12 November 2008

Malaysia rubber output forecast lowered

Shrinking areas due to expansion of palm oil

Rubber output in Malaysia, the world’s third-largest producer, was estimated at 1.19 million tonnes in 2008, down 6 per cent from an earlier forecast, due to expansion in palm oil plantations, the ANRPC said today. There were no changes in output forecast for Thailand and Indonesia, the world’s No. 1 and 2 producers respectively, but both countries have seen a slower growth in output in recent years due to bad weather, the Kuala Lumpur-based Association of Natural Rubber Producing Countries said in its latest report.

In July, the ANRPC estimated Malaysia’s output at 1.26 million tonnes in 2008, barely changed from 1.20 million tonnes in 2007. “It is striking to note that production during the January to September 2008 works out to be 16 per cent lower than that in the same period in 2006,” said the ANRPC, whose members account for 95 per cent of global output of natural rubber. “This sharp decline in output could be attributed to the substantial shrinkage in mature area by 173,000 hectares (388,731 acres) in just one year due to the expansion of palm oil plantations,” it said.

Output from Malaysia, the world’s second-largest palm oil producer, has been rising in recent years due to an increase in demand for cooking oil and biofuel. Dealers said many rubber and cocoa plantations have been replaced with palm oil. “Mature area declines in 2008 to 973,000 hectares from 1,146,000 hectares in 2007,” said the ANRPC, referring to size of rubber plantations estimated for this year. “In Malaysia, the total rubber area is anticipated to come down further by 268,000 hectares by 2020.”

Thailand’s rubber output was seen steady at 3.08 million tonnes in 2008 after falling more than 2 per cent last year, when heavy rains disrupted tapping. The ANRPC estimated production in Indonesia to rise to 2.86 million tonnes this year from 2.76 million in 2007, but the country’s production growth had declined recently. “It merits to mention that production during 2007 was badly affected due to adverse weather conditions,” said the report, referring to a 4.5 per cent decline in production last year.

The world’s top three rubber producing countries have agreed to jointly cut output by 215,000 tonnes in 2009 in a bid to shore up prices hit by dwindling demand and growing fears of a global recession. Cash rubber prices have fallen more than 40 per cent to US$1.90 a kg after hitting a 56-year peak of US$3.25 in July.

Source: Business Times, 2008-11-12.

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