Reduce supply to maintain rubber prices - RRI Director

by Gamini WARUSHAMANA

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The Government should intervene and help rubber growers to survive at this turbulent moment and activate the market by providing market information and reducing the supply, said the Director, Rubber Research Institute (RRI) Dr. Ashoka Nugawela.

Today the markets are not moving due to the negative expectation of a further decline in price. Farmers do not get information and middlemen are exploiting the situation. In some areas in the Kalutara district the farm gate price of rubber has fallen to Rs. 75/Kg.

There is a huge gap between the farmgate price and auction price. Middlemen and value added industries who directly purchase rubber from the farmers offer a lower price, though the auction price is higher.

At last week’s auction RSS 1 recorded a higher price of Rs. 205 and the price fluctuates around Rs. 190-200. Today markets are stagnant and the government has to activate it as the government cannot support the growers financially, Dr.Nugawela said. He called upon the media and relevant government institutions to publish the auction prices daily and provide all market information to the public.

The price of rubber has dropped as a result of a slump in demand. Therefore, to maintain prices we have to cut down on supply. Today the rain guarded rubber plantation is tapped on an average 28 days a month and plantations without rain guards are tapped on an average of 20 days per month. The RRI has recommended to reduce tapping to 15 days a month.

This would help to regain a higher price and reduce costs.

Internationally too this option is being considered and Thailand, Indonesia and Malaysia have entered into a tri-partite agreement to reduce natural rubber production to 20%, Dr.Nugawela said. These three countries account for 70% of the world’s natural rubber production. The main reason for the price reduction in rubber in the international market is the global financial crisis and the deepening economic recession. The automobile industry has been affected and demand for tyres have dropped sharply. Since 75% of the world’s natural rubber is devoured by the tyre industry the demand for natural rubber has also dropped.

The second factor is the decline in crude oil prices and the resulting drop of synthetic rubber prices. Crude oil prices have dropped by over 100% and hence we can expect the prices of natural rubber also to decline by the same amount, Dr.Nugawela said.