Vietnam asks Sri Lanka to join in rubber price support as commodities plunge
COLOMBO, Dec 09, 2014 (EconomyNext) – Vietnam has asked Sri Lanka to team up support rubber prices, as commodity prices fell compared to fiat currency with the US Federal Reserve printing less money.
"Eighty percent of our rubber produce is exported and we are largely depending on the world price," Vietnam’s ambassador Pan Kieu Thu was quoted as saying in Colombo during visit of a business delegation to the Ceylon Chamber of Commerce.
"So I thought about, have we ever talked about a common price mechanism, between our two countries."
Vietnam and Sri Lanka are two the largest natural rubber producers in the world. Vietnamese firms have also opened up rubber farms in neighboring Laos.
An 18 member Vietnamese business delegation is currently in Sri Lanka to explore trade and investment opportunities headed by Do Huu Huy, a senior official of the Ministry of Industry and Trade of Vietnam.
Agricultural commodity prices, oil, as well as metal prices are falling as US monetary policy normalizes and the dollar strengthens.
In the 1980s and 1990s during the period of ‘Great Moderation’ commodity prices fell to very low levels and farmers screamed for price support.
Commodity prices started to boom from 2000 when the Greenspan-Bernanke kept interest rates too low and fired the so-called ‘mother of all liquidity bubbles’, which ended in the Great Recession.
Organizations such as the Organization of Petroleum Exporting Countries are also helpless when Fed has better monetary policy and global inflation falls and other producing countries also cannot influence prices.