The Hindu Business Line : `Futures pushing down rubber prices'

Wide variation in prices of natural rubber (NR) is due to the influence of the domestic futures market, which in turn is following the international futures market and as a result, the demand and supply theory does not reflect on Indian prices, according to Mr N. Radhakrishnan, President, Cochin Rubber Merchants Association (CRMA).

Addressing the 23rd annual general meeting of the association, he said rubber stock in the country was currently 52,000 tonnes, an all time low in the past two decades. In spite of the thin stock level in the country, the prices had fallen from Rs 115 a kg to Rs 78 a kg in the past 3 months.

The highest-ever recorded stock was in January 2001 when the country held about 2,20,000 tonnes. At that time the dealers and growers together had over 1,80,000 tonnes against the present estimated stock with them of around 25,000 tonnes, he said.

Price fluctuation

The dealers were worst affected as prices fluctuate widely, he said. This year, the prices started rising from Rs 75 a kg in January 2006 and gradually reached up to Rs 115 a kg in June and then fell to the current price of Rs 78 a kg.

Attributing this to the influence of the futures market, he said: "Hedge funds play a large part in the price variations of commodities throughout the world and their movement from one commodity to other in order to reap profits, influence the international futures market."

The rubber dealers are the backbone of the rubber sector as they act as a link between the grower and consumer and ensure that rubber reach all over India by charging the lowest margin. Indian growers get around 98 per cent of the terminal market price whereas their counterparts in other countries get around 85 to 90 per cent.

Since the international price movement cannot be anticipated early, the rubber dealers are, in fact, losing heavily. "Our dealers cannot afford to sustain losses due to low margin of profit. In the interest of the rubber sector a healthy futures market has to be developed in India which will be complementary to the interest of physical trade, and with the active participation of growers and consumers," he said.

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