The Bounce Back
As floods threaten the livelihoods of Thailand’s rubber farmers, the global businesses they supply are turning to surprising new sources of the commodity. By Patrick McGee and John Reed
Praderm Chei Incha points out a waist-high, faint grey line that runs around the interior and exterior walls of his home. The watermark was left by floods that turned his family’s small rubber farm into a lake and prevented them from tapping their trees for a fortnight between December 2016 and January 2017.
“We were stuck in the house, with no income,” says his wife, Ladda Chei Incha. She uses her hand to show how the water levels rose above her hips. She and Praderm moved to the second floor, where they slept and ate their meals for more than two weeks.
Southern Thailand is reliably hot and rainy, and the Chei Incha family’s home province of Nakhon Si Thammarat is prime rubber territory. They are among the approximately 1.7m people in a country of 69m who grow rubber for a living, according to the kingdom’s Rubber Research Institute. Thailand is the world’s largest producer of natural rubber: it made 4.4m tonnes in 2016, according to Picheat Prommoon, a director of the institute.
But farmers say that the weather has become more destructive. In recent years, floods have struck repeatedly. A devastating storm in 2011 inundated industrial areas in central Thailand, disrupted industries including automotive and threatened the capital Bangkok. Farmers have also experienced periodic droughts and heatwaves due to rising temperatures. Such disruption hurts the rubber plants’ yield.
“In the past, the rain wasn’t so heavy like this; it’s unnatural,” says Manus Boon Phat, the president of the local rubber tappers’ association. He shows footage on his mobile phone from when he delivered relief packages to farmers by motorboat during the flooding. “Normally rain used to come in the rainy season. Now it can come anytime.”
As the Chei Inchas tell their story to the Financial Times, an unseasonal April downpour begins, sending everyone scurrying indoors.
The impact of flooding, mudslides, rising temperatures, and other extreme weather events is felt by rubber farmers not only in Thailand, but in Indonesia, Vietnam, and other rubber producing countries too. The loss of productivity trickles down to consumers overseas, as manufacturers of everything from tyres to gloves and condoms suffer shortages.
Rubber supply is fast declining, with some analysts projecting even more serious shortages as soon as the 2030s. The recent Thai flooding, coupled with booming sales for cars, led by China, has reinforced concerns that tyremakers — who consume 70 per cent of the world’s natural rubber — need to diversify their markets and secure their supply chain.
Rubber is not an easy business for suppliers. For most farmers, it is a hand-to-mouth existence. Their livelihoods depend on just a few big companies to sell them seeds as well as on government intervention in the market to influence the price.
The recent increase in floods has added to the difficulties faced by farmers of southern Thailand. When high flood waters linger on a plantation, saplings are the most vulnerable. Bigger trees can survive, but some will stop producing latex, an essential ingredient to make rubber, in its sap, farmers say. “They look OK, but they are dead — unproductive,” says Ms Chei Incha.
Farmers use knives to score the trunks of mature Hevea brasiliensis trees at night and then catch the latex sap in bowls, working from the early hours of the morning. The planters then sell the latex to brokers, who sell it to factories that process and ship it elsewhere in Thailand or overseas. Rubber trees take seven years to mature, and produce latex for about another 19, with the highest yield coming from August to October. The trees are then harvested for lumber that is sold for furniture production.
In the rainy season of 2016-17, the Chei Inchas lost several work days when their farm was underwater, cutting their income from the plot by about 20 per cent.
“This problem is probably going to happen every year,” says Ms Incha. “And after flooding, there are no measures to assist farmers from the government to prevent [more] flooding.” The government only compensates farmers for trees that die.
Thailand is particularly vulnerable to the forces of nature. It is lashed every year by two monsoons, first from the Indian subcontinent to the south-west, then later from the Pacific to the north-west. But has Thailand’s rubber industry played a role in contributing to its problems and the disruptions in global supply chains?
Forests have been vanishing at an alarming rate across south-east Asia, which produces the bulk of the world’s natural rubber. Climate scientists and environmentalists are clear that deforestation contributes to climate change, and blame recent flooding on higher temperatures.
When the rains do come, forest cover is better able to absorb the torrents than cultivated land, like rubber farms, which turned into swamps during the floods of 2016-17. “When it rains on the forest, the forest absorbs some of that rain, rather than it running off and flooding downstream,” says Chris Lang, an activist with Redd Monitor, an environmentalist website focused on preventing deforestation and greenhouse gas emissions.
In neighbouring Cambodia, Chinese and local companies have been bulldozing significant areas of forest, with the consent of the Cambodian government, to plant rubber trees or oil palms on a commercial scale. The brown haze that early this year cloaked Bangkok and Chiang Mai, a large city in northern Thailand, forcing citizens to don surgical masks, was blamed in part on massive fires on cleared land upwind over the Cambodian border.
The rubber industry is no newcomer to the region. Rubber plants, which originate in South America, have grown in south-east Asia for more than a century. However, the area under cultivation continues to expand. In Thailand, rubber farming has moved beyond its traditional home in the country’s warm south and east, to the north-east and north, now taking up 3.5m hectares.
Environmentalists are loath to overstate the impact of rubber farming on climate change. Palm oil, a more recent arrival to south-east Asia, is also typically farmed on a large scale as a monoculture, and is seen as a bigger deforestation culprit. Rubber trees are more often planted on smallholdings, and sometimes alongside forest areas or other crops.
“Rubber is better for the environment than oil palm,” says Rudi Syaf, director of the Indonesian non-governmental organisation Warsi, which advocates for the preservation of forests. “It is [usually] not a monoculture; rubber is mixed with other species.”
Other factors have contributed to the severity of Thailand’s floods in recent years, including the way water is managed in the country. Roads raised for flood protection, for example, act as dams when not engineered to include sufficient flooding tunnels, causing water to build up or shift course dangerously.
Thailand’s trading partners are taking notice and demanding environmentally responsible stewardship of the land. The EU, for example, sets standards of everything from labour practices to the use of chemicals on suppliers of rubber and its byproducts, including furniture made from rubber wood.
In 2016, Michelin, one of the world’s largest tyre producers and the largest buyer of rubber, committed to respect a principle of “zero deforestation” for rubber it uses, aimed at protecting primary forests and areas that might be endangered by expanding rubber plantations. Other tyremakers have followed suit. Carmakers, keen to make their image greener, are likely to be supportive too: last year General Motors said it wanted to rely on natural rubber sources “that did not lead to deforestation”.
These efforts will go some way towards protecting the land and the small farmers who live off it — but the tyremakers, who cannot risk disruption, are turning to new means of producing rubber.
It is not easy to diversify when it comes to natural rubber, says Jorge Almeida, head of corporate purchasing at tyremaker Continental: “It’s very concentrated in one specific region of the world that has the right characteristics for the Hevea tree.” This is where a century-old search for other sources of rubber comes in.
Continental, which was founded in 1871 to make rubber horseshoes and bicycle tyres, was involved with synthetic rubber from petroleum byproducts as early as 1910, decades before it was industrialised. Since the second world war, when the US ramped up synthetic production to 70,000 tonnes a month, consumption of synthetic rubber has exceeded that of natural rubber.
But synthetic rubber is not environmentally sustainable because of its inputs and certain products demand a quality that synthetic rubber does not so easily meet. In Continental’s truck tyres, for instance, 30 per cent of the material used is natural rubber; synthetic is 5 per cent.
Another source of natural rubber has been found, however. In the late 1920s, the Soviet Union had become anxious about its dependence on natural rubber, a strategic raw material needed for cars, military vehicles and aircraft. It spent more than two decades looking for alternative sources of latex. Among hundreds of plants the only viable candidate was the humble dandelion — or rather, Taraxacum kok-saghyz, the Russian or Kazakh dandelion whose rubber-making attributes were discovered in the early 1930s in the Tian Shan Mountains of Kazakhstan.
Harvesting dandelions for industrial scale rubber production failed to prove viable then, but in the last decade scientists have rediscovered the idea and tyremakers such as Continental and Michelin have pounced on it.
“From the economic point of view it’s just a brilliant idea to have an alternative source which has different independencies,” says Carla Recker, head of the dandelion project at Continental.
Quality, Ms Recker says, is not an issue with dandelion rubber. In 2014, Continental produced a prototype tyre from dandelion rubber which proved to have comparable performance. “Without proving that, we wouldn’t have gone forward,” she says. Last November, Continental invested €35m into building a new facility devoted to improving dandelion research and testing. (Continental calls its material Taraxagum.)
Another advantage of dandelions, says Ms Recker, is the shorter time to grow and harvest them. “If I go into rubber plantations, up to now I would have to decide for [the next] 30 years [what to do] with my land,” she says. “In the case of Taraxacum, I can decide from just year to year. I can vary the amount I would like to grow and harvest, depending on the economy, for instance… It gives you much more flexibility.” Dandelions also grow across much of the northern hemisphere, compared with the rubber tree’s limited scope.
Still, the economic case is a far way off. A German academic study in 2016 found that up to 62kg of dry rubber could be harvested from one hectare of dandelions. To be economically viable, and to match Hevea production, Ms Recker says Continental would need to improve this by more than 16 times, to 1,000kg per hectare.
Continental’s goal is to have series of production tyres made of dandelion rubber within five to 10 years. By 2030, it hopes that at least 10 per cent of its needs can be met with dandelions growing in Germany. “There’s still a lot of work to be done, many challenges to overcome, but it would be feasible to establish a supply chain based on this rubber,” she says. “We are very optimistic.”
Reporters: Patrick McGee in Germany
John Reed in Thailand
Photography and video: Cory Wright
Editors: Josh Spero and Madison Darbyshire
Picture editor: Alan Knox
Interactive designer: Cleve Jones
Production editor: George Kyriakos
© THE FINANCIAL TIMES LTD 2018