By Diogo Esperante : 

The recovery in prices, the import tax hikes, the Government’s anti-cyclical policies to protect its farmers from downtrend cycles, the important role of ABRABOR that is preparing a Master Plan to take the country’s NR plantation industry to a next level etc have enthused the Brazilian farmers and regained their confidence in production and investments.

The international price trajectory showed a slight downturn in the last 10 days of February 2017. This phenomenon seems to have been supported by a “profit-taking” movement — natural after the 70% surge in international prices that took the market by storm during the period from October 2016 to February 2017. March started out on recovery path quoting TSR-20 at USD 2.15 per kg. The support seems to be around USD 2.00.
This support level has been considered to be increasingly solid by a good number of analysts. Data published by the ANRPC points to a favourable situation both in fundamental (supply and demand) and non-fundamental factors (specially over oil price and grater flow of speculative capital on commodities in general).
Regarding fundamental factors, supply continues to be depressed not only as an effect of the January floods in Thailand (responsible for an estimated 300k tons of shortage) but also for the negative impact of non-tapped areas over January 2017. According to the ANRPC report, in Thailand these non-tapped areas sum up to 100k ha and in India represent about 25% of all productive rubber lands. Local authorities claim that prices are still not attractive enough and so farmers are still hesitant to resume activity.
On the other hand, the Asian demand is impressive. Countries like Thailand, Indonesia and Sri-Lanka had an average 12% hike during 2016 on their consumption figures and a remarkable – 6 per cent on their average exporting volumes. That means that these countries might be doing their part with regard to exporting less commodities and more industrialized goods in the near future.
Import-dependent countries better watch out and take care of their Rubber Producing Master Plans or “Brace for the Impact” on their Balance of Trades!
Brazil being one of the 10 biggest NR consumers in the world (with about 400k tons per year) has around 60% of all its NR consumption from imports. The rest is produced locally mainly in the São Paulo State, a SALB-free area.
Thailand and Indonesia being responsible for more than 70% of all rubber imported by Brazil, the word is out: Unless the Brazilians take measures now to seize the opportunity of increasing local production and diversifying imports, in a couple of years it might be too little too late.

Encouraging developments

The timing couldn’t be better. With the recovery in prices (even with the downtrend in local currency that reached an average of R$ 3.10 – USD^BRL) in the beginning of 2017, price came closer to an attractive band for production and investments.
The confidence of farmers is slowly coming back. The effects of import tax hikes (that went from 4 per cent to 14% in October 2016) are decisive.
For the first time in a long time, the country´s Government presented anti-cyclical policies with a clear message:
Brazil needs to expand its production
and the country is willing to protect its farmers from downtrend cycles when necessary.
We need to acknowledge the important role of ABRABOR (National Association of Natural Rubber Producers) that defended the urgency along with the Brazilian authorities and is preparing a Master Plan to take the country’s NR plantation Industry to a next level.
These are enthusiastic times to be living in the Brazilian NR market although we know forecasts are often like bikinis (showing what is important and hiding what is fundamental).
To that effect, good planning and responsible management are essential!