Exports Jan-Aug zoom 10.3% to 3.034 million tons

Natural rubber (NR) production this year in the world’s largest producing country, Thailand, is poised to leap 11.7% to 5.4 million tons, according to an estimate based on the exports up August.  

Thailand which accounted for 34.2% of the world output of NR in 2021, exported 3.034 million tons of NR during Jan-Aug 2022, up 10.3% year-over-year. The shipments up to Aug was composed of 38% TSR (Block rubber), 33% mixture rubber, 15% latex and 10% RSS.  The composition of export during Jan-August 2022 is shown in Table 1 in comparison with the corresponding figures in the previous three years.

Table 1. Composition of the quantity of NR exported from Thailand during Jan-Aug (Thousand tons)

	2019 Jan-Aug	2020 Jan-Aug	2021 Jan-Aug	2022 Jan-Aug
400110 Latex – Dry weight	449	459	459	463
400121 RSS	325	246	327	307
400122 TSR	1,082	660	1,034	1,157
400129 Other primary forms	38	25	32	43
400280 Mixture rubber	742	1,174	817	987
400510 Compound	53	50	70	70
400591 Compound	15	12	8	5
400599 Compound	3	3	3	2
Total	2,706	2,627 (-2.9%)	2,750 (+4.7%)	3,034 (+10.3%)

Expected exports during Sept-Dec 2022

Following a 10.3% annualized increase up to August, how the exports are expected to perform during the remaining four months of the year? The period of four months from September to December is the season of peak production of NR. Even assuming a moderate export performance, Thailand can export at least 1.566 million tonnes of NR during the four months from September to December. This represents only a 5.4% increase from the same period in the year ago (Please bear in mind that the quantity of 1.566 million tons of export over a period of 4 months in the peak production season, is on the lower side. The actual could be higher). Even by assuming such a low quantity of exports during Sep-Dec, the total exports during the full year would be 4.6 million tons, up 8.6% from the previous year (Table 2)

Table 2. Quantity of NR annually exported from 2019 to 2021 and projected export in 2022 (Thousand tons)

	2019	2020	2021	2022
Jan-Aug	2,706	2,627 (+2.9%)	2,750 (+4.7%)	3,034 (+10.3%)
Sep-Dec	1,375	1,264 (-8.0%)	1,486 (+17.5%)	1,566 (+5.4%)
Year Total	4,081	3,892 (-4.6%)	4,236 (+8.8%)	4,600 (+8.6%)

Domestic consumption to increase 19.8% to 840,000 tons

The consumption of NR in Thailand is expected to accelerate during 2022 largely driven by the intake of latex by several greenfield manufacturing facilities for rubber glove and other rubber-based medical products. Moreover, capacity additions have been reported in several existing latex-based manufacturing plants. The new plants and the capacity addition in the earlier-existed plants are expected to raise the domestic consumption of NR in Thailand by around 140,000 tons per annum. In that case, Thailand is likely to consume around 840,000 tons of NR during 2022, up 19.8%.  

Production to jump 11.7% to 5.4 million tons in 2022

Thailand imports NR only negligible quantities. Annual imports come to less than 2,000 tons only as per the trade data reported by the Ministry of Finance. As such, we are not accounting imports in this estimation.

The sum of the quantity exported (X) and the quantity domestically consumed (C) closely match with the quantity produced (P) in a normal year in Thailand. Although the two (i.e., X+C and P) had slightly deviated during the two pandemic years (2020 and 2021), they are closely matching each other if the averages for the past three years are used. This point is evident from below.

Average of X+C for 2019 to 2021:  4.792 million tons (Rounded as 4.8 million)

Average of P for 2019 to 2021:      4.825 million tons (Rounded as 4.8 million)

The point is that X+C (i.e., sum of the quantity exported and the quantity domestically consumed) could be a taken as a reliable estimate of production.  Based on this, the annual production of NR in Thailand during 2022 comes to 5.440 million tons (Export: 4.600 million tons, Consumption: 0.840 million tons).

Table 3 shows the figures of export, consumption and production from 2019 onwards

Table 3. Estimation of production of NR in Thailand during 2022 (Thousand tons)

	2019	2020	2021	2022
Export (X)	4,081	3,892	4,236	4,600
Consumption (C)	774	692	701	840
X+C	4,855	4,584	4,937	5,440
Production (P)	4,851	4,787	4,836	5,400
Growth in production*		-1.3%	+1.0%	+11.7%

As per the above, the production of NR in Thailand during 2022 will be 5.4 million tons, up 11.7%. In absolute terms, the production in 2022 will be 564,000 tons higher than the previous year.

Do ground realities justify a 11.7% jump in production?

The production of NR in Thailand was impacted during 2019 due to the severe floods in the South, and during 2020 and 2021 due to the pandemic-induced fall in the demand and acute shortage of migrant labourers. The cross-border travel restrictions prevented migrant labourers to return to Thailand from neighbouring countries. To be more specific, the 11.7% jump in production should be largely seen as a return to normally following the flood-hit 2019; and the pandemic-hit 2020 and 2021.

If compared with 2018, the expected absolute increase in production in 2022 comes to 427,000 tons only, or a 2.1% average annual growth between 2018 and 2022 which looks realistic (Production in 2018: 4.973 million tons, 2022: 5.400 million tons).

What will be the average yield if production touches 5.4 million tons?

To produce 5.4 million tons from 3.5 million hectares of the existing mature rubber trees in the country, the average annual yield per hectare should be 1,540 kg per hectare. Is the average yield of 1,540 kg per hectare a realistic outlook?

Thailand had three consecutive years of abnormal fall in production. While the production in 2019 was hit by severe floods in the South, the pandemic had impacted the production in 2020 and 2021. Thailand had obtained an average annual yield of 1,495 kg per hectare during 2018 (A normal production year). Compared with the average yield of 1,495 kg obtained in 2018, the average yield of 1,540 kg expected in 2022 represents only an increase of 45 kg over a four-year period which looks realistic (Table 4)

Table 4. Expansion of mature area and increase in average yield between 2018 and 2022

	Mature area (Million hectare)	Average annual yield (kg. per hectare)	Production (Million tons)
2018 Actual	3.327	1,495	4.973
2022 Projected	3.500	1,540	5.400
Increase between 2018 & 2022	0.173	45	0.427

The above point should also take into account that 462,000 hectares of uneconomic rubber trees were discarded in Thailand between 2016 and 2021. To encourage farmers to cut down their low yielding rubber trees and shift to food crops, the Rubber Authority of Thailand (RAOT) offers attractive financial incentives at the rate of around US$3,500 per hectare. The removal of such a large extent of low-yielding rubber trees should be having a noticeable positive impact on the average yield. In other words, the 45 kg of improvement in the average yield over the four-yield period should be seen as an outcome of a developmental intervention by the government.

Will the heavy rains and floods this year hit the production?

Thailand has witnessed heavy rains and floods at several times during this year. The country received 24% above average rainfall between Jan 1 and Sep 25, according to the Thai Meteorological Department. However, this year’s rains and floods have been largely confined to country’s north, northeast and central regions which are less important as far as natural rubber supply is concerned. More than 50% of Thailand’s supply of natural rubber comes from the south. The provinces which are severely hit by this year’s rains and floods represent only less than 20% of the total supply of NR in the country. More specifically, the climate-induced tapping disruptions have been less serious during the current year compared with the earlier years.

What about the output loss arising from fungal leaf disease?

The incidence of fungal leaf disease is less severe in Thailand compared to Indonesia. Only less than 150,000 hectares (Or around 4% of the total mature area in the country) have been infected by the fungal leaf diseases. Unlike the case of Indonesia, the Government of Thailand, through the Rubber Authority of Thailand (RAOT), extended timely support to the farmers to prevent the spread, reduce the intensity of infection and the recurrence of the disease.

Counter points and explanations

Point No.1: The 10.3% jump in exports during Jan-Aug 2022 could be partly contributed by delayed shipments of the previous months. As such, this increase cannot be interpreted as increase in production.

Explanations: Exports had jumped 17.5% in the last 4 months of the previous year (Sep-Dec 2021). Even on comparison with the pre-pandemic period (Sep-Dec 2019), the exports had jumped 8.1% during Sep-Dec 2021. It means, the delayed shipments should have largely been cleared off during the past 4 months of 2021 (Sep-Dec 2021) as is event from the data reported by the Ministry of Finance.

This point can be further validated by subtracting (X+ C) for 2021 from P (Production). If there was a major backlog in 2021, the computed figure would have been a large positive number. Strikingly, the computed value is negative, suggesting that the delayed exports were fully cleared off by Dec 2021.

Point No. 2: The export figures for Jan-Aug 2022 are over-stated. The quantity of exports includes compound rubber (HS 400510, 400591 and 400599) which are not 100% NR.

Explanations: Compound rubber constituted only 2.5% of the total quantity exported during Jan-Aug 2022. The non-NR part of this small quantity does not make any change in the observations made. Moreover, compound rubber is accounted in the export figures of the previous years as well.

Thank you for your keen interest and the patient readding.

Your critical comments and observations can help me in making the arguments more solid. Could you please share your thoughts on the various points presented above.

Thank you.

Jom Jacob

Chief Analyst and Co-founder

WhatNext Rubber Media International

www.whatnextrubber.com