Rubber Production in Indonesia to Miss 2010 Target on Rainfall, Group Says

Natural-rubber output in Indonesia, the world’s second-largest grower, may miss an industry group’s target for this year as heavy rains disrupt tapping, adding to signs that wet weather is hurting commodity production. 

Output may total 2.4 million metric tons in 2010, less than an earlier forecast of 2.6 million, said Suharto Honggokusumo, executive director of the Rubber Association of Indonesia. Production last year was 2.44 million tons, according to the Association of Natural Rubber Producing Countries. 

The missed target may tighten global rubber supplies, helping to support prices that have surged over the past year as demand has rebounded. The government in Indonesia, Southeast Asia’s largest economy, and other industry groups have also blamed the rains for lower output of tin, palm oil and cocoa. 

“Unusual rain and climate change have disrupted tapping,” Honggokusumo said in a phone interview from Jakarta. The rains - - which have been linked to the La Nina weather phenomenon -- started in July, two months earlier than normal, he said.

Rubber in Tokyo has advanced 35 percent over the past year, boosted by demand from China, the largest buyer, and limited supply. The most-active contract gained as much as 1.3 percent to 302.6 yen per kilo ($3,610 a metric ton) today, the highest intraday price since April 30, before ending lower at 293.5 yen. 

‘Supporting Prices’

“Reduced supply from Indonesia may add to tight conditions in the world rubber market, supporting prices,” Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co., said by phone. 

La Ninas bring wetter-than-usual weather to parts of Asia. Tropical rains from the central and west-central Pacific are expected to shift to Indonesia, according to the Maryland-based Climate Prediction Center. Conditions may strengthen and last through the Northern Hemisphere winter, it said last month. 

The shortage of rubber supply will help “prices to remain high,” Honggokusumo said yesterday, declining to provide a specific forecast. “I doubt that it will reach a record because oil prices and exchange rates affect the price.” 

Natural-rubber prices are influenced by crude-oil costs as synthetic rubber, a rival product, is made from naphtha. The futures contract in Tokyo is denominated in yen, and shifts in response to changes in the yen-dollar rate. 

Thailand, the largest producer, Indonesia and Malaysia together account for about 70 percent of global output. Bernard Dompok, Malaysia’s plantation minister, said in July that 2010 rubber output may be 900,000 tons. 

Thai Forecast

Thailand’s Meteorological Department said on Aug. 16 that a La Nina had developed and would probably intensify. Output this year was forecast in January at 3 million tons, according to the Thai Rubber Association. 

Cocoa-bean exports from Sulawesi, Indonesia’s main growing region, dropped for the first time in four months in August on heavy rains, the Indonesian Cocoa Association said on Sept. 6. Indonesia is the largest grower after Ivory Coast and Ghana, and Sulawesi accounts for about 75 percent of total output. 

The Indonesian Palm Oil Association said last month that output may drop by as much as 10 percent this year because of the longer-than-normal rainy season. Tin output may plunge about 20 percent, the energy ministry said Aug. 11. Coal output may be 300 million tons this year, missing a target of 320 million tons, according to the Indonesian Coal Mining Association. 

The La Nina may persist at least into early 2011, Australia’s Bureau of Meteorology said on Sept. 1. Indonesia’s Meteorology, Climatology and Geophysics Agency has forecast increased rainfall in Sumatra, Kalimantan and parts of Sulawesi and Java this month. Source: Bloomberg