Physical rubber supply in Thailand, the world's biggest producer, is expected to be tight over the next few weeks as monsoon weather has hit rubber areas along the Gulf of Thailand, officials and traders said on Friday. That is expected to push prices up in coming weeks.
The five provinces hit by heavy rain - Chumporn, Surat Thani, Nakhon Si Thammarat, Phatthalung and Songkhla - account for around 5.5 million rai of rubber area, around 800,000 hectares, according to the Rubber Research Institute of Thailand. Those provinces in southern Thailand account for roughly 90 percent of annual production of around 3 million tonnes rubber.
"Farmers should take around one or two weeks to restart tapping, collect latex and process it into rubber sheet," said a southern-based official of the Thai Rubber Association. Another trader in Thailand's Hat Yai rubber centre said cash rubber prices could rise over the next few weeks due to the disruption to supplies.
The price of benchmark smoked sheet (RSS3) was at $2.45 per kg on Friday while the unsmoked sheet (USS3), a raw material for RSS3 grade, was at 75 baht ($2.25) per kg. Prices of rubber sheet have doubled from $1.10 per kg in December 2008, the lowest in nearly seven year, due to steady demand while supply was cut by unfavourable weather in the big producing countries, Thailand, Indonesia and Malaysia.
Thai rubber exports are forecast to drop 3 percent in 2009 from 2008 to 2.6 million tonnes due to drop in supply, a senior Agriculture Ministry official said. Tokyo rubber futures (TOCOM), which set the global price trend, rose about 1 percent on Friday due to optimism over the global economy, which implies that demand will rise. At 0558 GMT, the benchmark rubber contract on TOCOM for April delivery was at 230.5 yen ($2.54) per kg.