The Hindu Business Line : Moderation in supply of sheet rubber

RUBBER market is not witnessing much fluctuations these days and the prices remain quite remunerative to the growers — around Rs 53 per kg for RSS 4. October to January is the peak production season and normally, rubber should flood the market during this period. But traders and consumers find the arrivals quite moderate. Imports by the tyre sector keeps the prices from rising. The price line does not come down as supply meets the demand, not exceeding by a large margin as in the past.

Mainly four factors can be attributed to the supply moderation in sheet rubber. First is the climatic factor. South-west monsoon was fairly strong in Kerala this year, the major rubber growing State. Close on heels of its conclusion, the north-east monsoon broke in and the rubber-growing tracts have been getting widespread rains.

The rains have forced the growers to skip tapping on majority of the days in the past four months from July to October. From early November, the rains have continued fairly strongly and tapping operations have been disrupted in many areas. Consequently, tapping has been low with some growers talking of 25 per cent decline in the crop.

Then there is the latex diversion factor. More growers are selling the crop as field latex as it has good demand from the latex centrifuging sector. They are able to get for latex a price equivalent to the processed low grade sheet rubber based on dry rubber content, which is economic as the processing expenses are not involved. Consequently, availability of latex for sheet rubber processing has come down.

It is worth noting that supply crunch is noticed only in sheet rubber. Availability of processed latex is quite good and its market is in low key, around Rs 40 per kg (wet weight). However, this is also quite remunerative as its price in dry rubber terms comes to Rs 70 per kg.

Export is the third factor. Exports have not been strong in 2004 as in 2003 as orders on export subsidy have not been issued. The Commerce Minister , Mr Kamal Nath, had announced about two months back that subsidy for export of rubber would continue at half the rate but the orders are still awaited. Even without subsidy, around 14,000 tonnes of rubber have been exported, as the operation is profitable since the world price rules ahead of the Indian price by around Rs 5 per kg. Outgo on export has affected the domestic availability.

In addition, there is a tendency among the better-off section of the growers to keep in stock some portion of the crop. They feel that the price would rise further by January 2005 and may go on to touch the international level. Growth in consumption of rubber in India is healthy around 6 per cent so far during 2004 and the demand for rubber will continue to be strong.

All these indicate that the market may rule around the current level till December and then slowly move up to approximate to the world market in about a couple of month's time.