Dec 03, 2009
Latex Prices Rebound In Brazil
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
After a year in which raw rubber prices sank to their lowest levels in four years due to the worldwide economic slowdown, latex prices in Brazil have started to recover. The average price of latex in Brazil is now approximately R$ 1.55 per kilo, which is 45% higher than one year ago. The state of Sao Paulo is the leading rubber producing state in Brazil (responsible for 55% of Brazil's production) and latex prices in the state have also recovered nicely. In northwestern Sao Paulo state in February 2009, latex was selling for R$ 1,300 per ton. Today, the price is R$ 2,500 per ton, which is above the long-term average price for latex.
Producers in Sao Paulo are not only pleased by the resurgence in price, the weather thus far this rainy season has also been conducive for latex production. Latex production usually starts to increase with the onset of the rainy season in October, but the rains started early this year and so to did the flow of latex. This year, the production of latex per tree is running well above the historical average.
In other news concerning rubber production, Grupo Amaggi (the family owned company of Blairo Maggi who is the governor of Mato Grosso) announced in early November that they bought an 80% stake in a 10,000-hectare rubber plantation owned by Michelin in southern Mato Grosso. Michelin initiated the plantation thirty years ago along side highway BR-163 on the southern border of the state. The plantation stretches for 17 kilometers along the highway and contains millions of rubber trees.
Michelin claims that the latex production on the plantation was far inferior to similar plantations in Asia, as well as other plantations in Brazil. They attribute the disappointing production to the distinct dry season in central Brazil. In southern Mato Grosso rainfall is very scarce between early May and late September. Therefore, latex production is sub-par for nearly half of the year. Grupo Amaggi did not disclose the purchase price and it is unclear what their intensions are for the property.
Ironically, one week after agreeing to purchase the property, Governor Maggi announced a statewide program of tax incentives aimed at increasing rubber production in the state. The program, backed by R$ 89 million in state funds, is geared toward helping small family farmers start producing rubber. There are also tax incentives for tire companies to locate new production facilities in the state.