* Rubber market in fourth consecutive year of glut
* Drop in output unlikely to happen overnight
* Farmers switch crops, find other jobs, reduce tapping
By Lewa Pardomuan and Anuradha Raghu
SINGAPORE/KUALA LUMPUR, May 29 A slump in
natural rubber prices to multi-year lows is spurring Southeast
Asian farmers to turn to other crops and tappers to look for
other jobs, potentially chipping away at a chronic supply
Any crop shift won't lead to a rapid drop in output, say
analysts, but along with threats of an El Nino weather pattern
could start to halt production growth as tumbling prices take a
toll on the region's five million-plus rubber farmers.
Output growth in top producer Thailand could halve this
year, while in neighbouring Vietnam, which recently overtook
Malaysia as the world's third-largest producer, farmers have cut
down trees and reduced tapping.
Asia accounts for about 90 percent of the world's natural
rubber output. The tyre-making industry makes up about 60
percent of global rubber consumption, and the commodity is also
used to make gloves and condoms.
"Supplies are increasing at a time when demand is relatively
sluggish," said analyst Abah Ofon at Standard Chartered in
Singapore, who said output would need to fall to have some
impact on prices.
"A 3-5 percent reduction in global supply will be tangible
enough for the market to take note," he added.
Rubber prices have sunk more than 25 percent this year and
hit 4-1/2 year lows on persistent worries about slower economic
growth in main consumer China and oversupply.
Global supply is forecast to exceed demand by 241,000 tonnes
in 2014 for a fourth year of glut, according to the
International Rubber Study Group, which rules out any near-term
rebound in prices.
However, traders said the low prices meant some farmers
would switch to quicker growing palm oil trees, while rubber
yields would falls as trees were neglected and farmers could not
afford to replace old stock.
"The bull may return in 2017 when the market feels the
impact of the low prices as farmers cut back on fertiliser and
trees suffer," said a dealer in Singapore, who trades Indonesian
rubber. "There will be no new planting and farmers will switch
crops for better returns."
Frustrated by the sagging price, farmers in Malaysia and
second-largest producer Indonesia have begun switching to palm
oil or finding jobs in factories and mines, say dealers and
"I have given up on rubber. A lot of other farmers have
started planting other crops like oil palm," said 62-year old
Roslai Hasan, who owns six acres in Malaysia's Selangor state.
It takes six years for rubber trees to mature and produce
latex, while palm trees begin to bear fruit within three years.
"You are now approaching levels where you are having an
impact on production," said Michael Coleman, managing director
of RCMA Asset Management, who helps manage the $140 million
Merchant Commodity Fund in Singapore.
"Clearly at $1,700 FOB (a tonne), which is $1,500 at the
farm gate, that's beginning to affect people in areas where
they've got good employment opportunities elsewhere, and that's
A lack of action by the International Rubber Consortium
(IRCo), which groups Thailand, Indonesia and Malaysia, has also
angered farmers and exporters, but the group appears hamstrung
by a lack of funds and political will.
For many farmers in Indonesia, low rubber prices are
"Now, one kilo of latex gives you 4,000 rupiah ($0.34). The
price of rice keeps rising, and it costs 10,000 rupiah to buy
one kilo," said Hambali Nasution, a 40-year old rubber farmer on
Indonesia's main growing island of Sumatra.
"We have to find other jobs to survive, such as working in
palm oil plantations. I have three children."
(Additional reporting by Samsul Said in KUALA LUMPUR; Editing
by Richard Pullin)