It’s been a while since I last reported about the state of the rubber industry. As I had mentioned we needed to wait about a year until there was a rebound in prices. This is even happening sooner than I expected, so good news. Sure enough, yesterday’s prices for dry latex was KHR 7,500, up from KHR 4,800 at the beginning of the season, but still lower then last year’s high of KHR 10,800.
I believe this is about the level it should stay at, not that I wouldn’t mind higher prices, but those higher prices would surely be the result of another overheating, only to come down hard again. The main component in the recovery of Cambodia’s rubber industry is China, the main buyer of Cambodian crepe rubber, either directly or through Vietnam. China’ s economy is still humming along at an about 8% growth rate. They managed to dampen the effects of the financial crisis much better than Western countries, as many economists point out.
The Cambodian government privatized about 25,000 ha in 2008/9 – the right move in my mind – and I believe investing in a rubber plantation is still something worth considering if people have a mind for it. The total acreage under cultivation in Cambodia is about 85,000 ha. There is still room for a lot more until the planned 130,000 ha are reached; the government’s official target acreage. A lot of the previous state plantations are older trees, which will soon reach their end of productivity. So even if there is no increase in demand any new plantations will partially fill a void left by the end of production of those old trees.
Good land for cultivation is available from private sellers in both Kompong Cham and Kompong Thom provinces, although one might have to search hard. The best chances are in Rattanakiri province. The only drawback there is the access roads. The last 120 km is still a pitted dirt road, which was virtually unnavigable after Ketsana. The government with the help of the Chinese has started building a new paved road but completion won’t be until 2015. So until that time one must expect travel times of about up to 6 hours in the rainy season if you want to go easy on your car, and about 2 hours during the dry season. A good alternative is to use one of the overland coaches and rent a car/truck with driver in Rattanakiri. Believe me the trip is much more comfortable this way.
Prices for arable land alone is about $2,000/ha and once trees have been planted from $3,000/ha up to $15,000/ha depending on the age of the trees. Producing plantations go for about $20,000/ha. If the plantation is managed on ‘lean’ principles the return on investment can be anywhere from 8% to 12%. Prospects will be even better if prices stay at the a. m. level.