Dr.N.YogaratnamThe bullish trend in natural rubber prices could continue at least till April due to the tight supply situation. Until April, a further tightness in supply will be seen due to the seasonal wintering of trees. However, from May until the year-end, supply would be back to normal, provided there are no major calamities. During wintering, production of natural rubber is known to fall.
The NR supply is expected to increase, but at a rate lower than five per cent this year. Even this is on the assumption that the weather will be normal and uprooting of aged trees will be low. Production by the ANRPC countries 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.
Due to low re-planting in 2004, only 0.233 million hectares 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 growers to retain aged trees, postponing replanting in the last two years. Over-aged trees and a further decline in yield may sometimes prompt farmers to uproot the trees in 2011.
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 changes in prices could prompt growers to keep the trees idle.
The improvement in average yield would be marginal as growers 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. Abnormally high prices have made retaining low-yielding aged trees economically viable. For example, if the price of rubber was US $2 in 2007 and the yield of a 30-year-old tree was 1,100 kg a hectare, a grower would have got $2,200. This year, even if the yield are to drop to 500 tonnes and at around US $5 a kg, the grower would only get a return of $2,500.
Besides this, production in non-traditional regions where productivity potential is lower is also a concern. This is because growers in these regions do not have adequate experience in the required skills and the agro-climatic factors are also not very favourable.
Asian physical NR prices
Asian physical NR prices were high towards the end of the 3rd week of January, 2011 as futures prices on the Shanghai market hit a record high, with supply remaining thin from leading NR producers, according to reports (Table,1).
The rubber price in Thailand, the world's largest exporter, reached a record of 172.80 baht (US$5.65) per kilogram on 20th January. Demand for NR has grown based on rising car sales led by China and India. Supply may also lag behind demand as Thai production, disturbed by heavy rain last year, drops further as growers tend to avoid tapping during the wintering season that begins in February, reducing latex output.
Rubber production in Thailand during the season, which runs until May, normally shrinks by 45 percent to 60 percent from peak production. The low-production period also occurs at the same time in northern Indonesia and Malaysia, lowering output.
According to reports, buyers are still in the market despite high prices to secure the commodity amid increasing supply concerns. Futures also gained amid speculation that buyers in China, the largest consumer, may boost purchases to replenish reserves before the Lunar New Year holiday. The week-long holiday starts from 2nd February.
Natural-rubber inventories in China declined 175 tons to 68,675 tons, based on a survey of 10 warehouses, according to the Shanghai Futures Exchange, which is about 55 percent lower than last year's peak of 151,832 tons.
China's economy expanded 10.3 percent in 2010 to $6.04 trillion, the fastest pace in three years, which compares with 9.2 percent in 2009. China's vehicle sales may grow 10 percent to 15 percent this year after jumping 32 percent to 18.06 million vehicles in 2010, according to forecasts by the China Association of Automobile Manufacturers.
The unprecedented upswing in NR prices seen at the Colombo Auctions also, breaking all recent records, should be watched with caution by the producers and consumers alike for contrasting reasons.
source - www.dailymirror.lk
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