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Rubber farmers switch crops as incomes drop

The Indonesian Tire Producers Association (APBI) has called on the government to promote the development of a rubber-based fuel to revive rubber demand and boost prices, and ultimately to prevent rubber farmers from switching to other crops

The Jakarta Post
Jakarta
Thu, January 23, 2020

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Rubber farmers switch crops as incomes drop

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span>The Indonesian Tire Producers Association (APBI) has called on the government to promote the development of a rubber-based fuel to revive rubber demand and boost prices, and ultimately to prevent rubber farmers from switching to other crops.

APBI chairman Aziz Zane said the continued decline in rubber prices because of weak demand from the global market and a plant disease outbreak, has turned rubber plantations economically unviable. As a result, many farmers have abandoned their rubber plantations and turned to other crops that offer better earnings, he added.  

“We are afraid that the rubber [plantations] will be gone,” Aziz said on the sidelines of a focus group discussion on the development of a rubber-based biofuel in Jakarta on Monday.

Indonesia, the second-largest natural rubber producer in the world, is struggling to develop its rubber processing industry and diversify rubber products amid a fall in global commodity prices due to a decline in demand. Efforts to increase demand in the domestic market have not gone as planned. Local tire manufacturers remain the largest buyers of rubber in the local market.

Out of Indonesia’s total rubber production of 3.55 million tons last year, only about 17 percent or 600,000 tons were sold in the local market. About 75 percent or 450,000 tons were bought by tire producers.

“The tire industry needs rubber. Moreover, Indonesian rubber has the best quality,” Aziz said.

As of July last year, a plant disease outbreak caused by the Pestalotiopsis sp fungus hit 320,000 hectares of rubber plantation in six provinces, namely North Sumatra, South Sumatra, Bangka Belitung, West Kalimantan, Central Kalimantan and East Kalimantan, according to former coordinating economic minister Darmin Nasution as quoted by kompas.com.

Last year, rubber prices plunged to US$1.21 per kilogram from $5 per kg in 2011, according to Riset Perkebunan Nusantara researcher Didiek Hadjar Goenadi. However, it was expected to pick up to $1.40 per kg this year.

He added that prices continued to decline because of an increase in supply from new producers such as Vietnam, Cambodia, Laos and Myanmar. At present, Thailand is the largest producer of rubber, followed by Indonesia and Malaysia.

“With falling rubber prices, it is very likely that people switch to palm oil by converting their land,” Pingkan Audrine from the Center for Indonesian Policy Studies told The Jakarta Post separately.

She added that trees in the country’s rubber plantations aged between 20 and 25 years on average produced poor quality rubber, with a low yield rate. Many farmers found it hard to replace old trees as the cost was high.

Total rubber production in 2019 is estimated to fall to 3.54 million tons from 3.68 million tons in 2017, data from the Indonesian Rubber Producers Association showed. It is expected to further decline because of the plant disease outbreak and a reduction in plantation areas.

To help farmers maintain their gains from the industry, APBI is calling on the government to develop a rubber-based biofuel. Aziz said the association was planning to send a letter to the Agency for the Assessment and Application of Technology, requesting support for research and development.

Rubber can be a raw material for biofuel as rubber seeds are made of 43 percent oil, according to Bandung Institute of Technology lecturer Tatang Hermas Soerawidjaja.

He went on to say that rubber seeds could be turned into hydrocarbon biofuel through a conversion process called catalytic cracking. He also said that a process called pyrolytic depolymerization could also be used to produce biofuel out of rubber seeds.

A rubber-based biofuel industry is expected to procure between 1 million and 2 million tons of the total annual rubber production capacity of 3.55 million tons, Aziz told reporters.

According to the Indonesian Chamber of Commerce and Industry (Kadin), a 1-ha rubber plantation is estimated to have an annual production capacity of 5,050 kg rubber latex, which translates into 1,000 liters of oil.

“The potential is very high, as we will use biofuel going forward,” said Johnny Darmawan, Kadin vice chairman for industrial affairs. “It appears that rubber has many benefits.”

Based on Presidential Decree No. 5/2006, the government is pushing for the use of biofuel to reach 5 percent of the total primary energy mix in 2025.

The production of rubber-based biofuel would not fully solve the problem because its use would have little impact on the decline in exports, according to Institute for Development of Economics and Finance researcher Andry Satrio. (dfr)

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