Agri Business

Natural rubber prices will remain firm till April

M. R. Subramani Chennai | Updated on January 25, 2011


Production likely to rise less than 5% this year

The bullish trend in natural rubber prices could continue at least till April due to the tight supply situation, according to an official of the Association of Natural Rubber Producing Countries.

“Until April, a further tightness in supply is seen due to the seasonal wintering of trees. From May until the year-end, supply will be better,” said Mr Jom Jacob, senior economist of the inter-governmental association comprising the 11 countries that produce rubber. During wintering, production of natural rubber drops.

In his presentation on ‘Rubber Outlook' at the India Rubber Expo 2011, Mr Jacob said rubber supply is expected to increase lower than five per cent this. “Even this is on the assumption that the weather will be normal and uprooting of aged trees will be low,” he said.

Production by the association members is expected to increase to a maximum of 9.87 million tonnes (mt), up 4.8 per cent from last year. This is in the event that the annual uprooting of rubber trees is at two per cent of the total area under cultivation.

Rubber trees begin yielding from the sixth year onwards; the yield peaks between 10 and 19 years before dropping again. Growers usually tend to replace trees that are older than 30 years.

Giving reasons for the lower increase in production this year, Mr Jacob said due to low planting in 2004, only 0.233 million hectare that is equivalent to 3.3 per cent of the yielding area last year, will be available for tapping this year.

“Moreover, high prices have prompted farmers to retain aged trees, postponing replantation in the last two years. Over-ageing trees and a further decline in yield may sometimes prompt farmers to uproot the trees in 2011,” he said.

In November last year, trees on 16,000 hectares were lost due to heavy winds and floods in Thailand. However, the yielding area expanded as growers tapped dormant trees last year. But the possibility of bringing more areas with dormant trees into production is limited.

Rising labour costs and the possibility of a correction in prices could prompt farmers to keep the trees idle, Mr Jacob said.

The improvement in average yield would be marginal as farmers have already exploited their available short-term means on the heels of high prices. The existing yielding area is dominated by trees planted in the 1980s and the productivity of these trees would have dropped drastically on account of ageing.

“There could be possible damage to yield potential due to unscientific over-exploitation of trees prompted by high prices,” he said, adding that abnormally high prices have made retaining low-yielding aged trees economically viable. For example, if the price of rubber was $2 in 2007 and the yield of a 30-year-od tree was 1,100 kg a hectare, a grower would have got $2,200. This year, even if the yield were to drop to 500 tonnes at around $5 a kg, the grower would only get a return of $2,500.

Besides, the influence of non-traditional regions where productivity potential is lower is increasing. This is because farmers in those regions are new to rubber cultivation.

“Economic recovery and the resultant non-farm employment opportunities can aggravate an already severe shortage of skilled tappers,” Mr Jacob said.

Scope for a rise in supply from next year onwards is better with new plantings being ready for tapping.

Published on January 25, 2011

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