Outlook on Global Supply of Natural Rubber

Outlook on Global Supply of Natural Rubber

Jom JacobSenior Economist

ANRPC, Kuala Lumpur

2 April, 2009 Qingdao International NR Forum 2

Structure of the Paper1. Trends in NR supply during 2003 -08 and Key

Observations2. Review of Supply from each Country and the Anticipated

Outlook for 20093. Factors determining NR Supply in the Short and Medium

Termsa) Trends in New Planting since 2003 and Potential Impact on

Supplyb) Trends in Replanting since 2003 and Potential Impact on Supplyc) Crop Shift from Rubber d) Anticipated Trend in Replanting in the Medium Term

4. Anticipated Trend in Tappable Area5. Anticipated Trend in Average yield6. Signals on Global Supply of NR

1. Trends in NR Supply during 2003-08 and Key Observations


Relative Share of the ANRPC Region in Global NR Supply during 2008

Others7.7%

ANRPC92.3%

World Production of NR9.94 million tonnes


NR Production within ANRPC Region(2008)

Vietnam6.6%

Thailand33.4%

Indonesia30.1%

China6.6%

Sri Lanka1.3%

India8.9%

Malaysia13.1%


Total Production of NRin ANRPC Region (‘000 tonnes)

7338

8055 82

38

911

8

9135

9179

6000

6500

7000

7500

8000

8500

9000

9500

2003 2004 2005 2006 2007 2008


Annual Growth in Production

9.5 9.0

2.3

10.7

0.2 0.50

2

4

6

8

10

12

2003 2004 2005 2006 2007 2008

2. Review of Supply from each Country and

Outlook for 2009


NR Supply in Thailand Review up to 2009 Q1 and Outlook for 2009

Tapped area expanded by 108,000 ha during 2005-2008

Marginal decline in average yield from 1736 kg in 2005 to 1711 kg in 2008

Production increased at the average annual rate of 0.9 % during 2005-08

Production was lower by 13.9% during first 2 months in 2009 (compared to the same period 2008)

2009 production is anticipated to decline to 3.075 million tonnes from 3.090 million tonnes in 2008


NR Supply in Indonesia Review up to 2009 Q1 and Outlook for 2009

Tapped area expanded by 154,000 ha during 2005-2008

Average yield increased from 862 kg per hectare in 2005 to 1004 kg per hectare in 2008

Production increased at the average annual rate of 8.3 % during 2005-08

Production during 2009 Q1 declined by 3.2% Production during 2009 is anticipated to be at the

same level in 2008 in spite of expansion in tapped area by 30,000 ha.


NR Supply in Malaysia Review up to 2009 Q1 and Outlook for 2009

Tapped area came down by 201,000 hectare during 2005-2008

Average yield increased from 990 kg per hectare in 2005 to 1430 kg per hectare in 2008

Production declined at the average annual rate of 1.6 % during 2005-08

Tapped area is anticipated to come down further by 20,000 hectare during 2009. Average yield is expected to improve to 1450 kg/ha in 2009 from 1430 kg/ha in 2008.

Production during 2009 is anticipated to come down to 1.023 million tonnes from 1.078 million tonnes in 2008.


NR Supply in India Review up to 2009 Q1 and Outlook for 2009

Tapped area expanded by 16,000 hectare during 2005-2008

Average yield improved to 1912 kg/hectare in 2008 from 1727 kg/hectare in 2005.

Production increased at 4.5 % during 2005-08 Production declined during 2009 Q1 by 11.2 % Production anticipated to decline during 2009 by

2.7% to 857,000 tonnes from 881,000 tonnes in 2008 Average yield is expected to decline to 1850 kg/hectare


NR Supply in Vietnam Review up to 2009 Q1 and Outlook for 2009



Production increased at the average annual rate of 12.2% during 2005-08

Production declined during 2009 Q1 by 1.8 % Production is anticipated to decline during 2009

to 650,000 tonnes from 662,900 tonnes in 2008 Tappable area is expected to come down by 16,700 ha Average yield is expected to improve to 1700 kg/hectare


NR Supply in ChinaReview up to 2009 Q1 and Outlook for 2009 Tapped area expanded by 39,000 hectare

during 2005-2008 Average yield came down to 1000 kg/hectare in

2008 from 1082 kg/hectare in 2005. Production decreased at the average annual

rate of 2.6% during 2005-08 Production is anticipated to increase by 13.7%

during 2009 to 580,000 tonnes from 510,000 tonnes in 2008. The increase is return to normal level after the drastic decrease in 2008.


Year Tapped area (,000 hectare)

Yield (kg/ha)

Production (‘000 tonnes)

Production Growth

2006 495 1128 538

2007 503 1168 588 + 9.3%

2008 510 1000 510 - 13.3%

2009 504 1150 580 +13.7%

Production of NR in China


NR Supply in Sri LankaReview up to 2009 Q1 and Outlook for 2009



Production increased at the average annual rate of 8.0% during 2005-08

Production is anticipated to decrease to 126,000 tonnes during 2009 from 129,200 tonnes in 2008 Tappable area is expected to come down by 2,000 hectare Average yield is expected to come down to 1319 kg/hectare


Total Mature Area in ANRPC Region

6700

6750

6800

6850

6900

6950

7000

7050

7100

7150

2005 2006 2007 2008 2009

(‘000 ha)


Trends in Average Annual Yield in ANRPC Region

(kg per hectare)

1203

1298

1282

1301 1301

1140

1160

1180

1200

1220

1240

1260

1280

1300

1320

2005 2006 2007 2008 2009


3. Factors Determining NR Supply

in the Short and Medium Terms

3a. Trends in Newplanting since 2003 and Potential Impact on Supply


Trends in Newplanting

2003 2004 2005 2006 2007 2008 2009*

Thailand 15.0 32.0 53.1 118.8 139.9 40.0 NA

Indonesia Negligible Negligible 17.1 67.0 67.3 19.1 20.6

Malaysia Negligible Negligible Negligible Negligible Negligible 11.0 NA

India 7.0 10.5 14.8 19.3 20.5 20.0 13.0

Vietnam 12.0 13.3 28.6 39.5 34.1 62.3 30.0

Sri Lanka 0.5 0.5 1.0 1.9 2.0 2.1 3.1

* Anticipated

(‘000 ha)

NA: Not available


Area Newplanted during 2003-08

(‘000 ha)

2003-04 2005-08 Total

Thailand 49 352 401

Indonesia 0 171 171

Malaysia 0 11 11

India 23 75 98

Vietnam 38 165 203

Sri Lanka 1 7 8

Other countries* 20 220 240

Total 131 1001 1132

*Estimate.


Potential Impact of Newly Planted Area on Global NR Supply

Cannot exert any significant impact until 2011,due to: Planting was low during 2003-04. So, addition to

tappable area during 2009 & 2010 would be low Planting rate high during 2005-08. But, trees

planted during 2005-08 cannot yield before 2011, due to gestation lag.

Impact on supply during 2012-14 would be marginal; Reasons: Although trees start yielding after the age of 6

years, the yield will be low in the next three years

Planting in 2005 was only moderate. Much of the planting had taken place in 2006 and 2007.


Expected Yield Profile for the Newplanted Area

‘Plus’ Factors Should have used

the best clones available.

‘Minus’ Factors Planting was mainly

in non-traditional regions.

Entrepreneurs, being new to rubber cultivation, could be unskilled.


Expected Output from Area Newplanted during 2005-08

Area newplanted

during 2005-08

(‘000 ha)

Assumed Yield

(kg/ha)

Additional Annual Production

(‘000 tonnes)

Thailand 352 1800 634

Indonesia 171 1400 239

Malaysia 11 1500 16

India 75 2000 150

Vietnam 165 1800 297

Sri Lanka 7 1400 10

Others 220 1400 308

Total 1001 1653 1654

3b. Trends in Replanting since 2003 and Potential Impact on Supply


Trends in Replanting (‘000 ha)

2003 2004 2005 2006 2007 2008* 2009*

Thailand 47.0 34.0 50.4 36.8 35.2 31.9 NA

Indonesia 5.0 5.0 5.0 44.9 50.0 40.0 55.0

Malaysia 19.1 19.4 20.6 20.2 23.1 20.7 20.0

India 7.4 7.1 7.5 8.4 8.5 8.7 9.0

Vietnam 2.7 4.3 4.7 4.6 7.0 8.0 9.0

Sri Lanka 1.1 2.1 2.5 4.4 5.2 1.0 3.6

* Anticipated


Area Replanted during 2003-08 (‘000 ha)

2003-04 2005-08 Total

Thailand 81 154 235

Indonesia 10 195 205

Malaysia 39 105 144

India 15 42 57

Vietnam 7 33 40

Sri Lanka 3 17 20

Others 20 40 60

Total 175 586 761


Impact of Replanted Area on Global Supply in the Medium Term

Out of 761,000 hectare of area replanted during 2003-08, about 77% (or 586,000 hectare) was undertaken from 2005 onwards.

Trees in this 586,000 ha cannot yield until 2011 due to the gestation lag.

The replanted trees attaining yielding stage in 2010 and 2011 are those planted during 2003 and 2004. But, the rate of replanting was low during 2003 and 2004. This means, addition to yielding area would remain low during 2010 and 2011.

3c. Crop-Shift from Rubber


Rubber trees in 442,000 hectare discarded during 2000 -08.

Indonesia: 333,000 ha

Malaysia: 105,000 ha

Vietnam: 3,000 ha

Thailand: 1,000 ha

The trend still continues in Malaysia. Rubber area in the country is anticipated to come down by 268,000 ha by 2020. Tappable rubber area came down by 221,000 ha since 2005 in spite of the high rubber prices. A further decline by 73,000 hectare is expected during 2010.


Possibility cannot be ruled out for a policy shift in favour of food crops by NR producing countries, in view of the food crisis experienced in the early 2008.

This may get further emphasis in view of the decline in rubber prices since mid-2008 and the policy initiative (still in process) by the three major NR producing countries to regulate supply.

Increasing shortage of skilled labourers compels farmers to shift to crops having relatively less labour inputs.

3d. Anticipated Trend in Replanting in the Medium Term


Postponement of Replanting from 2005-08

High NR prices induce postponement of replanting by 2-4 years Income loss arising from yield decline (due to ageing)

could be compensated by the higher price. Some extent of area that had to be replanted in the

past 4 years might have been postponed. The postponed replanting may take place in the current

low phase of the price. This can cause a shrinkage in yielding area till the

replanted trees start yielding after about 6 years.


Cycles in Planting

Replanting is largely dependent on age structure of trees

Age structure of trees depends on historical planting trends

There had been planting booms in the past, largely in responses to cycles in NR prices.


Price of NR during 1968-1993 (US$ per 100 kg)

20

40

60

80

100

120

140

1968 1972 1976 1980 1984 1988 1992

(RSS 3 in Kuala Lumpur)


Structural Shift in NR PricesFrom Late 1970s

NR price had scaled a peak towards the end of 1970s, after remaining low for a long period.

How did farmers respond to that price boom?


Thailand - Newplanting

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

1975 1980 1985 1990 1995 2000 2005

'000

ha


Thailand - Replanting

0.0

10.0

20.0

30.0

40.0

50.0

60.0

1975 1980 1985 1990 1995 2000 2005

'000

ha


Vietnam - Newplanting

0

5

10

15

20

25

30

35

40

45

50

1975 1980 1985 1990 1995 2000 2005

'000

hec

tare

s


Sri Lanka - Newplanting

0

500

1000

1500

2000

2500

3000

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

hect

ares


Sri Lanka - Replanting

0

1000

2000

3000

4000

5000

6000

7000

8000

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

hect

ares


India Newplanting and Replanting

Trends in Newplanting and Replanting

0

5000

10000

15000

20000

25000

30000

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005

NP+RP

NP


Replanting Boom starting 2010? In response to the price boom from late

1970s, there had been a planting boom starting from 1980 continuing till end of 1980s.

Trees planted during that period are expected to attain replanting age from 2010 onwards (Assuming 30 years life span)

Shadowing the planting boom from 1980, a corresponding replanting boom is imminent.

World rubber plantation industry is at the threshold of a replanting boom?

4. Anticipated Trend in Tappable Area


Large extent of existing yielding area is anticipated to enter into the inevitable gestation phase spanning for 6-7 years.

1.001million hectare newplanted and 0.586 million hectare replanted during 2005-08. Even if this much area starts attaining tappable age from 2011 onwards, this would be insufficient to offset the substantial decline in tappable area arising from the anticipated replanting boom.

Possibility of shrinkage in yielding area? This is likely to continue until the replanted trees attain tappable age in stages.

The trend may go till the end of the next decade.

5. Anticipated Trend in Average Yield


Available options for enhancing yield from existing yielding trees have been almost fully exploited, because prices remained high during 2004-08. Further scope for improvement in yield is very limited.

The price fall since mid 2008 is likely to exert downward pressure on yield.

Further increase in yield could be expected only after 2014 when the area new/replanted during 2005-08 comes in to full yielding stage.

6. Signals on Global Supply of NR


Up to 2011

Tappable area is likely to decline, or at most, stagnate at the present level. Decline already seen in 2008 and 2009.

Average yield is unlikely to improve.

Supply is unlikely to increase until 2011. There is possibility for the supply to decline.


Beyond 2011

1.587 million hectare was planted during 2005-08 (1.001million ha new planted and 0.586 million ha replanted). These trees are expected to start attaining maturity. This is a plus factor.

An upward shift in average yield is anticipated from 2014 onwards (It depends on price also). This is another plus factor.


Beyond 2011 (Contd.)

Anticipated replanting boom (shadowing the planting boom during 1980s) and the resultant shrinkage in yielding area are likely to eclipse the above two plus factors.

The crop-shift, especially in Malaysia, is another minus factor .

The supply beyond 2011 will be determined by the net effect of the two plus factors and the two minus factors.


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Outlook on Global Supply of Natural Rubber

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