Weak prices to offset growth in rubber exports
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)