The Hindu Business Line : Rubber may continue to rule over Rs 70/kg

NATURAL rubber prices may continue to rule above Rs 70 a kg in the coming months as production will begin to peter out from mid-February even as its demand is likely to continue, according to traders.

"There is very little chance that the price would fall... . Now Rs 70 a kg is an accepted price. The market no longer views this as an aberration," said Mr George Valley of Indian Rubber Dealers Federation.

The benchmark ribbed smoked sheet (RSS) - 4 grade is currently ruling at Rs 70.75 a kg. The previous domestic record price of Rs 70 was breached thrice during this fiscal. Prices have been ruling above Rs 70 for nearly a fortnight now.

"In my opinion, 75 per cent of the chances are that the prices would go up in the coming months," a trader, who does not want to be named, said.

He said factors such as rising prices of all commodities and precious metals, increasing demand for rubber and thinning supplies of the commodity in February and March indicate that prices would only go up.

"These are strong positives that would push up the prices," he said.

Futures indexes are showing higher prices for rubber till April. On the National Multi Commodity Exchange (NMCE) indices, April prices are over Rs 76.40 a kg and for March, the price is Rs 74.92.

However, Mr N. Radhakrishnan of the Cochin Rubber Merchants Association said the rubber futures market had not really aligned with the ground realities of the domestic market as it follows the movement of Tokyo Commodities Exchange and Singapore Commodities Exchange.

"The two-year history of futures here has not given a proper indication of the prices," he said. "We are following international speculation."

Mr Radhakrishnan said although it could be possible for the prices to climb in the coming months, if rubber production achieves the four per cent growth as reiterated by the Rubber Board, things might not be all that bad as feared.

"If we get the four per cent growth, we won't have much of a problem," he said.

Mr Valley said unexpected rains a few days in rubber growing areas had ensured that tapping will be in full swing till the first week of February. Rubber trees normally shed leaves by end of January, thereby affecting latex yield.

However, the rains would now prolong the fall by another week or so. "The production in January is going on well and farmers are likely to get profitable tapping till the first week of February," he said.

He said the prevailing prices have given farmers more room to hold the produce. "The tendency to hold back rubber is going up among farmers when they look at the futures prices," he said.

Nevertheless, the appreciation of rupee and yen (against dollar) is one factor that could influence a downward trend in prices.

"The attraction to export has now been affected by the strengthening of rupee. On the other hand, import has become a little bit cheaper," the trader said, adding that despite this trend, chances of prices to come down from the present levels appears rather thin.