Forecasting equilibrium quantity and price on the world natural rubber market

Abstract

Natural rubber on the world market has had small increases in demand and big increases in supply. Therefore, demand and supply are imbalanced and this impacts the natural rubber price of the world market causing a decline. This study aimed: (1) to develop de-mand and supply models to predict the world natural rubber quantity using simultaneous equations; (2) to predict all explanatory variables in the demand and supply models using the simple moving average technique; and (3) to estimate the equilibrium quantity and price for world natural rubber during 2017-2026. First, in the demand model, there was a positive relationship of the explanatory variables of world natural rubber production quantity, synthetic rubber price, percentage year of year (%YOY) of gross domestic product (GDP), and the exchange rate, while the negative relationship variable was natural rubber price. In the supply model, the positive relationship variables were natural rubber price, mature area, rainfall, and crude oil price, while the negative relationship variables were world natural rubber stock and urea price. Second, the predicted variables indicated that production, %YOY of GDP, exchange rate, amount of stock, and the mature area tended to gradually increase, while the synthetic rubber price, urea price, rainfall, and crude oil price tended to slowly decrease from 2017 to 2026. Finally, the equilibrium quantity forecast tended to gradually increase from 953.75 to 957.15 thousand tonnes, and the equilibrium price tended to fluctuate and decrease from 169.78 to 162.05 thousand yen from 2017 to 2026. Consequently, this study may be helpful to the governments of the world's important natural rubber producing countries to plan policies to reduce natural rubber production costs and stabilize the natural rubber price in the future, such as by setting suitable areas of world natural rubber plantation in each country, and defining appropriate and sustainable alternative crop areas in each country.