Bringing cheer to the nearly a million rubber farmers in Kerala, the price of natural rubber (RSS-4) touched an all-time high of Rs.174 a kg in the Kottayam market and Rs.173 in Kochi on Thursday.
The rubber price, which hit a rock bottom of Rs.25 a kg a decade ago, has been on the march for nearly three years now. Market watchers say the price rally is likely to continue in view of the heavy rain which prevent rubber tapping. The month opened at Rs.168 a kg and it grew steadily to the record price on Thursday. The price of latex too has risen to around Rs.120 a kg from below Rs.100 a month ago.
The mismatch between demand and supply is the main propeller of the price rise. Thanks to the booming automobile industry in India, the demand for tyre has escalated. (Natural rubber is the main raw material in tyre manufacture.) Globally too, the demand for natural rubber is on the rise.
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There is supply stickiness at the international level too. One of the reasons is the political turmoil and the consequent constraints on production and marketing in Thailand, which has emerged as the top producer of rubber. While major producing countries such as Thailand, Indonesia and Malaysia are fast switching over to block rubber, Kerala, which produces more than 90 per cent of India's rubber, is still sticking to sheet rubber which has its own captive market in India.
N. Radhakrishnan, former president of the Cochin Rubber Merchants Association, blames futures trading in rubber for the price escalation. He sees no major reason other than the speculative dealings brought in by the futures trade which began in 2004. “There is no physical delivery of the product,” he told The Hindu . “It is computer-based deal and often 10 to 15 times of the actual production are put on sale.” He thinks that the current price rally will be ultimately harmful to both the rubber industry and farmers. “Only the speculators stand to gain,” he rues.
The growers, expecting better prices in the future, hold back their stock and this creates artificial scarcity, thus leading to the price rise, market sources said. Usually, during the monsoon season, prices rise as there is heavy shortfall in supply because the tapping operation is hampered, they point out.
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However, for now, the farmers are smiling and the Kerala economy, which has relied on rubber and Gulf money for meeting the State's financial needs, is smiling too.