Malaysia, Thailand and Indonesia - the world's top three natural rubber producers - say they will not intervene in the market to control soaring prices.
Although there is concern that the high prices will not be sustainable, the three countries are "comfortable" with the current levels which provide high income for their three million smallholders, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said.
"As long as rubber prices are above the cost of production of US$1.30 (RM4.34) and between RM8 and RM10 a kg, we will not intervene and will let it be governed by market forces so that Malaysia's 250,000 smallholders can earn a higher income.
"However, we will continuously monitor the world rubber demand-supply situation and undertake appropriate measures to counter (any) negative price," he told reporters after a meeting with rubber producers in Kuala Lumpur yesterday.
Dompok was responding to worries over rising natural rubber prices, such as for Standard Malaysia Rubber (SMR 20), which is hovering above US$3 (RM10.02) a kg.
The soaring natural rubber prices have been attributed to the wintering season, slowing latex production, rainy season which prevents tapping, price rally on the Tokyo Commodity Exchange and strong demand from China's motor vehicle sector.
Prices which are too high can be a disadvantage as buyers may seek other alternatives, such as synthetic rubber.
Natural rubber prices may also be subjected to volatility and crash, like in 2008. In June of that year, the prices surged to US$3.26 (RM10.89) a kg.
Six months later, they crashed 66.1 per cent to US$1.10 (RM3.67).
The International Tripartite Rubber Council, which groups the three producing countries responsible for 70 per cent of the world's natural rubber production, curb volatile price fluctuations through two mechanisms: the Agreed Export Tonnage Scheme and the Supply Management Scheme.
The mechanisms regulate the flow of natural rubber into the marketplace and exports to ensure prices are neither too low nor too high.
An instance of this was the 111 per cent increase in natural rubber prices to US$2.87 (RM9.59) a kg last month compared with US$1.36 (RM4.54) in December 2008.
On another note, the three producers have invited Vietnam, the world's fourth largest natural rubber producer, to join the grouping and the International Rubber Consortium Ltd.
The move will strengthen cooperation among the world's natural rubber producers by increasing production and exports to 84 per cent and 93 per cent from 70 per cent and 76 per cent respectively.
At the meeting, Thailand was represented by its Deputy Agriculture and Cooperative Minister Supachai Phosu, and Indonesia by its Agriculture Vice-Minister Dr Bayu Krishnamurthi.
(Source: irco.biz)
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