Thailand’s food and Beverage sector grew by 8.46% in the last quarter of 2016, but Indonesian’s rubber farmers fared less well following reports that the Thai government was flooding the market with a further 125,000 tons of rubber stock.
F&B Sector Booming
The F&B sector is thriving in Thailand. By the end of 2016, F&B experienced nearly double the total growth of Thailand’s manufacturing sector. US$26.39 billion of food and beverages were exported last year, with local investment in the F&B sector hitting the $1.78 billion / Rp24 trillion mark. Foreign investment was also significant, with $1.6 billion flooding in from overseas investors.
The impressive growth of the food and beverage sector is in part down to the popularity of coconut beverages overseas. Many consumers are switching to coconut drinks for health reasons, so the beverage has great economic potential. Bottled drinking water has also made a significant contribution to Thailand’s prosperous F&B sector growth; bottled water accounts for 84% of the total value of products.
Investment in F&B Strong
Because of strong demand for beverages at home and abroad, investment in the beverages sector has been strong. Industry Minister AirlanggaHartarto expects beverage products to grow in 2017.
Decline in Global Rubber Prices
The situation for rubber farmers in Indonesia is less positive. Indonesia’s rubber farmers are suffering from the decline in global rubber prices. Indonesian rubber now sells for only Rp 9,000, which is a significant drop on the Rp 12,000 per kilogram it was worth previously.
Thailand Releases Rubber Stock on to Open Market
Indonesian Rubber Council chairman Azis Pane says the drop-in price of Indonesian rubber has been caused by news that the Thai government plans to release a further 125,000 tons of rubber stock. Flooding the global market with such a huge amount of rubber stock has a big effect on global rubber prices, and with Thailand one of the biggest producers of rubber in Southeast Asia, this is bad for smaller producers like Indonesia.
Mr. Pane is calling for government strategies to minimize the effect of price fluctuations on the global market.
Global price fluctuations for producers of raw materials, food and beverages cannot always be avoided, so it is sensible for small businesses to take advice from business and finance experts such as RSM if they are to avoid any cash flow crises that could jeopardize their profitability.
By Andre Jackson