Rubber:Stop The Export of Raw Unprocessed (Cup-lump) Rubber but PROTECT Farmers’ Right to Fair Price!

By Ambulah Mamey, International Agricultural Development Practitioner

USA-Senator Nyan Twanyen’s first major argument on the floor of the Liberian Senate is peripheral, lacks depth, and is not grounded in material evidence. He is repeating the usual sentiments that have not helped but kept the rubber sector underdeveloped.

The Senator’s statement that a price board violates Part-II Section-5 of the Competition Act of 2016 is either a misunderstanding or a deliberate misinterpretation of the act. The Competition Act prohibits conspiring to fix or control prices; it does not prohibit legal price regulation, which is the role of the proposed Rubber Board. For example, the Act prohibits rice importers conspiring with authorities to set high prices or rubber exporters conspiring to set lower prices to cheat consumers and farmers, respectively.

Contrary to the senator’s misunderstanding, price boards in commodity trade regulate prices to protect traders, not to conspire against them. Effective price boards include representatives from every actor along the commodity chain—from farm gate to ship docket—making conspiracies impossible. This participatory and transparent structure, which allows everyone (farmers, brokers, processors, and other traders) in the rubber industry to know the price of rubber at any given time, is what we advocate. Sadly, it is this structure that brokers oppose because they do not want farmers to be regularly aware of the price and changes in the price of rubber during different times of sale. The current rubber market regime the brokers want to maintain is technically not a free market regime because of acute information asymmetry. Farmers know little about the market price of rubber at the time they sell to brokers and processors, leaving them at the mercy of the brokers and owners of processing factories who have all the information. This is not a free market!

The insinuation that rubber factories (processors of Technically Specified Rubber) in Liberia do not have the capacity to buy the quantity of rubber that farmers are producing, consequently leaving farmers’ rubber unsold because brokers are banned from buying rubber, is incorrect. As of February 2024, Liberia’s four active rubber processing factories had a combined capacity to process 254,000 tons of raw rubber annually, while farmers produced only 185,000 tons. This means the factories can buy all the rubber produced in Liberia and still need 35% more to meet their capacity. Also, brokers are allowed to buy rubber from farmers and sell it to processing companies. The Executive Order states that no one, including processors and brokers, should export raw unprocessed rubber. It did not say brokers should not buy rubber.

I offer here an example of the rice and petroleum markets in Liberia to demonstrate and simplify how the rubber market would operate under the proposed price board. Rice and petroleum importers sell to distributors, who sell to wholesalers, then to retailers, and finally to consumers. The entire process is regulated, ensuring transparency and profit for everyone along the chain. This model is proposed for rubber: farmers will sell raw rubber (cum-lump) to brokers, brokers sell to factories, factories use the raw rubber to manufacture TSR (Technically Specified Rubber) and sell.

Further, the argument that the term “processing” or “adding value” is being misused shows a lack of understanding. The price for one ton of TSR is higher than one ton of raw rubber because of the value-added during processing. The attempt to discredit hundreds of millions invested in rubber manufacturing companies as “putting acid on rubber” is disingenuous. Even if proponents of such a statement do not know that the price difference between cup lump and TSR is the value added, can they not see the massive factories built by these rubber processing companies to know value is being added? This political rhetoric, “I am standing with the poor farmers against the big corporations,” may sound sweet to the ears but does not address the fundamental issues of fair prices for farmers, additional jobs for Liberians, additional tax revenue for the government, more foreign exchange for the CBL, reduction in inflation, and economic development in Liberia. All these are anchored on the new idea of prioritizing and supporting local manufacturing over the old idea of exporting raw materials.

Rubber farmers and brokers in Liberia deserve fair and better prices and profits. Exporting unprocessed rubber provides quick profit but denies Liberians jobs, higher tax revenue, and more foreign exchange. Processing rubber before export creates more jobs, higher tax revenue, more foreign exchange, and potentially reduced inflation. The solution, therefore, is not to export raw unprocessed (cup lump) rubber but to protect farmers’ interests through a price regulation mechanism that includes the representatives of farmers, thereby removing the chronic information asymmetry that keeps rubber price information in the hands of brokers and rubber processing factories to the disadvantage of farmers.