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Logo of Phnom Penh Post newspaper Phnom Penh Post - Falling rubber prices put sector's future in question

Falling rubber prices put sector's future in question

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p14_story124.jpg

Rural farmers are seeing their incomes threatened as rubber prices take

a hit from soaring Chinese stockpiles and declining global demand

Photo by: TRACEY SHELTON

Young rubber plants in Ratanakkiri. Despite rubber prices plummeting, analysts say the emerging sector can withstand a downturn.

FALLING demand and high stockpiles in China have sent rubber prices tumbling, putting Cambodia's future as a rubber producer in question.

Prices have plummeted from US$3,200 a tonne in April to $1,800 currently, but local experts maintain the commodity will recover.

"We think that the decline in the price of rubber will not cause rubber farmers to lose money. If farmers can sell their goods at a price of more than $1,000, they will make a profit. In contrast, if the rubber price goes below $1,000 per tonne, the farmers will see losses," said Ly Phalla, director general at the General Directorate of Rubber Plantations.

He added, however, that declining prices will not affect the expansion of the rubber sector, which is expected to grow to 150,000 hectares by 2015, an increase of 50 percent.

Cambodia exports 40,000 to 50,000 tonnes of latex per year to Vietnam and China. Most of Cambodia's 100,000 hectares of rubber plantation are new fields that have not yet gone into production.

But Ly Phalla said that by 2010, Cambodia would produce enough rubber to support a tyre plant and sponge plant for the export market.

He also said that Cambodia will be able to export 80,000 tonnes of latex rubber by 2015, and 150,000 tonnes by 2020. In 2007, the global rubber demand was 22 million tonnes.

The Financial Times reported that Chinese merchants have defaulted on contracts to buy rubber from Thailand, the world's largest supplier.

"Some are cancelling contracts, but many more are trying to renegotiate to lower the price," Piyaporn Saelim, of the Thai Rubber Association, told the FT. Most rubber is consumed by the auto industry, which is in decline.

Chan Sophal, president of the Cambodian Economic Association, said that the precipitous price drop is a concern for farmers, but he is optimistic that the decline is temporary.

"The rubber price in Cambodia in the last 10 years has gradually increased.... Rubber plantations take a long time to produce a yield," Chan Sophal said.

"The decline in price will not discourage farmers from planting rubber trees because the decline may only be short term."

Hak Vantha, 45, a rubber farmer with 70 hectares in Kampong Cham province, said the decline in the price of rubber does not concern him.

"Even if the price goes down, the plantations will still make a profit from both resin and wood," he said.

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