COVID19, Natural Rubber, and Fair Trade

It is somewhat unusual for the Fair Rubber Association to get a call from the Financial Times (FT). What was even more unusual was the question: What happens to rubber farmers and tappers when tyre companies and other rubber processing factories shut down? The answer is clear: They lose all income. No buyer, no sale, no pay. The Economist reported on April 4th, 2020: “About a tenth of the Thai population lives on less than USD 2.85 a day. (…) Thailand’s most severe drought in decades has cut production of sugar, rice and rubber.” Thailand is the world’s biggest producer of natural rubber. In addition to the problem outlined, Thailand (like most rubber producing countries) imposed a shut down in response to COVID19 similar to those in the ‘industrial world. Unlike in most ‘industrial countries’ the go­vernments in India, Sri Lanka, Indonesia, Malaysia, Thailand cannot afford relief packages for workers and industries. Shut downs affect Fair Trade supply chains, too: Even buyers like the members of the Fair Rubber Association, who are willing to pay a Fair price, cannot do so if a factory is shut down: The Economist also reported that the world’s biggest condom manufacturer was shut down (despite projections that an increase in births is now projected). The company referred to is an FRA member. The FRA’s work regarding a group of small farmers in Thailand was also affected, they had been hoping to be signed up as a Fair Trade producer supplier: Our Thai colleague reached their home town – but then the meeting had to be cancelled on short notice because of COVID rules. One rubber trader and friend of the FRA described the industry situation as follows: “But increasingly all we are doing is managing delays (…) as customers all over Europe shut down operations. (…) There will be many old companies which will not survive the financial and cash-flow stresses of this, despite government support. We are lucky that so far rubber has been in wintering, but as we start to come out of it during May and the supply pressure builds I can’t imagine what will happen to the price.“ A colleague of his commented somewhat cynically: “The good news about current prices is that there won’t be any deforestation to speak of. The bad news about current prices is that there won’t be many rubber tapper/smallholders left to tap the remaining trees. <Rubber> trees will be cut (…,) land will be reallocated, and global consumption of rubber will continue to rise – as it always does. Then we will have high prices again, which will ignite a new wave of deforestation. Repeat. The only way to break this calamitous cycle is by changing the pricing model for this important raw material.” Which is exactly what the FRA has been advocating for years, and what is more: this is what its members have actively been implementing by paying a Fair Trade premium of EUR 0.50/kg DRC (Dry Rubber Content). Rarely has there been a situation in the rubber world in which there has been such a tremendous need for FAIR trade.