Cambodia's small rubber farmers are hoping a commitment to stabilise prices among rubber producing countries will help curb sliding profits in the sector.
Industry representatives from Thailand, Indonesia, Vietnam, Malaysia, Cambodia and other rubber producing countries met in Malaysia last week to discuss what can be done to stem the fall of rubber prices.
According to an October 15 report from Reuters, the rubber producing nations agreed to urge their members not to sell rubber below $1.50 a kilogram.
Ly Phalla, director general of the Agriculture Ministry’s General Directorate of Rubber, who attended the Malaysia meeting, would not comment directly on a potential floor price yesterday.
“The major reason behind the lower price of rubber at the market is due mainly to oversupply,” he said.
“Once those major rubber producing countries slow down their production, the price will be better.”
Phalla said that industry bodies from rubber producing nations had arrived at an “in principle” agreement that would be formalised at an official signing by the Ministry on December 12.
Many Cambodian rubber farmers are currently facing unprofitable harvests due to declining prices.
Despite export volumes up 29 per cent in the first nine months of the year to 67,500 tonnes, the value of rubber exports have declined by 8 per cent from a year earlier to $113 million.
Leng Kimchheang, a rubber farmer who owns 100 hectares of rubber fields in Mondulkiri province, said that he was selling rubber in his area for 2,500 riel ($0.63) per kilogram.
“It cannot compensate the cost of labour,” he said.
It was necessary to complete the harvest however, Kimchheang said, to ensure that the tree continued to yield rubber in future years.
“I need to force myself to harvest to avoid damaging the tree,” he said.
Oul Kunthy, a rubber farmer with 6 hectares in Tbong Kmum province, sells his produce at 3,900 riel per kilogram, or close to $1,000 per tonne. Still, Kunthy said, at that price it is hard to justify production.
Prices have dropped dramatically he said from about $5,000 per tonne in 2010.
“We cannot survive with the current price, but we don’t know what to do or where to raise our difficulties,” Kunthy explained. “If there is a price mechanism to improve the price to a better level, it will provide us new hope.”
Independent Economist Srey Chanthy warned against applying a rubber floor yesterday.
”I don’t think the market will buy it, because they will have other alternatives and the demand is not there,” Chanthy said.
Chanty said that larger rubber producers had bought up a lot of land in recent years which was contributing to the oversupply in the market and driving down prices.
A fixed sale price above what the market was willing to pay, Chanty said, was likely to drive smallholders out of the business as it would weaken further the demand for rubber.
Only the larger producers, able to maintain lower costs of production would be able to sustain less global demand he said.