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23 Apr 2019

Agriculture

Rubber price may increase slightly in 2Q19 but pressure persists throughout this year (Current Issue No.2983)

           The attempt by the three natural rubber producing countries (Thailand, Indonesia and Malaysia) to boost rubber prices in 2Q19 by curbing rubber exports by 240,000 metric tons for four months from April-July 2019 amid the downward trend of rubber prices may prop up  rubber prices somewhat. The measure may increase the rubber price to around THB43.0 per kilogram in 2Q19 from Bt41.9 per kilogram in 1Q19. However, KResearch views that the uptick is likely to be short-lived.

         Regarding the outlook in 2H19, KResearch expects rubber prices to gradually drop to between THB37.5 and THB40.9 per kilogram or down 0.5-0.7 percent YoY because negative factors from 1H19 are expected to persist. For example, demand from China continues to slow down amid an oversupply of rubber in the global market. Meanwhile, crude oil prices in the world market are factors which deserve close attention.  Hence, the overall rubber prices in 2019 are likely to be sluggish, moving between THB40.8-THB41.2 per kilogram or a contraction by 0.8-1.7 percent YoY.

              Looking ahead, the attempt by the three rubber producing countries through their rubber export cutbacks are unlikely to provide a long-term solution for the slump in rubber prices in the global market. This is because the commodity price is dampened by structural issues relating to the imbalance between supply and demand, pressuring rubber prices in the world market to remain at a lackluster level. This poses a big question for the government whether it should attempt to shore up rubber prices through various measures such as assistances to rubber farmers both short term and long term. For example, domestic supply should be controlled in order to balance it with the demand. As an additional consideration, ​




Agriculture