By Michael Taylor
JAKARTA, Oct 12 (Reuters) – Indonesia’s rubber output is expected to ease next year due to the effects of an El Nino and haze from forest fires, the main rubber group in the world’s No.2 producer said on Monday, but is seen unchanged in 2015 at 3.2 million tonnes. Indonesia is expected to face moderate El Nino dry conditions which could strengthen from September to December, while fires on Sumatra and Kalimantan have shrouded large parts of Southeast Asia in so-called “haze”.
While it was too early to give a production forecast for next year, haze conditions preventing farmers from tending their trees, a lack of sunshine and dry soil would all hinder production. “It will go down next year but we are still doing analysis,” Moenardji Soedargo, chairman at the Indonesian Rubber Association (GAPKINDO) told Reuters.
“Compared to last year, 2015 is more or less unchanged.” Indonesia’s rubber exports were likely to fall slightly to 2.5 million tonnes this year from 2.6 million tonnes in 2014, he added, due to increased domestic demand. Soedargo said Indonesian rubber farmers had been hit hard by low prices.
Singapore STFc1 and Tokyo JRUc6 rubber futures have fallen to levels last seen in 2009, weighed down by slower economic growth in China, the world’s biggest rubber buyer. “The price level today doesn’t reflect the actual fundamentals – it’s been overdone,” he said.
Top rubber producing countries have previously looked to support prices by introducing floor prices, export curbs or farmer subsidies, which have had limited success.
Soedargo said farmers who sold 1 kg of rubber were currently only able to buy 0.5 kg of rice, compared with around 2 kg previously, a level that had remained stable even during other downturns. “It is devastating.
It should be a concern to all stakeholders,” he said, adding that some farmers had started cutting down their rubber trees to sell the timber. The loss of trees could hold back production when global activity improved, Soedargo said, particularly as Indonesian rubber trees had a lot of room to increase yields compared with other producing countries.
About 20,000 hectares of trees had been replanted this year, out of total plantings of 3.65 million hectares, as part of efforts to rejuvenate farms where trees had passed their maturity. GAPKINDO was in talks with the government about help to fund and arrange a bigger re-planting and rejuvenation rubber package for the country.
(Reporting by Michael Taylor; Editing by Richard Pullin)
