The price of rubber with dry rubber content (KKK) 100% in South Sumatera dropped to Rp13,892 per kilogram (Kg) on Monday (30/3). Rubber factory production was reduced by 35% and is predicted to get worse in March to April due to the Covid-19 pandemic.
Head of Plantation Product Processing and Marketing (P2HP) Department of Plantation of South Sumatra Rudi Arpian said the price of rubber at the beginning of this week was the lowest since the beginning of the year.
Based on the records of the South Sumatra Plantation Office, the lowest rubber price in the January period fell on the 29th at the level of 14,950 per kg and the February period on the 18th was Rp13,915 per kg. Meanwhile, the highest rubber price since the beginning of the year occurred on January 7 at Rp17,497 per Kg, Rp15,634 per kg on February 28 and on March 23, reaching Rp15,950 per kg.
According to Rudi, the supply of rubber from farmers to factory has begun to diminish. Farmers began to worry that factories would close because many factories in Bengkulu, Jambi and West Sumatra had closed.
The Plantation Office noted the production of rubber factories began to fall by around five per cent. While rubber supply from farmers to factories reached 15% compared to last February. He said so that the factory can still produce the South Sumatra Provincial Government appealed for entrepreneurs to make efficiency and cut production costs.
Rudi was also worried that Palembang had begun to apply quarantine or semi-quarantine like other regions because it would have an impact on the closure of rubber factories. Affected by the closure of the factory are farmers and farm labourers and labour in the factory.
Rubber farmers are urged to prepare mentally to survive in this challenging situation. The government will prepare direct assistance both from the Social Service through the existing social safety net in addition to the reallocation of Rp100 billion APBD and the state budget that is being compiled at this time, said Rudi.
Separately, Chairman of the Indonesian Rubber Association of Entrepreneurs (Gapkindo) in South Sumatra, Alex K Eddy noted a decline in rubber production by 35% or by 27,545 tons from January compared to last February.
Rubber production was 78,136 tons in January, while in February it was 50,591 tons. However, the amount exported in February was only 48,770 tons, while the local market absorbed the rest. This amount, said Eddy, fell by almost half of the average rubber exports under normal conditions.
In annual terms, the production also declined. Noted, January 2019 production was 78,000 tons, February 2019 amounted to 76,800 tons, and March 2019 was 75,000 tons.
On the other hand, the increase in the exchange rate of the US dollar against the rupiah last week was quite helpful for the purchase price of farmers. Nevertheless, production costs have not been too influential. Even though the purchase price for farmers has increased, export demand is still weak, and supply from farmers has decreased.
According to Alex, the demand for rubber exports is getting weaker because Europe and the US have set an emergency related to Covid-19. It hit hard their economic activities which impacted the tire industry. The coming months will be increasingly difficult and will greatly impact the absorption of Indonesian rubber. ***
CNN Indonesia, 31/03/2020