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13 May 2013


Rubber and Palm Oil Prices Pressured by High Inventories (Current Issue No. 2361 Full Ed.)

Key factors that have weakened rubber and palm oil prices in Thailand, especially during March-April, and perhaps in the near future, as well, include high rubber inventories in China, plus high palm oil stocks in Thailand and other major producing nations, e.g., Malaysia and Indonesia. Declines in the prices of both commodities have also been caused by downward trends in global crude oil prices plus futures prices on rubber and palm oil on signals toward a slower than expected growth of the Chinese economy.
However, if rubber demand picks up in China and global crude oil prices do not fall further, we at KResearch expect that rubber prices could probably recover during the latter half of 2013. Meanwhile, palm oil prices are unlikely to increase as they are largely controlled by Malaysia and Indonesia, though demand from their food, non-food and alternative fuel (biodiesel) industries remains strong. Those industries may consider using other alternatives if palm oil prices increase. In addition, there will likely be little demand for energy crops in making biofuels so long as global crude oil prices remain subdued.
It should be noted that although Thailand is a top rubber exporting nation and our crude palm oil exports come in third, prices of those commodities have invariably been determined by demand from importing nations, and/or the policies of our rivals. As a result, any policies to sustain rubber and palm oil prices should take into account the effects of such policies on the entire rubber and palm oil production supply chains.

Aside from agricultural zoning and amendments to laws for the development of Thai oil palm and palm oil industries being undertaken by the government, relevant parties should work together to add value not only to rubber and palm oil industries, but also to other important agricultural industries per Thailand's national development strategy, as well.

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