The world market price for natural rubber has increased somewhat over the last months. Instead of ca. USD 1.50/ kg a year ago, it is now at ca. USD 2.50. That’s good news for the producers.
In response we were promptly confronted with the comment: ‘We no longer see a need for a Fair Trade premium’. The remark came from a tyre company, which the Fair Rubber Association (FRA) had approached in an attempt to interest them in FairTrade.

Really ?

A year ago the world market prices did not even cover the costs of production for some producers – but the FRA was told: Your Fair Trade premium of EUR 0,50/kg is far too high.
Today the response is:
Since the prices are above the costs of production – it is impossible for us to pay (even) more. In February 2011 prices for natural rubber exceeded USD 6/kg – and going back in history the highest rubber prices were recorded in 1913: USD 6.74/kg. Eight years later they were at USD 0.26/kg …
But, we are told: 1913 and 2011 were speculation highs!

Indeed. Are things any different today?

In particular small farmers are totally at the mercy of the ‘anonymous’ market, they have zero influence over any of these developments: Whether the price of petroleum (the raw material for synthetic rubber) goes up or down; whether the demand for cars in China fluctuates in line with the global economy; whether governments encourage new rubber plantations (which can contribute to a glut seven years down the line when the trees are ready for tapping) … and in any case: what share of the world market price actually reaches the farmers?
And while some plantation workers (e.g. in India and Sri Lanka) have employment contracts, the plantation owners may struggle in times of low rubber prices to pay for upgrades of worker housing etc.
Furthermore: Why should raw material producers (and farmers) accept that it ‘suffices’ for them to receive a price that just about covers the cost of production? Why should they not have the right to earn a decent margin?
As mentioned, current prices are a bit higher. Has this lead to an increase in tyre prices? Or do the tyre manufacturers have sufficient ‘flexibility’ allowing them to buffer the raw material increase without having to pass it on to their customers? A standard tyre for a passenger car contains approx. 3 kg natural rubber, which represent an increase of USD 3 (ca. EUR 2.80) over the price of a year ago. Compare this with the Fair Trade premium of EUR 1.50/car tyre as per FRA criteria. Why did/does paying such a premium seem impossible?