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Asian Group Tries to Stem Rubber’s Swoon

Bangkok-Based Group Urges Members Not to Sell After Commodity’s Prices Drop on Signs of Economic Slowdown in China

The Southeast Asian cartel that controls the majority of the world’s rubber production urged its members not to sell the commodity, to help stem a plunge in prices so far this year.

Natural rubber, used to make items from tires to latex gloves, has been under pressure in recent weeks due to increasing signs of a slowdown in China, the world’s biggest buyer of the industrial commodity.

While that is a boon for companies that buy the product, it threatens to cut the incomes of farmers who rely on the rubber crop for their main income, and who have protested in the past when prices have dropped.

Rubber prices have dropped in recent weeks. Above, employees work at a tire factory in China, which is the biggest consumer of the commodity. Reuters

After a weekend meeting, the Bangkok-based International Rubber Consortium, which helps set production and export levels and acts like the OPEC of rubber, stepped in and said prices are now “unreasonably low” given that inventory levels in Thailand, Indonesia and Malaysia already are low and may fall further. Less supply typically helps bolster prices as demand chases fewer stocks.

“[We] would immediately advise respective trade associations in the [three] countries to jointly encourage their members not to offer natural rubber at prevailing low prices,” said the organization, which represents more than two-thirds of the supply of natural rubber.

The statement was a confidence booster, sending global benchmark Tokyo rubber futures up by as much as 3.0% Monday, just days after hitting a 171/2 -month low Thursday. The market is valued at more than $30 billion a year and is the second-largest tropical crop after palm oil. Benchmark futures are traded in Japan and physical trading takes place primarily in Southeast Asia.

A woman taps a rubber tree at a plantation near Kuala Lumpur, Malaysia. Natural rubber prices have been under pressure in recent weeks. Reuters

“Prices have fallen by so much that market sentiment was very negative, so investors just needed a government [authority] to say something,” said Gu Jiong, an analyst at Tokyo-based brokerage Yutaka Shoji Co. 8747.TO +2.66%

Rubber futures on the Tokyo Commodity Exchange are still 17% lower year to date, and the slump this time of the year is especially unusual as prices typically rise now because it is the so-called wintering season when rubber trees shed their leaves and output slows to a trickle.

“The low stock level would be further aggravated in the coming months with wintering expected to be severe in the three producing countries,” the organization added.

It also has said in recent days that it is trying to work with Vietnam, where rubber production is rising fast and presents another potential source of supply that could destabilize prices further.

Telling rubber traders to not sell at current low prices shouldn’t be a challenge as farmers tend to tap the trees less when prices are low. Plus, many rubber farmers in Thailand have already put down tools to join political rallies in the capital against the ruling government, placing a further strain on supply.

In the past, they also have complained about the price of rubber, with the last major protest taking place from late August to early September last year.

The Thai government has in the past few years implemented measures which included buying rubber at above market rates and providing subsidies for replanting, which reduces production in the short term.

Luckchai Kittipol, chief executive of Thai Hua Rubber Public Co., the third-largest natural rubber exporter in Thailand, said his supply of raw material already has fallen by half.

 - The Wall Street Journal

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People’s power decides the fate of a Sri Lankan rubber glove factory

By Quintus Perera

People’s power has made a mighty Sri Lankan corporate entity come on their knees to plead with the people to reopen its factory that manufactures rubber gloves.

At a media briefing held in Colombo this week, Dr Mahesha Ranasoma, Managing Director, Dipped Products PLC, a part of Hayleys Group, manufacturers of rubber gloves, said that they are reaching out to the villagers of Rathupaswala (in Gampaha district) to plead with them to reopen the factory, soliciting the people’s blessings.

The factory was forced to be closed down its operations, due to agitation and protest by the people around the factory in Rathupaswala and consequent to the killing of some protestors, allegedly by the armed forces.

Dr, Ranasoma said that the whole tragedy erupted in July this year, after one resident living near their factory at Rathupaswala got the water in his (resident’s) well tested by the Kadawatha Water Board that reported the water has low pH value and unsuitable for drinking purposes. He said that around another 3 to 4,000 residents also tested the water from their wells.

He contended that there are many sides to this episode, one is the aggrieved residents of Rathupaswala and the other is the large number of people affected due to the closure of the factory, the loss of foreign exchange to the country, the company’s dwindling revenue and the prolonged closure of the factory which would dry off the demand for their products.

On the other hand he said that all these issues were uncalled for as all the subsequent reports by competent authorities have shown that the pH value in the water around the factory is not affected by the factory effluents.

What the independent reports, say Dr Ranasoma said is that the Government Analyst on 13 August has concluded that the analysis shows that low pH in the neighbourhood wells cannot be due to factory effluent. The Central Environmental Authority on 30 August, he said has indicated that it is not possible to establish that treated effluent of the factory has influenced low pH in wells. Despite the negative conclusions arrived at by the Kadawatha Water Board earlier, the main Water Board has concluded on 30 August that there is no clear evidence to show that the low pH of the area is due to factory effluent.

Yet, media personnel persistently queried that if the factory effluent has not affected the pH value of the water, why isn’t the factory being reopened. Dr Ranasoma did not give a direct answer but repeatedly said that they are now seeking the blessings of the people around the factory to be reopened. But, he regretfully conceded that people do not want any solution other than the removal of the factory completely out of the locality. Dr. Ranasoma said that if the people so desired even at a great cost they are prepared to remove the factory effluent in bowsers to the Biyagama FTZ treatment plant and would be very transparent where the villagers can oversee the process.
When media people asked whether DPL provides pipe borne water to the affected residents free of charge as a part of the company’s corporate social responsibility, Dr Ranasoma said that they would be able to provide pipe borne water to a few poor residents close to the factory, but he said that anybody getting pipe borne water connection should have to pay the initial connection fee.

Dr. Ranasoma’s humble plea was that DPL’s global market build tirelessly over 36 years is declining by the day and if the closure persisted the entire demand would dry off. He said that per month the loss of revenue was calculated at Rs. 3 million and already for the last three months the amount would have been spiraled to Rs. 1 billion. He pleaded with the media to carry this message to the people of Rathupaswala.

He said that since the factory is closed for four months, their customers are compelled to seek supplies from Malaysia, China, Indonesia and Thailand. He thus pleaded in earnest to just allow them to continue the factory for a period of six months, until they move to a different location, at an enormous cost. He termed the closure of the factory as a national economic disaster.

To another query by a journalist, whether DPL was invited to Malaysia to set up their factory, Mohan Pandithage, Chairman/CO, Hayleys Group said “Yes”. He said that in Malaysia everything is ready and all what they have to do is just “plug-in” and they can commence production. He said that they do not accept this invitation due to sheer patriotism as having the factory in Sri Lanka would benefit the people and the country.

This is one rare case in Sri Lanka where the might of the state and other powers have been subject to people’s rights.

There are several other such incidents that still await justice including the alleged killing of a worker at the Katunayake FTZ and the alleged killing of a fisherman in Chilaw at a fishermen’s protest campaign. In fact in one case such people’s rights were snubbed when the then Police chief responsible for quelling the workers struggle at KFTZ by force in which one died, promoted and posted as ambassador to a foreign country.

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Sri Lanka intends to make rubber $3B industry

Sri Lanka intends to grow the value of its rubber industry to $3 billion from $1.2 billion.

Sudharma Karunaratne, secretary to the Sri Lankan Ministry of Plantation Industries

Sudharma Karunaratne, secretary to the Ministry of Plantation Industries, made that pledge at a meeting of the Association of Natural Rubber Producing Countries.

She said the country’s plan to do so is being prepared with the Asian Development Bank. Sri Lanka’s industry has a workforce of 200,000, with the rubber-growing sector dominated by smallholders, Ms. Karunaratne said.

She added that Sri Lanka has become a source of solid rubber tires for much of Asia.

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PA hits back at Union’s Statement

The apex representative body of Sri Lanka’s plantation industry, Planters’ Association of Ceylon (PA), last week vehemently condemned the statement made by Ceylon Planters’ Society (CPS) newly elected President, Suresh Navaratnam that the government should intervene and take over Regional Plantation Companies (RPC) that were underperforming or underutilized.

Claiming that the assertion made by the CPS President were irresponsible, Secretary General of the PA, Malin Goonetilleke said that Navaratnam, who is not a working planter himself at present, is not adequately conversant with issues facing the respective industry.

“We disagree with certain comments made by Navaratnam. If these companies are underperforming or mismanaged, as opposed to calling on the government to take over, the best thing CPS could do is delegating experts to look into the issue and thereby assisting the company to better itself,” Goonetilleke told The Nation Gain in an interview.

According to him, the private sector of the country has spent more rupees on enhancing their estates in contrast to the government in last couple of years. “If the government decides to acquire estates that are under the RPCs and improve them by replanting or introducing technology, etc. there is a cost involved, and that will have to be borne by the government,” he pointed out.

Commenting on estates that are under the purview of the government, Goonetilleke remarked that those too aren’t seemingly well-managed or yielding profits, given the EPF, ETF and gratuity payment related issues that have emerged over the years. Indicating some of the problems faced by the industry at the moment, however, PA’s Secretary General said that Sri Lanka’s labor being the most costly in the region is a serious concern. As means of countering the aforesaid issue, however, he said that a wage scheme that is formulated based on the productivity of labor would be ideal and has to be introduced in the ensuing years.

It was reported that Navaratnam had earlier made the comment on RPCs when he addressed the 77th Annual General Meeting of CPS.  The Ceylon Planters’ Society (CPS) was set up in 1936 as the trade union of the planters with D.E. Hamilton as its first Chairman.

- See more at: http://www.nation.lk/edition/biz-news/item/21643-pa-hits-back-at-union%E2%80%99s-statement.html#sthash.yHiqCMYK.dpuf

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6th ANRPC Annual Rubber Conference 2013 on Oct.8 in Sri Lanka

Sri Lanka will host the 6th Annual Rubber Conference of the Association of Natural Rubber Producing Countries (ANRPC) under the patronage of Minister Basil Rajapaksa. on 8th October in Colombo.

Along with the Annual Rubber Conference, the General Assembly and the committee meetings of the ANRPC will also be held in Sri Lanka from 8th to 10th October.

The conference on 8th October with the theme “Sustainable NR Economy: Where Do We Stand?”, will provide an international meeting point and an ideal platform for meaningful interactions and networking among rubber industry players, policy makers, researchers, and commodity analysts across countries.

The ANRPC, an inter-governmental organization comprises of 11 countries – Cambodia, China, India, Indonesia, Malaysia, Papua New Guinea, Philippines, Singapore, Sri Lanka, Thailand and Vietnam. These 11 countries account for about 92 per cent of the global production of natural rubber.

200 private and public sector representatives from Sri Lanka will participate at this annual conference.

Source: http://www.news.lk/news/sri-lanka/7060-6th-anrpc-annual-rubber-conference-2013-on-oct8-in-sri-lanka

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Sri Lanka’s Kotagala plantation to expand rubber cultivation to Cambodia

Aug 16, Colombo: Sri Lanka’s Kotagala Plantation which belongs to Lankem Ceylon PLC has planned to expand its rubber cultivations to Cambodia.

The Company is planning to set up a 15,000 hectare rubber plantation there, says Lankem Chairman, A. Rajaratnam.

Kotagala Plantation has identified new investment opportunities in Cambodia in the rubber plantation sector due to limited land available in Sri Lanka for large scale expansion into rubber planting and scarcity of labor.

The planting in Cambodia is expected begin at the latter part of the next financial year and crops are expected approximately within six to seven years.

“The area that finally will be cultivated in Cambodia is nearly four times as large as the company’s cultivations in Sri Lanka and will be key to securing the company’s future financial success”, Rajaratnam mentioned in his review in the company’s annual report.

Required approvals for this investment amounting to Rs.1.575 billion have been obtained from the authorities in Sri Lanka and the Company is expecting to commence planting operations in the year 2013/2014.

Courtesy: http://goo.gl/LnqQVz

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Potential of carbon trading from rubber plantations

By: Dr. N. Yogaratnam

Recently a training workshop was held in Colombo under the auspices of the International Rubber Research and Development Board (IRRDB) to promote the subject of Carbon Trading from rubber plantations among Plantation Companies in Sri Lanka.

For over a decade, evidence has been growing that accumulation of greenhouse gases in the upper atmosphere is leading to changes in climate, particularly in temperature. The average global surface temperature increased by 0.6 ± 0.2 0C over the 20th century and is projected to rise by 0.3 – 2.5 0C in the next 50 years and 1.4 – 5.8 0C in the next century.

Global warming changes the earth’s atmospheric circulation and is linked to changes in patterns of precipitation and the frequency and intensity of extreme climate events. The economic and ecological consequences of global warming will vary by region, but in the tropics, it will likely to threaten production of crops and may even become a major cause of species extinction.

Under the Kyoto protocol of the United Nations Framework convention on climate change, signatory countries must decrease emissions of carbon dioxide to the atmosphere, or increase rates of removal and storage. The Protocol’s Clean Development Mechanism (CDM) allows a country that emits C above agreed-upon limits to purchase C offsets from an entity that uses biological means to absorb or reduce greenhouse emissions. The CDM is currently offered for afforestation and reforestation projects, but it is expected that in the future it will be extended to C sequestration in agricultural soils. Markets for soil and plant C sequestration are also developing outside of the protocol in addition to those promoted by CDM.

The interest in C sequestration and trading as mechanism for both environmental protection and poverty alleviation in developing countries has increased considerably in the last decade. It is anticipated that the CDM could result in enhanced productivity and income as well as local conservation of natural resources in the developing world. This is of relevance to Sri Lanka.

Under a C trading arrangement, natural resource users who adopt and / or reintroduce land management technologies that store additional C in soils and vegetation compared to existing practices would be eligible to receive payments for the C those practices sequester. Two types of payments are anticipated, namely payments for C capture and C Storage.

Rubber-based cropping systems

Rubber based agroforestry involve complex and diversified cropping system that combines the growing of rubber and other agricultural crops in one area. A desirable rubber based cropping system would give a good economic yield while protecting the environment, conserving soil, water and nutrients.

Perennial tree crops as in the case of forest trees, are known to function as natural “Sponges” for absorbing corbondioxide from the atmosphere. Carbon sequestration is achieved through the uptake of carbondioxide from the atmosphere and its conversion into cellulose and organic matter.

The rubber tree Heva brasiliensis was first introduced as a crop for plantation agriculture several years ago from the wilderness of the Amazon Jungles. Hence, one can expect Hevea to behave as a typical tropical rain forest tree that would at least function as efficient as forest trees in C sequestration.

Moreover, technological practices that are known slow down soil C oxidation and increase C fixation and storage are also being adopted in rubber plantations. Such strategies include improved soil and water conservation practices such as leguminous cover cropping, application of organic manure, mulching, inter-cropping etc., which are known to have helped in the increased enrichment of soil organic C by about 30 to 50% from about 1.9% C to 2.39% C in the lower depth of soils and to 2.9 C% in the top soil.

Carbon accumulation within the mature Hevea ecosystem in the early years of maturity comprises mainly the carbon locked up within the mature tree through increase in dry matter accumulation, from within the interrow leguminous cover system and associated litter, decomposing Hevea leaf litter and branch material arising from self pruning and in shed reproductive parts including mature seed and fruit components and within the fertile top soil region. Annual leaf fall which includes falling branches twigs and fruit is estimated to be around 3.7 to 7.7 ton/ha.

Carbon trading

Malaysian estimates indicates that mean annual leaf litter fall for a mature Hevea rubber ecosystem which included falling branches, twigs and fruits to be around 3.7 to 7.7 ton/ha. Some preliminary studies done in Sri Lanka on biomass accumulation and crbon sequestration in rubber plantations from year 1 to year 33 when the trees are due for uprooting, indicates that total biomass accumulated in a tree at the age of 33 years is 1.8 mt which amounts is 963 mt per hectare. This value is made up of biomass accumulated in fruits, leaves and fallen branches and trees uprooted at the end of the trees’ economic life span of 33 years. The amount of Carbon sequestered in one hectare of a 33 year-old stand is 596 mt, the major portion coming from the trunks and branches. The total amount of carbon sequestered in one hectare of rubber plantation made up of tree biomass, latex produced and contribution from leguminous cover crops amount to 680 mt. The possible credit revenue entitlement per hectare at the end of 33 years at the rate of U$ 12 per mt is about U$ 8160 which is approximately equivalent to one million Sri Lankan rupees.

Consideration of additional soil C sequestration in the same land will provide additional financial benefits

These indicate that the economic potential for soil and plant Carbon sequestration and trading in rubber plantation appears to be vast and justifies further exploration.

Although technologies are available for the determination of carbon sequestration in soils and plant samples, development of more simpler, rapid and cost effective systems for both the technical potential to store soil organic carbon ( SOC) and the economic returns to growers who adopt practices that sequester carbon in soils and rubber plants would be an impetus for rubber growers to consider carbon trading business.

Institutional arrangement

The C market system appears to provide ample opportunities for buyers and sellers of C stock as a profit earning business but in practice however, C markets are very complex because they presuppose the existence and integration of many conditions at multiple levels. Prerequisites include the technical capacity to enhance C storage in crop production systems, the capacity for rubber growers and other resource users to collectively adopt and maintain land resource practices that sequester C, the ability for dealers or brokers to monitor C stocks at the field level, the institutional capacity to aggregate C credits at levels large enough for dealers to consider worth while and the financial mechanisms for incentive payment to reach growers. Hence, while C payments may contribute to increasing grower incomes and promoting productivity enhancement practices, they may also expose resource users to additional tension and risks.

Given its reliance on complex global agreements, contractual commitments and possibly subsidy programmes, C trading will not be able to function without government’s firm backing. State’s support will be instrumental in funding technology development and transfer, providing extension services, offering subsidies and incentives, regulating certification processes etc.

Because technical economic and institutional conditions are not yet in place to make C sequestration as a successful business venture, it is more practical for resource limited rubber industry to pursue C sequestration initially as “ long-term pilot projects” in partnership with global carbon trading professionals / ventures.

Ultimately, it will be the synergy of land management practices, measuring and monitoring methods, scaling up procedures and institutional mechanism that will generate and deliver a “marketable product”. Therefore, more applied research and practical experience are needed to better understand the uncertainties entailed in C sequestration and trading and to devise approaches that minimize risks and costs, create efficiencies and promote participation.

(The writer can be contacted at treecrops@gmail.com)

Source: http://goo.gl/42fKBf

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