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Nov. 17 (Bloomberg) — Rubber output from Thailand, the world’s largest producer, may decline “about 10 percent” this year as heavy rainfall disrupts production, according to the Thai Rubber Association. Futures gained.
Output will be 2.7 million to 2.8 million metric tons in 2010 compared with 3.1 million tons in 2008, Prapas Euanontat, the association’s secretary-general, said in an interview. Yields also fell as fertilizer costs rose, curbing use, Prapas said by phone.
The drop in production may help to extend a surge in futures prices this year. The estimate from the association, whose members represent about 85 percent of the nation’s output, compares with a Nov. 4 projection from the Thai Department of Agriculture for a fall to between 2 million and 2.5 million tons.
“Rainfall lowers tapping days,” Prapas said yesterday from the southern province of Nakhon Si Thammarat. Most Thai rubber is cultivated in the south. Output may rebound to about 3.1 million tons next year as higher prices prompt farmers to use “all their might to increase production,” said Prapas.
Futures on the Tokyo Commodity Exchange reached 240.7 yen a kilogram today, the highest price since October 2008. The commodity has climbed 75 percent this year on rising oil prices and speculation that a global recovery will spur demand.
The free-on-board price of so-called ribbed smoked sheet 3 at the Central Rubber Market in Songkhla Province was 84.55 baht ($2.55) a kilogram today, the highest level this year, according to the Rubber Research Institute of Thailand’s Web site.
Delayed Deliveries
“There is a strong possibility that total output will reach 3.1 million tons next year, thanks to price incentives,” said Rewat Yenchai, an analyst at AGROW Enterprise Ltd. in Bangkok. This year’s rainfall has “delayed product delivery into the market,” Rewat said.
Heavy rain in Thailand’s southern provinces may cut supply, Yium Tavarolit, an economist at the International Rubber Consortium Ltd., said on Oct. 27. The wet weather in some southern provinces is expected to continue this week, according to a weekly forecast from the Meteorological Department.
Thailand, Indonesia and Malaysia, the three biggest producers, suspended a plan agreed last year to pare exports, the International Rubber Consortium said last month. The reversal came as the global economic recovery stoked demand.
The three nations, which harvest about 7 million tons a year, cut exports by 690,000 tons in the January-to-July period, approaching the 700,000 ton target set in December to combat last year’s 56 percent slump in prices.
Thailand is expected to ship 2.31 million tons of rubber this year, according to an October forecast from the Association of National Rubber Producing Countries. The prediction in the group’s monthly bulletin was unchanged from September.
Source: Bloomberg