Outlook on Global Supply of Natural Rubber

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Outlook on Global Supply of Natural Rubber
Jom Jacob Senior Economist ANRPC, Kuala Lumpur
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Structure of the Paper

• Trends in NR supply during 2003 -08 and Key
  Observations
• Review of Supply from each Country and the
  Anticipated Outlook for 2009
• Factors determining NR Supply in the Short and
  Medium Terms
• Trends in New Planting since 2003 and Potential
  Impact on Supply
• Trends in Replanting since 2003 and Potential
  Impact on Supply
• Crop Shift from Rubber
• Anticipated Trend in Replanting in the Medium
  Term
• Anticipated Trend in Tappable Area
• Anticipated Trend in Average yield
• Signals on Global Supply of NR

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• 1. Trends in NR Supply during 2003-08 and Key
  Observations

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Relative Share of the ANRPC Region in Global NR
Supply during 2008
World Production of NR 9.94 million tonnes
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NR Production within ANRPC Region(2008)
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Total Production of NRin ANRPC Region (000
tonnes)
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Annual Growth in Production
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2. Review of Supply from each Country and Outlook
for 2009
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NR Supply in Thailand Review up to 2009 Q1 and
Outlook for 2009

• Tapped area expanded by 108,000 ha during
  2005-2008
• Marginal decline in average yield from 1736 kg in
  2005 to 1711 kg in 2008
• Production increased at the average annual rate
  of 0.9 during 2005-08
• Production was lower by 13.9 during first 2
  months in 2009 (compared to the same period 2008)
• 2009 production is anticipated to decline to
  3.075 million tonnes from 3.090 million tonnes in
  2008

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NR Supply in Indonesia Review up to 2009 Q1 and
Outlook for 2009

• Tapped area expanded by 154,000 ha during
  2005-2008
• Average yield increased from 862 kg per hectare
  in 2005 to 1004 kg per hectare in 2008
• Production increased at the average annual rate
  of 8.3 during 2005-08
• Production during 2009 Q1 declined by 3.2
• Production during 2009 is anticipated to be at
  the same level in 2008 in spite of expansion in
  tapped area by 30,000 ha.

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NR Supply in Malaysia Review up to 2009 Q1 and
Outlook for 2009

• Tapped area came down by 201,000 hectare during
  2005-2008
• Average yield increased from 990 kg per hectare
  in 2005 to 1430 kg per hectare in 2008
• Production declined at the average annual rate of
  1.6 during 2005-08
• Tapped area is anticipated to come down further
  by 20,000 hectare during 2009. Average yield is
  expected to improve to 1450 kg/ha in 2009 from
  1430 kg/ha in 2008.
• Production during 2009 is anticipated to come
  down to 1.023 million tonnes from 1.078 million
  tonnes in 2008.

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NR Supply in India Review up to 2009 Q1 and
Outlook for 2009

• Tapped area expanded by 16,000 hectare during
  2005-2008
• Average yield improved to 1912 kg/hectare in 2008
  from 1727 kg/hectare in 2005.
• Production increased at 4.5 during 2005-08
• Production declined during 2009 Q1 by 11.2
• Production anticipated to decline during 2009 by
  2.7 to 857,000 tonnes from 881,000 tonnes in
  2008
• Average yield is expected to decline to 1850
  kg/hectare

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NR Supply in Vietnam Review up to 2009 Q1 and
Outlook for 2009

• Tapped area expanded by 65,000 hectare during
  2005-2008
• Average yield improved to 1661 kg/hectare in 2008
  from 1441 kg/hectare in 2005.
• Production increased at the average annual rate
  of 12.2 during 2005-08
• Production declined during 2009 Q1 by 1.8
• Production is anticipated to decline during 2009
  to 650,000 tonnes from 662,900 tonnes in 2008
• Tappable area is expected to come down by 16,700
  ha
• Average yield is expected to improve to 1700
  kg/hectare

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NR Supply in ChinaReview up to 2009 Q1 and
Outlook for 2009

• Tapped area expanded by 39,000 hectare during
  2005-2008
• Average yield came down to 1000 kg/hectare in
  2008 from 1082 kg/hectare in 2005.
• Production decreased at the average annual rate
  of 2.6 during 2005-08
• Production is anticipated to increase by 13.7
  during 2009 to 580,000 tonnes from 510,000 tonnes
  in 2008. The increase is return to normal level
  after the drastic decrease in 2008.

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Production of NR in China
Year Tapped area (,000 hectare) Yield (kg/ha) Production (000 tonnes) Production Growth
2006 495 1128 538
2007 503 1168 588 9.3
2008 510 1000 510 - 13.3
2009 504 1150 580 13.7
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NR Supply in Sri LankaReview up to 2009 Q1 and
Outlook for 2009

• Tapped area expanded by 3,800 hectare during
  2005-2008
• Average yield improved to 1360 kg/hectare in 2008
  from 1145 kg/hectare in 2005.
• Production increased at the average annual rate
  of 8.0 during 2005-08
• Production is anticipated to decrease to 126,000
  tonnes during 2009 from 129,200 tonnes in 2008
• Tappable area is expected to come down by 2,000
  hectare
• Average yield is expected to come down to 1319
  kg/hectare

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Total Mature Area in ANRPC Region
(000 ha)
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Trends in Average Annual Yield in ANRPC Region
(kg per hectare)
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3. Factors Determining NR Supply in the Short
and Medium Terms
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• 3a. Trends in Newplanting since 2003 and
  Potential Impact on Supply

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Trends in Newplanting
(000 ha)
2003 2004 2005 2006 2007 2008 2009
Thailand 15.0 32.0 53.1 118.8 139.9 40.0 NA
Indonesia Negligible Negligible 17.1 67.0 67.3 19.1 20.6
Malaysia Negligible Negligible Negligible Negligible Negligible 11.0 NA
India 7.0 10.5 14.8 19.3 20.5 20.0 13.0
Vietnam 12.0 13.3 28.6 39.5 34.1 62.3 30.0
Sri Lanka 0.5 0.5 1.0 1.9 2.0 2.1 3.1
Anticipated
NA Not available
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Area Newplanted during 2003-08 (000 ha)

2003-04 2005-08 Total
Thailand 49 352 401
Indonesia 0 171 171
Malaysia 0 11 11
India 23 75 98
Vietnam 38 165 203
Sri Lanka 1 7 8
Other countries 20 220 240
Total 131 1001 1132
Estimate.
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Potential Impact of Newly Planted Area on Global
NR Supply

• Cannot exert any significant impact until
  2011,due to
• Planting was low during 2003-04. So, addition to
  tappable area during 2009 2010 would be low
• Planting rate high during 2005-08. But, trees
  planted during 2005-08 cannot yield before 2011,
  due to gestation lag.
• Impact on supply during 2012-14 would be
  marginal Reasons
• Although trees start yielding after the age of 6
  years, the yield will be low in the next three
  years
• Planting in 2005 was only moderate. Much of the
  planting had taken place in 2006 and 2007.

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Expected Yield Profile for the Newplanted Area

• Plus Factors
• Should have used the best clones available.

• Minus Factors
• Planting was mainly in non-traditional regions.
• Entrepreneurs, being new to rubber cultivation,
  could be unskilled.

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Expected Output from Area Newplanted during
2005-08
Area newplanted during 2005-08 (000 ha) Assumed Yield (kg/ha) Additional Annual Production (000 tonnes)
Thailand 352 1800 634
Indonesia 171 1400 239
Malaysia 11 1500 16
India 75 2000 150
Vietnam 165 1800 297
Sri Lanka 7 1400 10
Others 220 1400 308
Total 1001 1653 1654
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• 3b. Trends in Replanting since 2003 and Potential
  Impact on Supply

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Trends in Replanting (000 ha)
2003 2004 2005 2006 2007 2008 2009
Thailand 47.0 34.0 50.4 36.8 35.2 31.9 NA
Indonesia 5.0 5.0 5.0 44.9 50.0 40.0 55.0
Malaysia 19.1 19.4 20.6 20.2 23.1 20.7 20.0
India 7.4 7.1 7.5 8.4 8.5 8.7 9.0
Vietnam 2.7 4.3 4.7 4.6 7.0 8.0 9.0
Sri Lanka 1.1 2.1 2.5 4.4 5.2 1.0 3.6
Anticipated
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Area Replanted during 2003-08 (000 ha)
2003-04 2005-08 Total
Thailand 81 154 235
Indonesia 10 195 205
Malaysia 39 105 144
India 15 42 57
Vietnam 7 33 40
Sri Lanka 3 17 20
Others 20 40 60
Total 175 586 761
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Impact of Replanted Area on Global Supply in the
Medium Term

• Out of 761,000 hectare of area replanted during
  2003-08, about 77 (or 586,000 hectare) was
  undertaken from 2005 onwards.
• Trees in this 586,000 ha cannot yield until 2011
  due to the gestation lag.
• The replanted trees attaining yielding stage in
  2010 and 2011 are those planted during 2003 and
  2004. But, the rate of replanting was low during
  2003 and 2004. This means, addition to yielding
  area would remain low during 2010 and 2011.

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• 3c. Crop-Shift from Rubber

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• Rubber trees in 442,000 hectare discarded during
  2000 -08.
• Indonesia 333,000 ha
• Malaysia 105,000 ha
• Vietnam 3,000 ha
• Thailand 1,000 ha
• The trend still continues in Malaysia. Rubber
  area in the country is anticipated to come down
  by 268,000 ha by 2020. Tappable rubber area came
  down by 221,000 ha since 2005 in spite of the
  high rubber prices. A further decline by 73,000
  hectare is expected during 2010.

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• Possibility cannot be ruled out for a policy
  shift in favour of food crops by NR producing
  countries, in view of the food crisis experienced
  in the early 2008.
• This may get further emphasis in view of the
  decline in rubber prices since mid-2008 and the
  policy initiative (still in process) by the three
  major NR producing countries to regulate supply.
  
• Increasing shortage of skilled labourers compels
  farmers to shift to crops having relatively less
  labour inputs.

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• 3d. Anticipated Trend in Replanting in the Medium
  Term

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Postponement of Replanting from 2005-08

• High NR prices induce postponement of replanting
  by 2-4 years
• Income loss arising from yield decline (due to
  ageing) could be compensated by the higher price.
  
• Some extent of area that had to be replanted in
  the past 4 years might have been postponed.
• The postponed replanting may take place in the
  current low phase of the price.
• This can cause a shrinkage in yielding area till
  the replanted trees start yielding after about 6
  years.

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Cycles in Planting

• Replanting is largely dependent on age structure
  of trees
• Age structure of trees depends on historical
  planting trends
• There had been planting booms in the past,
  largely in responses to cycles in NR prices.

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(RSS 3 in Kuala Lumpur)
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Structural Shift in NR PricesFrom Late 1970s

• NR price had scaled a peak towards the end of
  1970s, after remaining low for a long period.
• How did farmers respond to that price boom?

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Thailand - Newplanting
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Thailand - Replanting
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Vietnam - Newplanting
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Sri Lanka - Newplanting
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Sri Lanka - Replanting
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India Newplanting and Replanting
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Replanting Boom starting 2010?

• In response to the price boom from late 1970s,
  there had been a planting boom starting from 1980
  continuing till end of 1980s.
• Trees planted during that period are expected to
  attain replanting age from 2010 onwards (Assuming
  30 years life span)
• Shadowing the planting boom from 1980, a
  corresponding replanting boom is imminent.
• World rubber plantation industry is at the
  threshold of a replanting boom?

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4. Anticipated Trend in Tappable Area
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• Large extent of existing yielding area is
  anticipated to enter into the inevitable
  gestation phase spanning for 6-7 years.
• 1.001million hectare newplanted and 0.586 million
  hectare replanted during 2005-08. Even if this
  much area starts attaining tappable age from 2011
  onwards, this would be insufficient to offset the
  substantial decline in tappable area arising from
  the anticipated replanting boom.
• Possibility of shrinkage in yielding area? This
  is likely to continue until the replanted trees
  attain tappable age in stages.
• The trend may go till the end of the next decade.

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5. Anticipated Trend in Average Yield
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• Available options for enhancing yield from
  existing yielding trees have been almost fully
  exploited, because prices remained high during
  2004-08. Further scope for improvement in yield
  is very limited.
• The price fall since mid 2008 is likely to exert
  downward pressure on yield.
• Further increase in yield could be expected only
  after 2014 when the area new/replanted during
  2005-08 comes in to full yielding stage.

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6. Signals on Global Supply of NR
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Up to 2011

• Tappable area is likely to decline, or at most,
  stagnate at the present level.
• Decline already seen in 2008 and 2009.
• Average yield is unlikely to improve.
• Supply is unlikely to increase until 2011. There
  is possibility for the supply to decline.

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Beyond 2011

• 1.587 million hectare was planted during 2005-08
  (1.001million ha new planted and 0.586 million ha
  replanted). These trees are expected to start
  attaining maturity. This is a plus factor.
• An upward shift in average yield is anticipated
  from 2014 onwards (It depends on price also).
  This is another plus factor.

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Beyond 2011 (Contd.)

• Anticipated replanting boom (shadowing the
  planting boom during 1980s) and the resultant
  shrinkage in yielding area are likely to eclipse
  the above two plus factors.
• The crop-shift, especially in Malaysia, is
  another minus factor .
• The supply beyond 2011 will be determined by the
  net effect of the two plus factors and the two
  minus factors.

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