September 10, 2012

Brazil Launches Programs to Increase Rubber Production

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Even though Brazil was the original source of the world's rubber production in the late 1800s and early 1900s, Brazil currently produces only about 30% of the rubber it consumes domestically. The three leading producing countries in the world today are Malaysia, Thailand, and Indonesia.

In Brazil today, there are slightly more than 100,000 hectares of rubber trees and if Brazil wanted to become self-sufficient in rubber production by the year 2030, the country would need at least 800,000 hectares of rubber trees. According to IBGE, the three leading rubber producing states in Brazil are Sao Paulo with 131,000 tons produced in 2010 on 51,000 hectares followed by Bahia with 32,000 tons on 31,000 hectares and Mato Grosso with 19,000 tons on 21,000 hectares.

The goal of becoming self-sufficient in rubber production is not only based on economic self-interest, it would also help to achieve environmental and social goals as well. Rubber tree cultivation is low carbon agriculture by nature and in fact, the trees help to sequester large amounts of carbon as well. During the typical lifetime of a rubber tree, which is about 30 years, one hectare of tress would sequester 230 to 575 tons of carbon during that period.

As a way to stimulate more rubber production, the Brazilian government has opened up new lines of credit for increased rubber production especially by small family farmers. The program, which was launched in February, will allow a producer to borrow R$ 15,000 per hectare with a maximum of R$ 80,000 per producer. The loan can be repaid over 20 years with a grace period of 8 years until the first payment is due. The interest rates on the loans are 4% to 4.5%.

In Mato Grosso for example, the goal is to plant 160,000 hectares of rubber trees over the next 15 years, which would propel the state into second position in 15 to 20 years behind Sao Paulo. The program is aimed at small and medium size producers with the goal of helping 30,000 rural families start small scale rubber production. For each one million trees in production (2,000 hectares) the gross receipts would be approximately R$ 1,200,000 per month. Since rubber production is very labor intensive, it is seen as an ideal enterprise for small family farmers with limited land and financial resources.