KUALA LUMPUR: The Malaysian Rubber Board (MRB) is extending the rubber production incentive scheme to support pricing, in view of falling prices.

In a statement today, MRB said the government was concerned over low rubber prices and would continue to ensure smallholders' well-being is taken care of.

The incentive was activated when the average monthly price for the Standard Malaysian Rubber (SMR) 20 Free on Board (FOB) was at RM6.10 per kg or when the farmgate price was at RM2.50 per kg and below.

Some 600,000 rubber smallholders account for about 90 per cent of the natural rubber produced in Malaysia.

“Smallholders can make their claims based on September production from October 1 to 31, 2019,” said MRB.

It also said the average September farmgate prices for cuplump or scrap rubber of RM2.05 per kg, RM1.75 per kg and RM1.95 per kg for the peninsula, Sabah and Sarawak, respectively.

Based on these pricing, cup lump payment to smallholders would be 45 sen per kg for the peninsula, 75 sen per kg for Sabah and 55 sen per kg for Sarawak.

MRB said the continued decline in rubber prices in the world market in early October 2019 was influenced by the negative sentiment in the Chinese market, the world's largest natural rubber consumer.

“A major Chinese merchant company, which imports 1.6 million tonnes of rubber a year from major rubber producing countries, has halted rubber purchases and has also terminated all remaining rubber trade contracts," said MRB.

This situation has affected the world rubber market, including that of Malaysia with the price of Standard Malaysian Rubber (SMR) grade 20 falling to its lowest level in 2019 to RM5.16 a kg on October 4, 2019.

Currently, Malaysia is the fifth largest producer of natural rubber in the world with a total production of 670,000 tonnes, behind big producers Thailand, Indonesia, Vietnam and China.

MRB said Malaysia continued to cooperate with Thailand and Indonesia under the International Tripartite Rubber Council (ITRC) framework to address the prolonged decline in rubber prices through supply management scheme, demand promotion scheme and agreed export tonnage scheme.

SMR grade 20 rubber price rose 9.5 per cent to RM6.21 a kg in the second quarter compared to RM5.67 per kg in the first quarter due to lower rubber supply.

By the third quarter, however, SMR price fell 10 per cent to RM5.59 per kg due to ongoing US-China trade war.

High tariffs slapped by US and China on each others' products had somewhat dampened many countries' performance of their manufacturing sector, and in turn affected global demand for rubber.