In collaboration with the Ministry of Trade of Indonesia, IRCo organised its fifth webinar in 2022, themed “Current Economic Challenges on Sustaining Remunerative and Fair Natural Rubber Prices to Farmers”. The seminar was held physically in the Main Office of the Ministry of Trade of Indonesia, Jakarta, Indonesia, on 23 November 2022.
SGX SICOM Rubber Derivatives
By Kenneth Ng, Singapore Exchange (SGX)
Singapore Exchange (SGX) remains one of the most influential securities and derivatives exchanges in the world, with its largest capitalization (> USD 1 trillion) in Southeast Asia. Among other products, it offers natural rubber futures and options contracts, focusing on TSR20 and RSS3. In 2021, almost 1.7 million NR contracts were cleared at SGX, accounting for 8.5 million tons of natural rubber. Market participants include, but not limited to, consumers/consuming countries (11%), producers (12%), dealers (21%) and proprietary traders (27%). To market participants, this NR derivatives market is an effective hedging tool to manage underlying rubber price exposures and risks; while many consumers buy futures contracts to hedge against possible increases in price, producers may sell NR futures contracts for protection against an unexpected, sharp decline in price. Financial traders, however, may strive to create liquidity and narrow the bid/ask spreads by hedging and trading in either market conditions. In addition to futures, SGX also offers NR put/call options contracts which may be used as alternative means of hedging for NR market participants by paying premiums to buy protection against adverse price movements.
Sustainable Procurement in Agri-Commodities
By Gerald Tan, Agridence
Agridence is a technology company that develops software tools to solve digitalization and sustainability challenges in agri-commodities. Formerly known as HeveaConnect, Agridence was recently rebranded in order to expand into other agri-commodities, with a new governance structure at Agridence Rubber to address the industry call for independence and neutrality, and to work with SGX on the price methodology for physical price discovery.
Digitalizing the rubber value chain begins at the trading platform for physical natural rubber trading, which has gained traction with more than 750,000 metric tonnes traded since 2019, and now counts the world’s top tyre makers, rubber producers and traders as its customers.
Agridence aims to facilitate and integrate traceability and sustainability data into the digital trading platform for sustainable procurement with a suite of products to collect traceability and sustainability data for sellers. These products are a factory data management app and an upstream supply chain traceability app. The factory data management app helps factories to collect quality, traceability and sustainability data, while the upstream supply chain traceability app helps factories to collect the plantation origin of raw material that they purchase, as well as to help conduct farmer outreach or education programmes.
Moving forward, Agridence will pioneer green financing on the trading platform, with a suite of products enabling data to flow from upstream to downstream consumers, and in turn, value provided from financial institutions can be channelled upstream, providing increased benefits to smallholder farmers.
The Future of the NR Economy: Pathways for Sustainable Growth
By Salvatore Pinizzotto, International Rubber Study Group (IRSG)
International Rubber Study Group (IRSG) is the longest-living intergovernmental organisation in rubber, focusing on both natural and synthetic rubber. It was established in 1944 as a forum for discussion and authoritative source of rubber statistics and market intelligence. Nowadays, the IRSG network has grown across the world, with more than 100 industry members representing the whole rubber supply chain: producers, consumers, associations, NGOs, financial institutions, processors, traders and academics. IRSG emphasised its concerns about climate change and its impact on natural rubber systems and the need to implement sustainable agriculture practices to safeguard the natural rubber production. Rubber is a strategic raw material, and it is crucial to effectively build and manage resilience in the industry, looking at natural and synthetic rubber as part of the same ecosystem. Stakeholders in the rubber economy need to develop a roadmap towards sustainability, identifying clear goals, actions and timeline through a more inclusive approach and dialogue. Smallholders are the backbone of the natural rubber sector. Education, Financing and Safety for all, and in particular for women, should be among the priorities for all organisations and companies involved in the rubber industry. IRSG reiterated its position that to achieve sustainable growth it is strategically important to provide to smallholders an income sufficient to sustain their families and implement sustainable agriculture practices. IRSG remains committed to being a platform for discussion among all players and stakeholders in the industry and to making meaningful contributions towards more sustainable natural and synthetic rubber industries.
Global Platform for Sustainable Natural Rubber
By Bani Bains, Global Platform for Sustainable Natural Rubber (GPSNR)
GPSNR was launched in 2018 with a mission to “bring together companies, smallholders, academics and civil society to transform the natural rubber supply chain into a sustainable, equitable and fair one”. At the present, GPSNR has more than 200 members, representing more than 55% of the global NR value chain. These members provide a shared investment pool for 1) capacity building, 2) due diligence and 3) data and knowledge sharing. The future projects of GPSNR include, but not limited to, income diversification through agroforestry. GPSNR pointed out that natural rubber has a complex supply chain with all stakeholders around the world involved. As a collective momentum emerges among players to bring about change towards sustainability, GPSNR holds a strategic position to facilitate this movement in endeavouring to create a sustainable, equitable and fair NR industry for all stakeholders.
On this occasion, IRCo expresses sincere appreciation to the Ministry of Trade of Indonesia, our distinguished speakers and all participants for making this seminar a fruitful and successful event.