SINGAPORE - Thailand’s natural rubber output this year is likely to drop by 8-10% to its lowest level since 2020, according to a plantation manager and two traders, as heavy rains and extremely thin margins curb tapping in the world’s biggest producer.
The decline comes at a time when benchmark futures prices on the Osaka Exchange have jumped by almost 25% since the year began.
“Rubber prices have not kept pace with rising costs, leading to unfavourable margins for farmers,” said a plantation manager with a major rubber processor in Thailand, declining to be named as he is not authorised to speak to the media.
A drop of 8-10% would put output at between 4.6 million and 4.7 million tonnes.
The rubber industry is in its peak September-December harvest and export season, when companies stockpile to prepare for leaner supply in the first half of the year.
But most rubber processing plants in Thailand are running at only 30-40% of capacity, said Farah Miller, CEO of Helixtap Technologies, a Singapore-based data company.
“There has also been a structural issue, as some farmers, especially smallholders, are moving to other crops … more profitable alternatives like durian and palm cultivation,” she said.
Thailand accounted for more than 30% of global natural rubber supply in 2022, according to Bank of Ayudhua. China, the world’s top buyer, accounted for over 45% of global imports and bought 6.06 million tonnes.
The plantation manager said there had been a noticeable decline in plantation maintenance standards, with farmers using less fertiliser to reduce costs, leading to a decline in latex production.
The annual cost of running a typical Thai rubber farm of 1.6 hectares is roughly 114,000 baht, according to the plantation manager. At prevailing prices on the Osaka exchange, rubber farmers earn around 117,500 baht annually, resulting in negligible profits.
In the coming year, analysts expect Thai rubber output to decline further, though some noted there should be some support for the market going forward.
“Ultimately, natural rubber remains an irreplaceable commodity, particularly when it comes to essential applications such as truck, tractor and airplane tyres,” said Ms Miller. “A rise in the demand for electric vehicles would also support demand.”