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The region’s rubber sector has a blueprint of strategies to hedge it against falling prices and struggling output.
Prices under the weather
World demand for rubber has outpaced production, according to the latest Trends & Statistics released by the Association of Natural Rubber Producing Countries (ANRPC). This is not unprecedented as rubber is one market commodity that fluctuates more often than is stable.
“During January 2017 to September 2017, the world output of natural rubber (NR) stood at 9.240 million tonnes while world demand of NR
accounted for 9.637 million tonnes. As a result, a shortfall in world supply reported close to 400,000 during this period,” ANRPC’s Secretary General Dr Nguyen Ngoc Bich stated recently. This trend, characterised by demand outstripping output, has been witnessed in the first eight months of 2017, said ANRPC. It adds that the world consumption of NR during that period reached 8.54 million tonnes against the global production of almost 8.04 million tonnes.
It was obvious that the strong demand has not quashed the negative sentiments in the market, such as rubber inventories in the region, development in the oil industry, currency strength, and current geopolitical tensions. In other words, “the NR market is anticipated to continue struggling due to plunging prices,” ANRPC deduced.
Ajith Kumar, ANRPC’s President, speaking at an annually-organised rubber conference held in Vietnam recently, said “rubber prices will continue to hover at low levels”, adding that this imbalance could impact millions of rubber farmers.
Meanwhile, a Price Stabilisation Fund (PSF) will also be created to secure prices as well as provide income support to rubber growers during price declines. Six major rubber exporters will be pitching contributions to fund the initiative.
ITRC: not measuring up?
Asia dominates global rubber production,accounting for 93% of the total global output: Thailand remains the largest producer, followed
by Indonesia and Vietnam. Other large rubber producers in the region include Malaysia, India, and China – the latter also being the world’s largest consumer of rubber. The region, with its capacities, is the first to be hit when prices go haywire.
The International Tripartite Rubber Council (ITRC), formed by the region’s main rubber players of Thailand, Indonesia, Malaysia, which
cumulatively account for 70% of the global rubber (to increase to 80% once Vietnam comes on board), has been working at stabilising and shoring up prices by either cutting back on exports or on outputs to mitigate oversupply of rubber.
However, of late, ITRC has failed to stabilise rubber prices when Thailand and Indonesia did not comply to the 615,000 tonnes Agreed Export
Tonnage Scheme (AETS), according to Malaysia’s Deputy Plantation Industries and Commodities Minister Datuk Datu Nasrun Datu Mansur.
Representing the International Rubber Consortium (IRCo), which was formed under the framework of ITRC, the three countries met in
November to tackle the current supply and demand situation of NR.
Demand, in the recent quarters, has been on the upswing according to IRCo. At its recent discussions, it identified a few strong sentiments
favouring demand for NR including improved global GDP in 2017, pegged at 3.6% against the previous year’s 3.2%; the improvement of
automobile sales in major markets of China, EU and Japan, which grew by 4.8%, 3.7%, 7.1%, respectively, from January to September, compared to a year ago. This has had positive impact to tyre production, it said. Additionally, strengthened crude oil prices and other commodities as well as increasing usage of NR for roads and highway construction are seen as favourable for demand.
On another hand, IRCo determined that “prices are not reflective of market fundamentals”. What it means is that there are yet other factors that account for the unstable rubber prices. The group said that the La Niña, which is expected from November 2017 to January 2018, would bring heavy rains and would affect NR production. In addition, the wintering season, beginning in the last quarter of 2017, would contribute in supply reduction of NR to global market.
Capping the discussion, IRCo said that it willcollectively monitor and consider measures to strengthen NR prices to also protect the interest of
small holders who manage the majority of rubber planted areas, because any reduction in prices has direct impact on their income and welfare.
Genomic solutions hit home
Malaysia, which produced above 300,000 tonnes of NR in 2016, according to the Malaysia Rubber Board (MRB), has provided assistance to its small holders and rubber tappers.
Recently, the government has allocated RM200 million for programmes for rubber shareholders. A modern infrastructure will take the cue, among other initiatives to make latex production more efficient.
An important gist in the government’s strategy is incorporating cloning technology in rubber production. It introduced the use of the high-yielding 1Malaysia rubber clones and latex timber clones, developed by the MRB. A rubber clone provides higher and faster rubber yield.
The board is also seeking to increase plantation acreage and by 2020, it targets to cultivate an estimated 500,000 ha of rubber in Sarawak and in
Sabah, 300,000 ha.
Cloning technology has also been eyed as a fertile solution among rubber producing countries. In 2015, the Kuala Lumpur-based International
Rubber Research and Development Board (IRRDB), an R&D network of NR research institutes, shared some 49 rubber clone varieties among its associate institutes under its sharing system.
One such country is the Philippines, owing to its ample rubber cultivating areas, while developing its own clones, such as the high-yield USM 1 clone developed by Dr Romulo L. Cena of the University of Southern Mindanao.
In August, the Philippine Department of Agriculture announced that it was allocating nearly US$147,000 to trial the performance of the rubber clones shared by other rubber producing countries from the IRRDB network, to help increase its annual yield to 3 metric tonnes from the current less than 1 metric tonne.
Rodolfo L. Galang, Philippine Rubber Research Institute (PhilRubber) Executive Director, said that the country received rubber clones from Thailand, China, India, Ivory Coast, Ghana and Indonesia. The clones will be tested in various locations in the country with different planting environments to determine which would be suitable for adoption.
In India, a new high-yielding clone called Thadathil has been developed to double profit in terms of growth and production. With the clone, for
example, 1.5 kg of dry rubber can be produced from ten trees, twice the yield of the commonly cultivated
variety RRI-105.
The clone, developed after more than three decades of research and trials, is a prodigy of Father Thomas, a priest who hails from Cheenikkuzhi at Udumbannoor in Thodupuzha. He said that his clone will produce trees with thicker bark and latex that is more consistent.
The Indian Rubber Board has been at the forefront of developing NR clones, and in 2016 released its first high-yielding clone suitable for
a low temperature region. The RRII 208 clone, developed by the Rubber Research Institute of India (RRII), is for exclusive cultivation in theNorth East. It can resist low temperatures and diseases associated with such climatic conditions. Another clone for high temperature zones is also being developed.
India, as well as all other rubber producing countries in the region have their development strategies in place to improve outputs because at the
end of the day, an efficient rubber production is an important barometer to clinch a fair NR price.