Sri Lanka rains reduce rubber crops
By Rohan Gunasekera
Dec 29, 2014 11:47 AM GMT+0530 | 0 Comment(s)
EconomyNext - Heavy, unseasonal rains have drastically reduced rubber tapping in Sri Lanka, affecting revenue of listed plantation companies in the December quarter, usually a peak cropping period.
The disruption caused by rain comes on top of a steep fall in prices owing to over-production and high global stocks and the strengthening of the US dollar, the currency in which most commodities are traded.
Industry officials said rain has also affected other top rubber growing countries in East Asia which should eventually reduce global crops and stock levels and lead to a recovery in prices.
"This year we've had more rainy days than dry days," explained Damitha Perera, Director of Forbes & Walkers, a brokerage.
"The rains have had a severe impact. We expect a 30-35 percent drop in crop, perhaps even more in the last two weeks," he told EconomyNext.com.
"December and January are usually peak months for cropping."
With rains expected to continue a drop in rubber crops is expected in January too.
Dan Seevaratnam, Chief Executive Officer of Watawala Plantations, which has six percent of its acreage in rubber, said the unseasonal rains had sharply reduced tapping days.
"Previously, we had 250-260 dry days for tapping. Now we get hardly 150 days a year in rubber growing areas."
Roshan Rajadurai, chairman of the Planters' Association and Managing Director of Kelani Valley and Talawakelle Plantations, said climate change had increased the intensity of rainfall.
"The erratic weather has affected harvesting of rubber in the rain-fed lowlands in the south and south-western regions. Because of climate change, the number of days available for tapping has come down and the rainfall intensify is far more than before."
Perera of Forbes & Walkers said the sharp fall in prices had prompted small farmers to neglect their trees which had also reduced crops.
"Small and medium-scale producers have curtailed operations due to high costs. It's not worthwhile for them to employ people and tap at these price levels of 250-300 rupees a kilo, on average."
Major rubber producers like Malaysia, Thailand and Indonesia have also been hit by floods or farmers have reduced tapping owing to the fall in prices.
"So, eventually, world production will also come down," Perera said. "Even in India farmers are also going to neglect their properties because of the price decline."
This means that prices should recover once excess global stocks are absorbed by industry.
"That'll take some time but then prices should start recovering," said Perera.
"Also, with the United States economy improving, their buying power is improving. The only hitch is that with oil prices down, competition from synthetic rubber is increasing. But natural rubber is essential for certain products."