Indonesia rubber output to fall in 2000

Indonesia rubber output to fall in 2000

HAT YAI, Thailand (Reuters): Indonesian rubber output is expected to fall by as much as five percent in 2000 to around 1.47 million tonnes from last year's 1.55 million tons, a top Indonesian Rubber Association official said on Thursday.

"Due to low rubber prices last year, some farmers in some regions have shifted to other cash crops such as oil palm," Suharto Honggokusumo, executive director at Indonesia's rubber association told Reuters in an interview.

In addition, prolonged rain in other regions this year had cut output, he added.

Last year, rubber prices fell sharply to their lowest level in 30 years at an average of around 23 U.S.cents/lb, mainly due to weak global demand, Honggokusumo said.

Indonesia's main rubber growing areas are in North Sumatra, South Sumatra and Kalimantan on Borneo island, officials said.

Indonesia, the world's second largest producer of rubber, produced 1.64 million tonnes in 1998, they added.

Meanwhile, the country's rubber exports in 2000 were estimated to be steady as last year's 1.4 million tonnes, supported by an expected improvement in the U.S. economy this year.

"However, if the U.S. economy in the second half of the year is not as good as expected, Indonesia's exports volume could possibly be lower than estimated," Honggokusumo said.

Around 75-80 percent of Indonesia's total rubber output each year normally goes to the U.S. market, he added.

Indonesian officials said it was difficult to predict how much rubber the country had sold so far this year.

Indonesia's rubber price trend in the second half of the year would mainly depend on the rate of the local currency, said T.B. Tjandra, board member of the Indonesian Rubber Association.

Due to concerns over the fluctuation of the rupiah, currently around 8,710/8,725 per dollar, most Indonesian sellers sold rubber only for nearby shipment. The furthest forward sales were for September shipment, Honggokusumo said.

Despite current low world prices, the Indonesian government had yet to adopt any policies to discourage rubber farmers from the crop, Indonesian rubber officials said.

"The government has yet to initiate any incentive that would be enough to change rubber farmers' minds," Tjandra said.

In Thailand, the world's top producer of rubber, the government has tried to trim output in a bid to prop up prices by granting financial support to farmers who shift to an alternative crop -- oil palm.

Meanwhile, the rubber price this year would partly dictate Indonesian rubber output in 2001, the officials said.

"That would also depend on this year's prices. If farmers perceive that this year's prices are very low, in 2001 they might shift to other crops," Tjandra said.

So far, farmers in most Indonesian growing areas generally were still satisfied with the current price, he said.

"They are still happy as long as their income from tapping one kg of rubber can buy two kg of rice," Tjandra added.

The Indonesian officials are in Hat Yai for a rubber meeting held between June 29 and July 1.