Global rubber output to drop as farmers curtail tapping

Global natural rubberoutput could drop for a second straight year in 2015 as pricesnear six-year lows have prompted Asian farmers to curtailtapping during their peak season.

Lower production this year - which would be the first timein at least a decade that output has fallen two years in a row -would help reduce stockpiles and allow prices to reboundafter losing more than 25 percent so far in 2015.

"Lower prices during peak tapping period will have anegative impact on overall production," Sheela Thomas,secretary-general of the Association of Natural Rubber ProducingCountries (ANRPC), told Reuters.

Production from the ANRPC members, which togetheraccount for about 92 percent of global output, is set to fall in2015 from last year's 10.952 million tonnes, as farmers fromThailand, Indonesia, Malaysia and India suspend tapping, Thomassaid. She did not say by how much the output would drop.Earlier this year the group was expecting a rise of morethan 5 percent in 2015 production, but the poor priceenvironment spoiled that estimate.

So far this year, over the January-October period, ANRPCmembers have produced 9 million tonnes of rubber, down 0.9percent from the same period in 2014.

Total production from the ANRPC in 2014 was down 1.9 percentfrom the previous year.

Asia's peak rubber output usually comes in the Decemberquarter, when cooler weather makes for good tapping conditions.Output normally moderates due to "wintering" in the firstquarter, when trees shed leaves due to drier weather.

"Lower tapping (this year) is in accordance to the market.When prices fall, farmers choose not to tap rubber trees," saidGeneral Chatchai Sarikulya, agriculture minister of Thailand,the world's biggest natural rubber producer.

Rubber prices in Thailand have fallen 29 percent so far in2015, in line with the global market.

Thai farmers' response to the weak prices will help todetermine the overall drop in the world output, though recentgovernment measures to support farmers there may limit anyreduction in output, Thomas said.

The Thai government has approved measures worth 13 billionbaht ($365 million) to assist rubber farmers hurt by the pricesfalling to multi-year lows.

Disruption in tapping in Indonesia, the world's secondbiggest producing country, could lead to a 10 percent drop itsrubber production in 2015, says Moenardji Soedargo, chairman ofthe Indonesian Rubber Association.

"The lower production is a result of several factors. Firstis the El Nino and haze that disturbed photosynthesis. Second,the price is too low and this doesn't justify farmers andprivately owned plantations continuing production," he said.

Some Indonesian farmers have even chopped down productivetrees to switch to other crops like cassava.

In India, the fifth-biggest producer, output is expected todrop 13.4 percent to 610,000 tonnes, estimates ANRPC.

Many Indian farmers are not covering labour costs at currentprices and have been forced to suspend tapping, said GeorgeValy, a rubber dealer in the southern Indian state of Kerala.

Still, despite a slowdown in its economy, China's rubberimports are rising and this should support prices, Thomas said.

China, the biggest consumer of rubber, has imported 3.64million tonnes in first ten months of the current year, up 8.6percent from a year ago.

Other ANRPC member countries include Cambodia, China, PapuaNew Guinea, the Philippines, Singapore, Sri Lanka and Vietnam.