Increasing stability in natural rubber supply chain

Abstract

The natural rubber in the world market has small increase in demand and big increase in supply. Therefore, the demand and supply are imbalance and impact the natural rubber price of the world market to decline. This study is set to (1) to develop demand and supply model for predicting the world natural rubber quantity by using monthly data from 2004 to 2015 with simultaneous equation; (2) to predict all explanatory variables in demand and supply model by using monthly data from 2011 to 2015 with simple moving average technique; and (3) to estimate equilibrium quantity and price in world natural rubber by using demand model, supply model, and predicted explanatory variables.

Firstly, in the demand model, the positive relationship of explanatory variables are world natural rubber production quantity, synthetic rubber price, %YOY of GDP, and exchange rate from Chinese Yuan to Thai Baht, while negative relationship variable is natural rubber price. In the supply model, the positive relationship variables are natural rubber price, size of mature area in Thailand, rainfall in Thailand, and crude oil price, while negative relationship variables are world natural rubber stock and urea price.

Secondly, the predicted variables show that number of production, %YOY of GDP, exchange rate, number of stock and size of mature area in Thailand tend to gradually increase, while synthetic rubber price, urea price, rainfall, and crude oil price tend to slowly decrease from 2017 to 2026.

Finally, the forecasting of equilibrium quantity tends to gradually increase from 953.75 to 957.15 thousand tons, and equilibrium price tend to fluctuate and decrease from 169.78 to 162.05 thousand yens from 2017 to 2026. As a consequence, this study may be helpful to the government of the important natural rubber producing countries to plan the policies for reducing natural rubber production costs and stabilizing natural rubber price in the future, as well as setting the suitable size of world natural rubber plantation in each country.