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The plight and root cause of surging physical rubber prices in Thailand (the world’s largest producer with 31% of global natural rubber output), Malaysia and Indonesia, as well as rubber futures across various exchanges, somewhat echo that of the cocoa industry in the Ivory Coast: persistent underinvestment in the past and thus a continual dependence on aging infrastructure (i.e., rubber-yielding trees planted in the 1980s and thus just beginning to enter the stage of declining yields, per Macquarie, an investment bank) and a stable-to-shrinking supply of agricultural land–is finally translating into increased volatility in quality and yield.  Coupled with ever-changing weather patterns and voracious demand from emerging markets for tires, condoms and gloves–led by China, whose tire consumption according to the FT grew 57% y-o-y for 1H2010 per Pirelli–and prices are likely to stay trending upward.  The cash price in Thailand gained 1.6 percent to 130 baht ($4.40) per kilogram this week, just shy of the record 130.55 baht on April 27th.  Yet “prices may surge above 150 baht by the end of this year as demand remains robust while supply is limited,” said Supachai Phosu, the country’s deputy minister of agriculture and cooperatives.  Chinese demand, by the way, is likely to increase its upward rate of acceleration, if for other reason than the continuation of a government subsidy for fuel-efficient cars and also the enduring prospect of further surprise rate hikes underpinning current consumption.

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