Rubber-Producing Countries Seek Ways to Boost Prices
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Kompas/Nikson Sinaga
Farmers collect sacks containing rubber latex in Tifa Juhar village, Sinembah Tanjung Muda Hulu district, Deli Serdang regency, North Sumatera, Tuesday (11/7). Many farmers are cutting down rubber trees to sell the wood because the rubber prices have fallen to Rp 5,000 per kilogram from Rp 20,000 per kilogram in 2011.
PALANGKARAYA, KOMPAS – Three major rubber-producing countries held a meeting to propose efforts to boost rubber prices through export restrictions. Since earlier this year, the price of rubber at the farmers’ level has not moved beyond Rp 7,000 (US$0.53) per kilogram.
A trilateral meeting between representatives from Thailand, Malaysia and Indonesia discussed the Agreed Export Tonnage Scheme (AETS). The Indonesian government is planning to issue a special export restriction policy.
The secretary of the North Sumatra branch of the Indonesian Rubber Producers’ Association (Gapkindo), Edy Irwansyah, said in Medan on Wednesday that the three countries’ export restriction plan was serious. The three countries are also said to be planning to cut rubber production and boost domestic consumption.
Government representatives of the three countries, which together form the International Tripartite Rubber Council (ITRC), met in Bangkok, Thailand, last week. “The ITRC members are preparing a scheme to balance rubber supply and demand to boost prices,” Edy said.
At the Singapore Commodity Exchange (Sicom), the price of crumb rubber of the technical specified rubber (TSR) 20 type was US$1.51 per kilogram on Tuesday (8/8/2017),down from US$2.20 per kilogram in February and US$1.95 per kilogram in March.
Export restrictions are a short-term solution to boost rubber prices. Export restrictions in March-December 2016 doubled the price of rubber. The price of TSR 20 rubber was US$1.08 per kilogram in January 2016 and US$2.2 per kilogram in early 2017.
Other than export restrictions, cutting production is another way to curb rubber supply in the global market. However, Edy said, it would be difficult to cut rubber production in Indonesia, as 85 percent of the nation’s rubber was produced by farmers. Production cuts are only possible for big companies.
Edy said increased domestic absorption of natural rubber was the effective long-term way to increase rubber prices. Currently, domestic industries could only absorb 15 percent of domestic rubber production. Almost all of produced rubber is absorbed by the tire industry. The natural rubber industry must be diversified to include asphalt mixture, making speed bumps and rubber fenders.
Unmotivated farmers
Rubber plantation owner Martianiberu Sebayang, 25, in Rumah Sumbul village, Sinembah Tanjung Muda Hulu district, Deli Serdang regency, said the rubber price reached Rp 10,000 per kilogram in February. The price held up for a month before plummeting to Rp 5,000 per kilogram. Such price fluctuation was demotivating for farmers, most of whom are neglecting their rubber fields.
Martiani said farmers were currently having difficulties to secure work as rubber tappers. Wages have plummeted due to the profit-sharing wage system, in which farmers and tappers each get half of the profit.
Nowadays, tappers can only get around Rp 30,000 per day. As a result, tappers prefer to work as construction workers, which offers higher pay. Many farmers have resorted to cutting down their rubber trees to sell them and replace them with other plants. This is despite their families having been involved in the rubber business for generations.
However, Gapkindo South Kalimantan deputy chair Vincentius Eoi said that policy would only make things more difficult for businesses, because it may cause businesspeople to reduce production and rubber absorption.
“The hope is that the price will go up. However, this will cause difficulties for businesspeople, as we want to keep buying rubber and yet our export is restricted,” Oei said.
The AETS scheme has been implemented several times to boost prices at the farmers’ level since 2016. However, in practice, Thailand released its rubber stocks when the price was high, resulting in plummeting rubber prices in Indonesia.
“Thailand once released its rubber stocks in the interest of certain nations, despite the AETS scheme having been proposed by Thailand. The government should take this experience into consideration before deciding on any restriction policy,” Oei said.
In Pulang Pisau regency of Central Kalimantan, the rubber price currently hovers between Rp 6,500 and Rp 7,000 per kilogram. This marks an improvement from Rp 4,500 per kilogram in March.
“The current price has been stable for a week. Hopefully, it will not plummet to Rp 4,000 per kilogram like earlier this year,” Gohong village head Yanto L Adam said in Palangkaraya on Wednesday.
Yanto explained that his village, located in PulangPisau regency, had 230 families earning money from tapping rubber. Each of the families had an average of one hectare of rubber fields.
