committee recently launched the third phase (2010-2012) of its natural rubber-planting project involving 800,000 rai.
The plan is to be implemented on new plantation areas in the North (150,000 rai), Northeast (500,000 rai), Eastern, Central and Southern (150,000 rai each) regions of Thailand.
"Farmers will have more choice in managing their farms - whether rubber, cassava or sugarcane. Many of them have decided to grow rubber due to the attractive price, and it's a valuable investment as rubber is a long-living tree," said Khunsri Thongyoi, assistant vice president of Charoen Pokphand's Crop Integration Business Group.
However, the problem facing farmers now is the difficulty in purchasing rubber seedlings due a supply shortage blamed on the effects of global warming.
The problem has seen the price of rubber seed grow from Bt5-Bt6 to Bt12-Bt15 per kg.
One major rubber-seedling supplier has stopped taking orders for this year, with its capacity currently running at 10-15 per cent below orders. The price of its cross-bred seedling has increased from Bt35 to Bt50 per tree.
Khunsri said farmers in the Northeast are planning to expand their plantation areas mostly by planting areas that are currently vacant. In addition, they generate extra income by growing cassava between the rows of rubber trees.
"Farmers [are looking to capitalise on] rising prices of both rubber and cassava," said Khunsri, adding that one of his customers has been able to generate income of Bt1 million from his 70-rai rubber plantation. If rainfall is not disrupted, the rubber price should not be lower than Bt100 per kg in the second half this year, according to an international rubber research report, which said the shortage situation is likely to last until 2020.
The effects of global warming, according to some experts, has caused the rubber yield to drop by 60 per cent. Consequently, farmers have had to adjust their methods, tapping the trees for rubber every two to three days, rather than every other day. Farmers' average production has fallen from 1 tonne to 300kg per month.
Luckchai Kittipol, president of the Thai Rubber Association, said the attractive price has lured farmers to expand plantation areas, further boosting demand for rubber seedlings. The seedling price in the South has increased two to three times from Bt12-Bt14 to Bt35-Bt50 per tree.
Lukchai said rubber trading is a lucrative business now, as trades are largely done in cash. In addition, farmers and labourers are both benefiting from the high price.
"All rubber growers are smiling, as they're making a lot of money," he said.
However, Luckchai said, the rubber price could be unsustainable, as it is now unacceptable to manufacturers. So far, the natural rubber price is more than Bt30 per kg higher than that of synthetic rubber.
The Thai Rubber Association forecasts that the price will gradually decline in the second half of this year, with quoted prices seen falling to between Bt80 to Bt100 per kg.
"Too high a price will see a fall in consumption. In addition, if the supply-shortage problem can be resolved, prices will again be subject to the normal market mechanism," said Luckchai.
The Association of Natural Rubber Producing Countries (ANRPC) said in its May report that demand for natural rubber remains strong despite woes and worries clouding expectations for a global economic recovery.
The ANRPC said that demand remains strong in China, India and Malaysia.
Consumption of natural rubber rose during the first four months of the year by 25.5 per cent in China, 11.7 per cent in India and 13.6 per cent in Malaysia. On the supply side, the ANRPC anticipated total supply of natural rubber from its member countries could rise 6.2 per cent this year to 9.4 million tonnes.
The ANRPC's report concluded that a continued supply tightness being felt in the market after the winter off-season is believed to be the key driving force of the current natural rubber market, and that concerns over comfortable availability of natural rubber in the short term have contributed to keeping market sentiment positive.