Asrian Hendi Caya
Academist of Unila; Researcher of Pusiban
IT is like rubbing salt into the wound. That is how the condition of rubber farmers today. The price of rubber now is moving because it has plummeted. In the last few months, the prices of rubbers have been around Rp. 3,000-Rp 4,000 per kilogram. In a way, this is the impact of the Covid-19.
This happens because domestic rubber prices are strongly influenced by the global market. Now, the global market is plummeting because of many world rubber market countries such as China, experience lockdowns due to the Covid-19. China is the world’s biggest user of natural rubber with estimation by 40% share. The others are Western Europe, the United States, Southeast Asia, and South Asia.
One of the causes of the depressed world rubber price is due to the existence of new suppliers of natural rubber on global markets, such as Myanmar, Laos, and Cambodia. It means the world’s supply is getting more and more if it is added to the previous world’s main rubber supply from Thailand, Vietnam, India, China, Malaysia, and Indonesia, which dominates the world rubber market by around 85%.
The formation of global market prices is influenced by the International Futures Market. Up to now, SICOM Rubber from Singapore is the influential one along with TOCOM from Tokyo, Japan, and Shanghai Future Exchange. At the same time, the foreign exchange rate also influences, especially the effect of regional currency exchange rates on the US dollar.
Another important factor is the tire industry. The world rubber market is absorbed around 70% by the tire industry. The weakening of the world economy hits the automotive industry as a major user of the tire industry. This is how mutual economic relations between countries and between economic activities relate to each other.
Globalization has integrated the world economy. The economic events in a country, especially that have a major role such as the United States and Thailand, could affect other countries. Lately, the trade war between the economic giants, the United States and China, has become a worrisome.
Another problem is synthetic rubber products made from crude oil. Lately, crude oil prices have dropped dramatically. This will certainly depress the price of natural rubber in the global market, while most of Indonesia’s rubber is exported, reaching around 80%.
The domestic market is also affected by what happening in the world. For example, in Sumatra, some factories in Bengkulu, Jambi, and West Sumatra following by South Sumatra now have been closed. This will increase the burden on rubber farmers. Since the price has dropped, many rubber reservoirs are no longer operated. This difficulty is compounded by unfavorable weather.
High intensity of rainfall makes farmers unable to tap rubber trees optimally. The result of tapping is estimated to be less than 30 kg per day per hectare. It turns out that some rubber farmers are cultivators. Thus, the results obtained are only one third. You can imagine how the condition of the rubber farmers now.
The results obtained by rubber farmers in Lampung seem to be heavier than in South Sumatra. Lampost reported: “In early January 2020, the weekly price of latex has increased from Rp5,500 / kg to Rp7,000 / kg. In February, the price gradually dropped to Rp6,000 / kg. In March, the price dropped again to Rp5,000 / kg. April 2020, prices fell again at Rp4,000/ kilo “.
While the Palembang IDN Times reported: “The selling price of dry rubber in March was the worst during 2020, which was Rp 13,892. In January the lowest was 14,950 and in February the lowest was 13,915,” said the Head of the Management and Marketing Division of the Sumsel Plantation Service, Rudi Arpian on Monday (30/3).
Demand and Supply Approaches
Then, how to find a way out of this problem? It is indeed difficult to influence world market prices because of the many factors in it. However, the efforts to influence can use demand and supply approaches. To improve the prices, the International Tripartite Rubber Council (ITRC) in 2019 (quarters 2 and 3) has agreed to limit the exports. This is intended to suppress the bid.
A large share of rubber for export in Indonesia must certainly have a strategy to expand the market to other countries. Rubber productivity and quality must be improved continuously to get high competitiveness, so both price and quality can compete with others. Enlarge the domestic market by encouraging rubber downstreaming through industrial growth based on rubber raw materials are also important. If the tire factory is still the biggest absorbent, the growth of industries in the future must also be encouraged by the sports and household equipment industry, gloves, footwear, engineering equipment, yarn, etc.
Sumatra is a major producer of rubber in Indonesia. Seven of Indonesia’s ten major rubber producers are in Sumatra. Lampung is among the top ten of it. Therefore, rubber-based industries must be grown in Sumatra, especially with the connection of Sumatra and Java through the highway that is currently being built
Consedering that main producer of rubber is a community of plantations, there must be an effort to develop rubber farmers so the productivity and quality of rubber are high. In the future, farmers must be empowered continuously by applying good cultivation. Considering the unstable price, especially if it has plummeted for a long time, there must be a safety net scheme for rubber farmers in times of crisis such as this due to the Covid-19. Otherwise, there will be a shortcut made by rubber farmers by replacing commodity.
Commodity replacement is very crucial because the rubber requires a long time to produce. Safety nets are expected to help rubber farmers overcome the difficulties of their short-term living needs. Besides, smallholder rubber farmers need to be nurtured to have additional income.
Besides increasing welfare (income), Commodity replacement also will be a safety net when rubber prices plummet or there is a disruption in the producing process. For example, the integration of rubber farming with other crops or livestock or provide special skills that can be utilized for the farmers both men or women and children to use their free time productively.
Financial schemes must be developed to support the sustainability of rubber farming and developing sustainable rubber plantations. The schemes can be fostered through an allowance for export revenues because most of the rubber is exported. The government also can provide special funding in collaboration with financial institutions. The scheme is intended to help farmers get out of the crisis during difficult times, including capitalizing on crop maintenance and even rejuvenation of rubber plants. [PR Team]
