1. Outlook on Global Supply of Natural Rubber Jom Jacob Senior Economist ANRPC, Kuala Lumpur

2. 2 April, 2009Qingdao International NR Forum2 Structure of the Paper 1.Trends in NR supply during 2003 -08 and Key Observations 2.Review of Supply from each Country and the Anticipated Outlook for 2009 3.Factors determining NR Supply in the Short and Medium Terms a)Trends in New Planting since 2003 and Potential Impact on Supply b)Trends in Replanting since 2003 and Potential Impact on Supply c)Crop Shift from Rubber d)Anticipated Trend in Replanting in the Medium Term 4.Anticipated Trend in Tappable Area 5.Anticipated Trend in Average yield 6.Signals on Global Supply of NR

3. 1. Trends in NR Supply during 2003-08 and Key Observations

4. 2 April, 2009Qingdao International NR Forum4 Relative Share of the ANRPC Region in Global NR Supply during 2008 World Production of NR 9.94 million tonnes

5. 2 April, 2009Qingdao International NR Forum5 NR Production within ANRPC Region (2008)

6. 2 April, 2009Qingdao International NR Forum6 Total Production of NR in ANRPC Region (‘000 tonnes)

7. 2 April, 2009Qingdao International NR Forum7 Annual Growth in Production

8. 2. Review of Supply from each Country and Outlook for 2009

9. 2 April, 2009Qingdao International NR Forum9 NR Supply in Thailand Review up to 2009 Q1 and Outlook for 2009 Tapped area expanded by 108,000 ha during 2005-2008 Marginal decline in average yield from 1736 kg in 2005 to 1711 kg in 2008 Production increased at the average annual rate of 0.9 % during 2005-08 Production was lower by 13.9% during first 2 months in 2009 (compared to the same period 2008) 2009 production is anticipated to decline to 3.075 million tonnes from 3.090 million tonnes in 2008

10. 2 April, 2009Qingdao International NR Forum10 NR Supply in Indonesia Review up to 2009 Q1 and Outlook for 2009 Tapped area expanded by 154,000 ha during 2005-2008 Average yield increased from 862 kg per hectare in 2005 to 1004 kg per hectare in 2008 Production increased at the average annual rate of 8.3 % during 2005-08 Production during 2009 Q1 declined by 3.2% Production during 2009 is anticipated to be at the same level in 2008 in spite of expansion in tapped area by 30,000 ha.

11. 2 April, 2009Qingdao International NR Forum11 NR Supply in Malaysia Review up to 2009 Q1 and Outlook for 2009 Tapped area came down by 201,000 hectare during 2005- 2008 Average yield increased from 990 kg per hectare in 2005 to 1430 kg per hectare in 2008 Production declined at the average annual rate of 1.6 % during 2005-08 Tapped area is anticipated to come down further by 20,000 hectare during 2009. Average yield is expected to improve to 1450 kg/ha in 2009 from 1430 kg/ha in 2008. Production during 2009 is anticipated to come down to 1.023 million tonnes from 1.078 million tonnes in 2008.

12. 2 April, 2009Qingdao International NR Forum12 NR Supply in India Review up to 2009 Q1 and Outlook for 2009 Tapped area expanded by 16,000 hectare during 2005-2008 Average yield improved to 1912 kg/hectare in 2008 from 1727 kg/hectare in 2005. Production increased at 4.5 % during 2005-08 Production declined during 2009 Q1 by 11.2 % Production anticipated to decline during 2009 by 2.7% to 857,000 tonnes from 881,000 tonnes in 2008 Average yield is expected to decline to 1850 kg/hectare

13. 2 April, 2009Qingdao International NR Forum13 NR Supply in Vietnam Review up to 2009 Q1 and Outlook for 2009 Tapped area expanded by 65,000 hectare during 2005-2008 Average yield improved to 1661 kg/hectare in 2008 from 1441 kg/hectare in 2005. Production increased at the average annual rate of 12.2% during 2005-08 Production declined during 2009 Q1 by 1.8 % Production is anticipated to decline during 2009 to 650,000 tonnes from 662,900 tonnes in 2008 Tappable area is expected to come down by 16,700 ha Average yield is expected to improve to 1700 kg/hectare

14. 2 April, 2009Qingdao International NR Forum14 NR Supply in China Review up to 2009 Q1 and Outlook for 2009 Tapped area expanded by 39,000 hectare during 2005-2008 Average yield came down to 1000 kg/hectare in 2008 from 1082 kg/hectare in 2005. Production decreased at the average annual rate of 2.6% during 2005-08 Production is anticipated to increase by 13.7% during 2009 to 580,000 tonnes from 510,000 tonnes in 2008. The increase is return to normal level after the drastic decrease in 2008.

15. 2 April, 2009Qingdao International NR Forum15 YearTapped area (,000 hectare) Yield (kg/ha) Production (‘000 tonnes) Production Growth 20064951128538 20075031168588+ 9.3% 20085101000510- 13.3% 20095041150580+13.7% Production of NR in China

16. 2 April, 2009Qingdao International NR Forum16 NR Supply in Sri Lanka Review up to 2009 Q1 and Outlook for 2009 Tapped area expanded by 3,800 hectare during 2005-2008 Average yield improved to 1360 kg/hectare in 2008 from 1145 kg/hectare in 2005. Production increased at the average annual rate of 8.0% during 2005-08 Production is anticipated to decrease to 126,000 tonnes during 2009 from 129,200 tonnes in 2008 Tappable area is expected to come down by 2,000 hectare Average yield is expected to come down to 1319 kg/hectare

17. 2 April, 2009Qingdao International NR Forum17 Total Mature Area in ANRPC Region (‘000 ha)

18. 2 April, 2009Qingdao International NR Forum18 Trends in Average Annual Yield in ANRPC Region (kg per hectare)

19. 2 April, 2009Qingdao International NR Forum19 3. Factors Determining NR Supply in the Short and Medium Terms

20. 3a. Trends in Newplanting since 2003 and Potential Impact on Supply

21. 2 April, 2009Qingdao International NR Forum21 Trends in Newplanting 2003200420052006200720082009* Thailand15.032.053.1118.8139.940.0NA Indonesia Negligible 17.167.067.319.120.6 Malaysia Negligible 11.0NA India7.010.514.819.320.520.013.0 Vietnam12.013.328.639.534.162.330.0 Sri Lanka0.5 1.01.92.02.13.1 * Anticipated (‘000 ha) NA: Not available

22. 2 April, 2009Qingdao International NR Forum22 Area Newplanted during 2003-08 (‘000 ha) 2003-042005-08Total Thailand49352401 Indonesia0171 Malaysia011 India237598 Vietnam38165203 Sri Lanka178 Other countries*20220240 Total13110011132 *Estimate.

23. 2 April, 2009Qingdao International NR Forum23 Potential Impact of Newly Planted Area on Global NR Supply Cannot exert any significant impact until 2011,due to: Planting was low during 2003-04. So, addition to tappable area during 2009 & 2010 would be low Planting rate high during 2005-08. But, trees planted during 2005-08 cannot yield before 2011, due to gestation lag. Impact on supply during 2012-14 would be marginal; Reasons: Although trees start yielding after the age of 6 years, the yield will be low in the next three years Planting in 2005 was only moderate. Much of the planting had taken place in 2006 and 2007.

24. 2 April, 2009Qingdao International NR Forum24 Expected Yield Profile for the Newplanted Area ‘Plus’ Factors Should have used the best clones available. ‘Minus’ Factors Planting was mainly in non-traditional regions. Entrepreneurs, being new to rubber cultivation, could be unskilled.

25. 2 April, 2009Qingdao International NR Forum25 Expected Output from Area Newplanted during 2005-08 Area newplanted during 2005-08 (‘000 ha) Assumed Yield (kg/ha) Additional Annual Production (‘000 tonnes) Thailand3521800634 Indonesia1711400239 Malaysia11150016 India752000150 Vietnam1651800297 Sri Lanka7140010 Others2201400308 Total100116531654

26. 3b. Trends in Replanting since 2003 and Potential Impact on Supply

27. 2 April, 2009Qingdao International NR Forum27 Trends in Replanting (‘000 ha) 200320042005200620072008*2009* Thailand47.034.050.436.835.231.9NA Indonesia5.0 44.950.040.055.0 Malaysia19.119.420.620.223.120.720.0 India7.47.17.58.48.58.79.0 Vietnam2.74.34.74.67.08.09.0 Sri Lanka1.12.12.54.45.21.03.6 * Anticipated

28. 2 April, 2009Qingdao International NR Forum28 Area Replanted during 2003-08 (‘000 ha) 2003-042005-08Total Thailand81154235 Indonesia10195205 Malaysia39105144 India154257 Vietnam73340 Sri Lanka31720 Others204060 Total175586761

29. 2 April, 2009Qingdao International NR Forum29 Impact of Replanted Area on Global Supply in the Medium Term Out of 761,000 hectare of area replanted during 2003-08, about 77% (or 586,000 hectare) was undertaken from 2005 onwards. Trees in this 586,000 ha cannot yield until 2011 due to the gestation lag. The replanted trees attaining yielding stage in 2010 and 2011 are those planted during 2003 and 2004. But, the rate of replanting was low during 2003 and 2004. This means, addition to yielding area would remain low during 2010 and 2011.

30. 3c. Crop-Shift from Rubber

31. 2 April, 2009Qingdao International NR Forum31 Rubber trees in 442,000 hectare discarded during 2000 -08. Indonesia: 333,000 ha Malaysia: 105,000 ha Vietnam: 3,000 ha Thailand: 1,000 ha The trend still continues in Malaysia. Rubber area in the country is anticipated to come down by 268,000 ha by 2020. Tappable rubber area came down by 221,000 ha since 2005 in spite of the high rubber prices. A further decline by 73,000 hectare is expected during 2010.

32. 2 April, 2009Qingdao International NR Forum32 Possibility cannot be ruled out for a policy shift in favour of food crops by NR producing countries, in view of the food crisis experienced in the early 2008. This may get further emphasis in view of the decline in rubber prices since mid-2008 and the policy initiative (still in process) by the three major NR producing countries to regulate supply. Increasing shortage of skilled labourers compels farmers to shift to crops having relatively less labour inputs.

33. 3d. Anticipated Trend in Replanting in the Medium Term

34. 2 April, 2009Qingdao International NR Forum34 Postponement of Replanting from 2005-08 High NR prices induce postponement of replanting by 2- 4 years Income loss arising from yield decline (due to ageing) could be compensated by the higher price. Some extent of area that had to be replanted in the past 4 years might have been postponed. The postponed replanting may take place in the current low phase of the price. This can cause a shrinkage in yielding area till the replanted trees start yielding after about 6 years.

35. 2 April, 2009Qingdao International NR Forum35 Cycles in Planting Replanting is largely dependent on age structure of trees Age structure of trees depends on historical planting trends There had been planting booms in the past, largely in responses to cycles in NR prices.

36. 2 April, 2009Qingdao International NR Forum36 (RSS 3 in Kuala Lumpur)

37. 2 April, 2009Qingdao International NR Forum37 Structural Shift in NR Prices From Late 1970s NR price had scaled a peak towards the end of 1970s, after remaining low for a long period. How did farmers respond to that price boom?

38. 2 April, 2009Qingdao International NR Forum38 Thailand - Newplanting

39. 2 April, 2009Qingdao International NR Forum39 Thailand - Replanting

40. 2 April, 2009Qingdao International NR Forum40 Vietnam - Newplanting

41. 2 April, 2009Qingdao International NR Forum41 Sri Lanka - Newplanting

42. 2 April, 2009Qingdao International NR Forum42 Sri Lanka - Replanting

43. 2 April, 2009Qingdao International NR Forum43 India Newplanting and Replanting

44. 2 April, 2009Qingdao International NR Forum44 Replanting Boom starting 2010? In response to the price boom from late 1970s, there had been a planting boom starting from 1980 continuing till end of 1980s. Trees planted during that period are expected to attain replanting age from 2010 onwards (Assuming 30 years life span) Shadowing the planting boom from 1980, a corresponding replanting boom is imminent. World rubber plantation industry is at the threshold of a replanting boom?

45. 4. Anticipated Trend in Tappable Area

46. 2 April, 2009Qingdao International NR Forum46 Large extent of existing yielding area is anticipated to enter into the inevitable gestation phase spanning for 6-7 years. 1.001million hectare newplanted and 0.586 million hectare replanted during 2005-08. Even if this much area starts attaining tappable age from 2011 onwards, this would be insufficient to offset the substantial decline in tappable area arising from the anticipated replanting boom. Possibility of shrinkage in yielding area? This is likely to continue until the replanted trees attain tappable age in stages. The trend may go till the end of the next decade.

47. 5. Anticipated Trend in Average Yield

48. 2 April, 2009Qingdao International NR Forum48 Available options for enhancing yield from existing yielding trees have been almost fully exploited, because prices remained high during 2004-08. Further scope for improvement in yield is very limited. The price fall since mid 2008 is likely to exert downward pressure on yield. Further increase in yield could be expected only after 2014 when the area new/replanted during 2005-08 comes in to full yielding stage.

49. 6. Signals on Global Supply of NR

50. 2 April, 2009Qingdao International NR Forum50 Up to 2011 Tappable area is likely to decline, or at most, stagnate at the present level. Decline already seen in 2008 and 2009. Average yield is unlikely to improve. Supply is unlikely to increase until 2011. There is possibility for the supply to decline.

51. 2 April, 2009Qingdao International NR Forum51 Beyond 2011 1.587 million hectare was planted during 2005-08 (1.001million ha new planted and 0.586 million ha replanted). These trees are expected to start attaining maturity. This is a plus factor. An upward shift in average yield is anticipated from 2014 onwards (It depends on price also). This is another plus factor.

52. 2 April, 2009Qingdao International NR Forum52 Beyond 2011 (Contd.) Anticipated replanting boom (shadowing the planting boom during 1980s) and the resultant shrinkage in yielding area are likely to eclipse the above two plus factors. The crop-shift, especially in Malaysia, is another minus factor. The supply beyond 2011 will be determined by the net effect of the two plus factors and the two minus factors.

53. 2 April, 2009Qingdao International NR Forum53 THANK YOU