Weak prices to offset growth in rubber exports
JAKARTA (JP): Increased volume of the country's rubber exports will be offset by the continuing slump in prices of the commodity on the international market, an Indonesian Rubber Association (Gapkindo) executive predicts.
Gapkindo's executive director A.F.S. Budiman said the country would manage to increase rubber export volume by about 5 percent next year from the projected 1.53 metric million tons this year.
However, rubber export revenue would drop slightly from the projected US$1.4 billion this year due to sagging international prices.
"We are confident that we can increase our rubber production despite the La Nia weather phenomenon next year and also expand our export volume by about 5 percent," Budiman told The Jakarta Post.
La Nia, which means "little sister" in Spanish, is brought about by unusually cool temperatures in the Pacific Ocean and often follows the drought-inducing El Nio weather pattern. Its arrival brings about more rains and violent tropical storms.
Many rubber traders and commodity observers have predicted that La Nina will cut the country's rubber production because heavy rains would discourage farmers from tapping rubber sap.
Budiman disagreed and said soaring prices of commodities in the crisis would force farmers to step up their activities to make ends meet.
He acknowledged that rubber farmers had enjoyed "windfall" income from the increasing rubber prices in the domestic market due to the weakening of the rupiah against the U.S. dollar.
However, the heyday was over following the strengthening of the rupiah and rising prices of basic needs like rice and sugar.
The stronger rupiah will also threaten the competitiveness of Indonesia's rubber on the international market during a time of dropping demand in the prolonged crisis in Asia.
International rubber prices are expected to remain low.
Singapore rubber futures prices ended lower on Wednesday on bigger volume, dealers said.
The January RSS 1 contract last traded at 110 Singapore cents, the January RSS 3 contract at 66.25 U.S. cents and the February TSR 20 (FOB) contract at 58 U.S. cents.
Budiman said the International Natural Rubber Organization (INRO) had intervened several times during the last few months by purchasing rubber in the market. However, the reaction from the market was far from satisfactory.
Many traders contend that INRO's intervention was merely to pacify Malaysia and Thailand which had threatened to leave the organization because of the inability to bring up rubber prices.
Weakening rubber prices would also drive down Indonesia's revenues from rubber exports.
Rubber exports were projected to produce about $1.4 billion in revenues this year, a slight decrease from $1.5 billion booked in 1997. Indonesia's rubber export value peaked in 1995 at $2.19 billion. (29)