Farmers worried over falling rubber price due to downturn

Farmers worried over falling rubber price due to downturn

Kochi: The fall in natural rubber prices from Rs83 a kg on 15 November to Rs62 in the wake of a worldwide economic downturn and the drop of crude oil prices to $50 (Rs2,500) a barrel has jolted Indian growers who are now expected to hold on to their stock in the hope of better prices later.

The Rubber Board, the government trade promotion body, has also written to the government that a suspension of futures trade in natural rubber should be lifted following a review later this month. Rubber prices had previously zoomed to Rs147 a kg.

Meanwhile, the Association of Natural Rubber Producing Countries, or ANRPC, a quasi-governmental body, is set to meet in Bangkok on 26-28 November to chalk out some strategies. One of the issues is prices being released from Bangkok despite practically no trades happening there. That market, Indian industry experts say, is quoting a price of Rs86 a kg when there were no takers for even lower quality varieties at Rs70.

Sajen Peter, chairman of the Rubber Board, says the low offtake of automobiles and the ongoing decline in crude oil prices have seen rubber prices drop. “It is only natural that India cannot remain isolated, especially when there is a slackening demand in the automobile sector, with the tyre industry consuming a good part of the natural rubber," he says.

The tyre industry, which consumes at least 50% of the roughly 850,000 tonnes of rubber produced annually in India, has not been taking fresh stock. Some of them had contracted imports at Rs130 a kg; those supplies have just started coming in.

Also, the fall in crude prices will prove favourable to the tyre industry which will go in for synthetic rubber manufactured using raw materials such as butadiene, styrene, isoprene, chloroprene, acrylonitrile, ethylene and propylene got as by-products from the petroleum industry.

This, too, has contributed to the drop in natural rubber prices, he adds.

George Valy, president of the Indian Rubber Dealers’ Federation, says there will be some resistance from the growers who are expected to hold on to their stocks for some time. Moreover, tapping of trees for rubber will continue for another 50 days since the tapping season is expected to end by the middle of January.

On the other hand, the sector expects automobile prices to fall in the coming days, which could increase the demand for vehicles, which in turn would raise demand for natural rubber.

After August 2005, when rubber prices were at Rs60 a kg, prices have never dropped to this level, notes Valy.

Peter says he has written to the commerce ministry that the suspension of rubber futures trade, along with soya oil, chana (chickpea) and potato in May and extended through November, should be lifted.

The suspension, he says, has had little impact on the prices, and rubber is perhaps the only commodity fetching farmers the highest price at their doorsteps—of around 93%—unlike other commodities such as fruits or vegetables where the farmers typically only get around 30% of the eventual prices.