SINGAPORE: A slump in natural rubber prices to multi-year lows is spurring Southeast Asian farmers to turn to other crops and tappers to look for other jobs, potentially chipping away at a chronic supply overhang.
Any crop shift won’t lead to a rapid drop in output, say analysts, but along with threats of an El Nino weather pattern could start to halt production growth as tumbling prices take a toll on the region’s five million-plus rubber farmers.
Output growth in top producer Thailand could halve this year, while in neighbouring Vietnam, which recently overtook Malaysia as the world’s third-largest producer, farmers have cut down trees and reduced tapping.
Asia accounts for about 90 percent of the world’s natural rubber output. The tyre-making industry makes up about 60 percent of global rubber consumption, and the commodity is also used to make gloves and condoms.
“Supplies are increasing at a time when demand is relatively sluggish,” said analyst Abah Ofon at Standard Chartered in Singapore, who said output would need to fall to have some impact on prices.