87 / 2015-09-14 23:04:08

Transmission of Shianghai Future Exchange price to Thailand natural rubber growers’ market.

Price Transmission,Price volatility,Natural rubber

An examination on price transmission of natural rubber among various market types, i.e., future contract market, export market and grower’s local market, are still undiscovered issues. Price transmission may initiate a positive or negative impact to trade activities between Thailand and China. Natural rubber (NR), a major trade product between Thailand and China, has greatly continuous extents in volume and value. An average growing rate of NR in volume is 14.97% (year 2007 to 2014) account for 56.81% share of total Thai’s NR export.
This study aims to analyze price transmission of NR among future contract market - Shianghai Future Exchange (SHFE), rubber export market in Bangkok, and growers’ local market. The study is conducted in 2 steps: 1) analyze the price transmission between NR export price of Thailand to China, and the monthly reference price of rubber smoked sheet No.3 in the Shianghai Future Exchanges market, and 2) analyze the price transmission between latex purchased prices at local markets of Office of Rubber Replanting aided funds, (ORRAF) and NR export price of Thailand to China.
Overall results present a long term relationship among different natural rubber prices. The results showed that NR prices in the Thailand - China export market equal to 0.827 of the reference price in the futures market in SHFE and also having a retard adjustment in short term (equal to 0.0859 per month). The SHFE price is leading price influence to export price and price transmission margin of this equal to 17.3 %.
Hence, another result illustrates that NR export price of Thailand to China usually greater than growers’ local market price in 12.25%. Both prices swiftly and conversely adjust for new equilibrium within 3 months. NR export price is a leading price to determine the level of growers’ latex price. That is, the growers’ local price is implicitly regulated by SHFE future price through NR export price. However, grower’s local price, NR export price and SHFE future reference price are likely more volatile over time.
Collaboration model between Thailand and China in the NR price stabilization and preparation to cope with volatility price in the future should be initiated. The cooperation may include industry development along the rubber supply chain, particularly focusing on the downstream rubber.