As rubber prices slumped toward a six-year low, 20 of 30 workers who drained the sticky latex from trees on Winai Chaikunanant’s plantation in Thailand quit. Even with income sharing, they earned less than the minimum wage.
Winai isn’t faring much better. The 70-year-old loses money on every kilogram produced on the farm he’s tended for five decades because government subsidies aren’t big enough to make up the difference. Half his trees were left untapped this season, and he plans to raze about 100 rai (40 acres) to grow cassava or pineapple instead. And the market may only get worse for rubber growers.
Global demand for natural rubber, used mostly in tires, is slowing as the economy cools in China, the world’s largest buyer of new cars. Supplies are expanding after a decade-long rally in prices to a record in 2011 encouraged top producers like Thailand, Indonesia and Vietnam to plant more trees. Output will exceed use for two more years, with the surplus quadrupling in 2016, according to The Rubber Economist Ltd., a London-based industry researcher.
‘We face so many challenges from all sides,’ Winai said on his 600-rai plantation in Rayong, about 180 kilometers (110 miles) southeast of Bangkok.
Rubber traded in Tokyo, a global benchmark, has tumbled 70 percent from a record in 2011, touching a six-year low of 153 yen ($1.26) a kilogram on Nov. 6. Futures in Shanghai have slumped 22 percent in 2015. The export price from Thailand, the top producer, is down 23 percent.
This post was published at David Stockmans Contra Corner on January 4, 2016.
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