Rubber farmers switch crops
May 30, 2014
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.
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.
