Latex prices drop: correction or trend change?

Latex prices have experienced a significant drop in most markets, mirroring the decline in prices of some rubber sub-products, though it’s not yet as evident in TSR-20.

As we had been warning, prices had reached very high levels, so a drop was expected once the worst of the climate crisis in Asia had passed (which is now starting to happen). The question is whether this decline will halt here or continue in the coming weeks.

In the short term, further declines may occur. However, the low level of inventories may limit this drop, meaning prices will likely remain high in historical terms.

Improving weather in Thailand and resumption of production.

After many difficult weeks, the weather is beginning to improve in Thailand. Rainfall is expected to be 10% below the historical average for the coming month, which will bring relief to producers, who have been heavily affected by floods and heavy rains that prevented their activities. Reports indicate a “substantial shift” in short-term outlooks, which could push natural rubber prices lower in the coming weeks.

In contrast, heavy rains persist in Chinese production regions, though the improved conditions in Thailand, the world’s leading producer, dominate the market.

Dollar appreciates: markets seem to lean toward Trump as winner.

Over the past month, the dollar has appreciated by around 3% compared to the average of other currencies. This implies lower commodity prices, including natural rubber, for a simple reason: if the dollar is worth more, all goods measured in dollars are worth less.

Why is the dollar appreciating? Partly, it may be because the market expects Trump to win the November 5 election. A Republican victory could strengthen the dollar due to an expansive fiscal policy (which would delay interest rate cuts by the Federal Reserve) and protectionist measures (which could weaken countries exporting to the United States, who may devalue their currencies to offset this).

However, if part of this effect is already reflected in the market, we could see a greater depreciation if Kamala Harris wins than the appreciation if Trump does.

Key meeting for Chinese policy.

China’s main legislative body will meet next week, and it is expected to approve fiscal stimuli amounting to approximately USD 280 billion to sustain growth momentum. This can have two opposite effects on market sentiment. The confirmation of stimuli could lead to increased investments, boosting financial asset and commodity prices, including natural rubber. However, the opposite effect could occur if the announcements fall short of expectations.