Natural-rubber output in Thailand, the largest producer and exporter, may drop 4.1 percent in the fourth quarter as heavy rain disrupts latex tapping, supporting prices, according to the Thai Rubber Association.

Production during October to December may total 930,000 metric tons, compared with 970,000 tons a year ago, the group’s President Luckchai Kittipol said in a phone interview.

Rubber futures on the Tokyo Commodity Exchange may trade between 320 yen to 340 yen per kilogram ($3,978 to $4,227 a metric ton) over the next two months, while the cash price in Thailand will be in a range of 115 baht ($3.85) to 125 baht per kilogram, said Luckchai. The benchmark Thai price reached a record 130.55 baht on April 27.

“Supplies are quite low as rainfall has persisted since July, lowering production,” Luckchai said from Bangkok. “Low supply will continue to support prices.”

The commodity used to make tires and gloves surged 20 percent this year as a La Nina weather pattern caused heavy rainfall across major producing countries in Asia, amid strong demand from China, the largest buyer, to replenish stockpiles that were 71 percent lower than this year’s high.

Global rubber output this year is unlikely to increase more than 5.3 percent to 9.4 million tons, from a previous forecast of 6.3 percent, the Association of Natural Rubber Producing Countries said Oct. 27. A further cut in output is expected because of tapping disruptions in Malaysia, Thailand and India. Thai output is estimated to fall 3.9 percent in the fourth quarter to 933,000 tons, the group said in a monthly bulletin.

Flash Floods

Thailand’s floods spread to seven provinces in the country’s south after a tropical depression brought heavy rain to the area, the Department of Disaster Prevention and Mitigation said today. The nationwide death toll from floods since Oct. 10 rose to 104, the agency said.

“Floods in key producing areas in Thailand’s south increase worries that low supply will be squeezed further, boosting prices higher today,” Chaiwat Muenmee, analyst at commodity broker D.S. Futures Co. said by phone from Bangkok. The company temporarily closed its branch in Songkhla today because of floods, he said.

“Floods have spread to Songkhla province and farmers can’t go out tapping for four to five days,” Luckchai said yesterday. The nation’s output this year may total 3.15 million to 3.2 million tons, similar to the previous estimate. The impact on total production will depend on how long the rain lasts, he said.

China’s Stockpiles

Thai prices are unlikely to reach a record as high rubber prices will likely lower consumption, said Luckchai. The benchmark price was at 120.30 baht ($4.03) yesterday.

The April-delivery contract in Tokyo climbed 1.9 percent to 333.3 yen per kilogram at 2:05 p.m. local time. Rubber futures advanced to a 27-month high of 343.3 yen per kilogram on Oct. 26 on speculation China will step up purchases to replenish stockpiles amid concerns over declining supplies from floods and heavy rain.

Shares of Sri Trang Agro-Industry Pcl, Thailand’s biggest publicly traded rubber producer, were headed for a record close in Bangkok trading after the nation’s rubber association said output may fall in the fourth quarter, said Ploenjai Jirajarus, an analyst at Capital Nomura Securities.

“Reports on supply reduction and worries over disruption of trade and transportation from floods in Songkhla province boosted rubber prices, benefiting Sri Trang,” Polenhai said by phone from Bangkok. Songkhla is Thailand’s major rubber-trading center.

Sri Trang shares surged as much as 7.5 percent to 32.25 baht today. The price reached an intraday record of 32.50 baht on Oct. 26 following a rally on Tokyo and Shanghai markets.

Source: Bloomberg

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