Emerging Markets Weekly Blog Post 23/3/2016

While Malaysia might not be in as serious a situation as countries like Brazil and Venezuela, the commodities crash has had a serious impact on it as well. It is oil prices which gain most of the attention in the financial newspapers, but a whole gamut of commodities have been hit over the past couple of years, including rubber. Rubber is one of Malaysia’s most important commodities and prices have plunged in recent times, having a very negative impact on those working in the rubber industry.

Just two years ago, farmgate prices were much higher and four years ago, they were much higher again. Back in early 2014, Malaysian rubber farmers were getting at RM3 per kilo (around $1  a kilo based on excahnge rates then). Recently prices have dropped to as low as RM 1.50 a kilo in peninsular Malaysia and RM 1.30 in Sabah and Sarawak, the two states on the island of Borneo. This is around 35 cents to 40 cents a kilogram, which has had a devastating impact on the small-scale farmers and rubber tappers who make a livelihood off this commodity.

Tappers from Kedah province on the West Coast of Malaysia say that they have seen their incomes plummet over the past two years. Many tappers report that they now survive on a mere RM 100 a month (less than $25) and survive by growing kangkung, a type of edible swamp cabbage which is popularly eaten in the villages of South-East Asia.

Indonesian Rubber Farmers Feel the Pain

Across the Strait of Melaka, growers of rubber are also feeling the pain. The low price of rubber has also become a serious issue in the regency of South Aceh on the island of Sumatra. In South Aceh, growers are currently only fetching Rp 4.000 a kilogram, which is a mere 30 cents. This price does not even provide farmers with an income they can live on, so political pressure is growing for some sort of government relief in that part of Indonesia.

Similar articles have appeared in every major  rubber-growing area of Indonesia. While price volatility is the norm with commodities, rubber prices have now stayed at very depressed levels for over a year, forcing many farmers towards bankruptcy. One often-cited reason for the fall has been Vietnam, which has ramped up production in recent years, creating more competition.Rubber farmers from Pontianak, West Kalimantan, Indonesia complain that prices have now been declining for four years, and poverty has spread in all districts where rubber is the main cash crop. This is just another aspect of a general downturn for emerging markets which too few mainstream news agencies seem interested in reporting.

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A rubber tapper in West Kalimantan

 

 

 

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