Future Price For Rubber And Palm Oil

[ttthailand]

I see the current price for Rubber at an all time high. How long will this price last ? Is the high price linked to the sell of cars in China and around the world ? With the current price so high everyone ( locally) has been growing rubber for the last two years. Will the supply be so high in 7 years that the price will be forced down ? Is it a wise move to grow rubber knowing the history of the up and down prices ( a few years ago the price was so low people stopped cutting) ??

With regards to Palm Oil, it is used for cooking oil, fuel for your truck, animal feed and many other things. Will the price continue to go up as the world requires more and more oil ? Is the price of Palm Oil more reliable than rubber ?

I currently have palm oil planted and have some more land to grow something. I was thinking perhaps to put in some rubber just in case the rubber prices remained high. I think palm oil will keep going up slowly but who knows for sure...

What are your thoughts ?

[Dakling]

Both rubber and palm oil are tied to the price of oil. Both should continue to trend upwards as the global recovery gains strength. We may never see oil below $100/bbl again for any sustained length of time, unless some new technology emerges to replace it. There may be some future minor reversals if things in the middle east improve significantly (Libya, Yemen, Sudan, etc.) but if these insurrections spread to Saudi there will be a huge upward swing and I wouldn't be surprised to see oil spike to $150/bbl. Rubber and palm oils would follow that trend though at a slower rate.

On the supply side, natural rubber production is not expected to keep up with demand. There is a significant portion of synthetic rubber that could be replaced with natural rubber if there was enough natural rubber available. New areas that can sustain rubber production are being planed with rubber (China, India, Laos, Issan), while some traditional area are replacing it with new crops. The success of palm oil is a contributing factor to this as in some areas (Malaysia and South Thailand and possibly Indonesia), many farmers are choosing to replace rubber with palm oil.

Conventional food crops should also continue to trend upwards as more and more areas that currently grow food crops turn to bio-fuel or rubber or some other higher return crops. My guess is that labour costs will also continue to trend upwards though and it may become more and more difficult to find cheap labour in the mid to long term. It will be interesting to see if migration in Thailand reverses, it could be possible that the urban poor from Issan may begin to return to farming if margins improve.

The 2 things that seem to most directly influence rubber prices are price of oil and tire production. I wouldn't expect to see either of those reverse until the next recession, in 5-10 years.

Granted I don't have a crystal ball up my arse or nothing so your guess is as good as mine.

historical rubber prices

Edited May 2, 2011 by Dakling

[Mosha]

Agree with the above providing the Mayans and the Hopi are wrong. Palm is a quandry. Price was almost 12Bt/kg then they stopped making B5 Bio diesel. Now about 4.5 in Ranong

Edited May 2, 2011 by Mosha

[IsaanAussie]

Agree with the above providing the Mayans and the Hopi are wrong. Palm is a quandry. Price was almost 12Bt/kg then they stopped making B5 Bio diesel. Now about 4.5 in Ranong

This year was the intended launch of B10 compatible pickup trucks. That may now be delayed due to the situation in Japan and late model test programs. However it will happen and the investment in engine technology will have already been made. The question is has the withdrawal of B5 been caused by policy change or refinery technology upgrades? For those in palm oil, I wouldn't panic yet. But I would be following press releases from the motor companies on B10 release dates. Most will know that the small body pickups of Toyota and others is now centred out of Thailand. If engine production moves then the overall production system here is liable to be altered. IMHO too much to loose for Thailand.

[afarang]

The price of natural rubber , is directly linked to the price of oil, from which they make synthetic rubber. But it is always at a discount to synthetic, that is natural rubber is cheaper than synthetic. With the growth of both India and China, I see no possibility of natural rubber prices dropping. Certainly ,there is massive new plantings taking place, but I doubt if they will be the provider of over-production. Especially, if we hit hit or are about to hit, Peak oil. The same goes for Palm oil, world-wide use is ahead of production and most probably will not approach balance for at least 10 years.Also For example, Malaysia is changing from rubber to palm, in a big way. My guess , therefore is that BOTH will boom for many, many years.