By: Vickie Zhao and Grace Ngau

Production◦ Where

Thailand, Indonesia, Malaysia

Most rubber from petroleum and latex in tree

More than ¼ all rubber from latex in trees

◦ Who Farmers

Trade futures contracts on commodities It protects farmers from price drops & and

buyers from price rises EFP

Tires and tubes = largest consumer Household and industrial products Elastic

◦ Textile industry

Latex

Found in trees◦ Used to produce natural rubber◦ Decrease in supply = increase in price = demand

for alternative product (synthetic rubber)

Mainly produces tires; more cars on road, more rubber produced.

Increase in oil = less cars on road.

Even though rubber’s price doubled, even tripled in the past few years, it started dropping these few months.

Solution

Futures Contracts (Hedging): benefit both consumers and producers◦ Consumers: hedge against price increases; buy in

futures market to ensure they will make profit despite changes in the price of rubber

◦ Producers: sell in futures market to hedge against a lower selling price for their rubber. Ensures that drop in prices are alleviated by gains in the futures market.

Exchange for Physicals (EFP)◦ Where a buyer and seller exchange a futures

position for a physical one.◦ Allows players to choose their counter parties

(people involved in the transaction), type of rubber delivered, and time of delivery.

Sessional Trading◦ Fixed single contract price for each contract

month in each session◦ All trading is carried out at a single price when

total amount of selling order and buying orders become equal

◦ Price of the contract is raised or lowered if the volume of selling and buying differs; this continues until both volume of orders are equal

Running Market◦ A market where prices of goods are changing

rapidly in one direction, with very few price changes in the other direction

◦ No major fluctuations in prices◦ Reduces chance of unpredictable changes in the

market that will affect buyers and sellers

International Institute of Synthetic Rubber Producers: Global organization that includes most of the world's synthetic rubber manufacturers. Based in Houston.

International Rubber Study Group: International association of government bodies and other groups involved in the rubber industry. Headquarters in London.

Government policies Growth in industrial production International rubber price movements

"Exchanges in Japan." 2005. OKACHI & CO, LTD. 1 Nov. 2008 <http://www.okachi.co.jp/english/products/index.html>.

"World financial crisis doubling up rubber industry." 14 Oct. 2008. VietNamNet Bridge. 1 Nov. 2008 <http://english.vietnamnet.vn/biz/2008/10/808434/>.

"Information on Rubber". UNCTAD. June, 12, 2007 <http://www.unctad.org/infocomm/anglais/rubber/sitemap.htm>. ( A note about this website, we used many sub sites that were the sub sections of information on rubber.)

"Rubber". Wikimedia Foundation, Inc.. 4 November 2008 <http://en.wikipedia.org/wiki/Rubber>.

"Commodity markets". Wikimedia Foundation, Inc.. 31 October 2008 <http://en.wikipedia.org/wiki/Commodity_market>.

"Rubber Industry Trade Associations". Crain Communications Inc. 2008 <http://www.rubbernews.com/subscriber/hotlinks.html>.