Natural Rubber Prices Fall, but Latex Quotations Hold Steady

Rubber prices dropped by 6.1% this week, primarily due to Chinese investment groups liquidating their long futures positions. This type of activity will continue to generate market volatility. Latex prices, however, showed greater resilience, with only a 1.2% variation.

Other variables also exerted downward pressure, and while high prices are still expected, the upward trend observed in December is likely to slow. China's economic data for November fell short of expectations, and the dollar appreciated following a Federal Reserve announcement forecasting fewer rate cuts in 2025. Additionally, a week of limited rainfall allowed water levels to recede in producer countries.

Precios caucho | U$S/100Kg

Funds Unwind Positions in China

JThe Japan Exchange Group estimates that Chinese commodity funds have liquidated over 60% of their long positions from a week ago (a long position is a bet on price increases through futures contracts), resulting in a drop in both current and future prices.

Relief as Rainfall Subsides

While some areas remain affected, flooding in Thailand, Vietnam, and Malaysia has eased, with only scattered rainfall reported last week. This has led to a slight recovery in supply and a downward correction in natural rubber prices.

Price Growth Outlook for 2025

The World Bank projects a 3% increase in natural rubber prices over the next two years. Although modest, this growth is significant given the substantial price increases seen throughout 2024.

The report warns that the biggest risks are on the downside, especially if an oversupply of automobiles in China forces a reduction in production.

Federal Reserve (FED) Cut Rates, but the Impact Was Unexpected

The FED reduced its benchmark interest rate by 0.25%, bringing it to a range of 4.25%-4.50%. This typically weakens the dollar and boosts commodity prices.

However, the opposite occurred, with the dollar appreciating by 1.5% against other currencies. This was because the rate cut had already been priced in by the market, which instead focused on another detail: the FED now forecasts only two additional rate cuts next year, fewer than previously anticipated. While the Federal Reserve cannot make political statements, the expectation of an expansionary fiscal policy under Trump appears to be making the FED more cautious about cutting rates further.