Need to revamp supply chain system
By TA News Bureau:
The 40th annual session of the Association of Natural Rubber Producing Countries (ANRPC) will be held in Ho Chi Minh City, Vietnam, on Oct. 27. The 10th Annual Rubber Conference will also be held during the same week, which is expected to be attended by around 350 invited guests from about 20 countries. A major focus of the conference will be on the need to ravamp the supply chain system in order to help farmers increase revenue and sustain interest in NR farming, says Jom Jacob, Senior Economist, ANRPC
How significant is the ANRPC Annual Assembly 2017 considering the current global NR situation?
Besides a review of demand-supply situation and price trends, ANRPC will evaluate the progress of various projects and studies undertaken by it the organization. As a new initiative, in 2017 ANRPC has introduced collaborative studies by establishing linkage with institutions and organisations both in the private sector and government sector. The ANRPC Public-Private Meet on Oct. 24 will discuss the outcome of two important studies being undertaken in collaboration with the Malaysian Rubber Products Manufacturers Association (MRPMA) and the Securities and Exchange Board of India (SEBI).
The Assembly, which is the supreme body of the inter-governmental organisation representing the interest of more than 10 million rubber producers in the world, is expected to come out with new decisions and programmes to help the world natural rubber production sector to be competitive. In the context of continuing market uncertainties and challenges facing sustainable growth of world NR production sector, joint efforts and collective decisions through this inter-governmental forum of natural rubber producing countries assume significance.
Could you please elaborate on the theme of the conference: “Reengineering Value Chain for Revitalizing Production Sector”?
The Annual Rubber Conference is being held against the backdrop of continuing market uncertainties and concerns clouding on long-term prospects of rubber cultivation. Nearly 90% of the world production comes from smallholders who are sensitive to fall in prices. Continued low prices have largely dissuaded them from proper maintenance of holdings. As a result, the production sector has become increasingly inefficient in terms of the average yield per hectare of harvested area. In the 11 ANRPC member countries, constituting 90% of the world production, the average yield has continuously fallen from 1,347 kg/ha in 2013 to 1,231 kg/ha in 2016. This is despite development and release of high-yielding clones by rubber research institutes across countries and the introduction of improved harvesting methods. To revitalize the production sector, it is necessary to generate renewed interest among farmers so that they will actively involve in farm activities.
To generate interest among farmers it is essential to make farm income more attractive. In some of the producing countries, it is possible to achieve 30% increase in income by addressing the low farm-gate prices. Farmers’ income can be more than doubled by addressing the yield gap between laboratory and the field in the case of a few other producing countries. For example, the average yield realised in Indonesia during 2016 was 1,045 kg/ha and that in the Philippines was 694 kg/ha. But, the potential yield of the clones developed by research institutes in these countries is more than 3,000 kg/ha. In a few cases, poor quality of the produce deprives farmers of the potential higher income.
In short, farmers by and large lose considerable income due to inefficiencies in supply-chain infrastructure, value-chain system and information dissemination system in the market. Farm income can be considerably increased by thoroughly reviewing the existing supply-chain system in each country, identifying the weaknesses and revamping them. While there are limitations to influence market prices, ample opportunities are available to support the income of farmers by focussing on supply chain and value addition. The four talks and two panel discussions of the conference programme are focussed on this theme. The two panel discussions represented by key policy-makers in the 11 countries are expected to unfold the opportunities available to revitalize the production sector by reengineering the existing value chain.
What is your take on the current global NR scenario? Is 2017 a better year? How good could 2018 be?
World supply of NR is anticipated to rise by 4.9% to 12.863 million tonnes during 2017. World demand during the year is likely to increase by 1.0% to 12.803 million tonnes. These figures are based on actual data up to August 2017 and forecasts for the remaining months of the year. In means, 2017 is likely to end up with a closely matching supply and demand. More specifically, the demand-supply situation is likely to stay favourable to the market till end of the year. However, the market may swing on either side by tracking the general trends in commodities which are highly sensitive to global economic and geo-political factors.
Coming to 2018, world supply can increase by 5.0% to 13.506 million tonnes and the demand by 3.5% to 13.251 million tonnes (Table 3). The projected supply is based on anticipated expansion of mature area across countries and by assuming normal climate and market condition. Demand is anticipated to grow faster in 2018 owing to improved world economic outlook. These projections suggest that the world supply in 2018 would be 255,000 tonnes more than the demand. Obviously, the surplus is insignificant as it comes to less than 2% of the world supply.
Do you think the increasing emphasize on alternatives will bite into NR’s growth prospects in the future?
Alternative sources of natural rubber from plants such as Guayule and Russian Dandelions are unlikely to contribute even 1% of the world demand for NR in the next few decades. These alternative sources do not pose any kind of threat to Hevea (Para rubber tree) even in the long-term future. It is also important to consider the potential available to increase the supply of NR from Heave. For example, take the case of Indonesia having around 3.7 million hectares of rubber area. If the average yield in the country is increased from the present level of 1,058 kg/ha to 1,700 kg/ha, the corresponding additional supply is 2.4 million tonnes per year. The average yield of 1,700 kg/ha is achievable when compared to the level attained in countries like Vietnam. It means, huge untapped potential already remains with Heave.
However, natural rubber may face stiffer competition from synthetic substitutes. The increasing penetration of electric cars and anticipated fall in energy prices are issues of concerns for NR sector. Potential fall in energy prices indicates possibility of synthetic rubbers becoming cheaper. ANRPC is undertaking a study on this issue in collaboration with the Malaysian Rubber Products Manufacturers’ Association (MRPMA). Preliminary results of the study are slated to be discussed in the Public Private Meet to be held on 24 October.