The Hindu Business Line : Rubber prices seen in ‘comfort zone’

Tight supply concerns in the rubber sector would persist and the impact of slowdown in planting from 1997 to 2000 was expected to reflect in the forthcoming years.

M.R. Subramani

Coonoor, Sept. 8

Rubber prices are expected to be in the “comfortable zone” despite projections of moderation in the global economy, while coffee prices are likely to undergo some correction, a Commodities Outlook session was informed on Monday.

“Though global economy is expected to moderate, it is not expected to fall into recession. Indian economic growth rate is projected to grow 7.5 per cent, but for a $7.5-trillion economy it is substantial to sustain demand for commodities and raw materials,” said Mr Sajen Peter, Chairman of the Rubber Board.

Prices for the ribbed smoked sheet (RSS-4), which touched a record Rs 147 a kg last week, ruled at Rs 141 on Monday.

Demand-Supply scenario

Against an estimated production of 8.75 lakh tonnes (lt), consumption was expected to be 8.99 lt. “The demand-supply balance of 24,000 tonnes is not a worrisome factor,” he said, adding that the increase in crude oil prices had a positive impact on rubber price.

Tight supply concerns in the rubber sector would persist and the impact of slowdown in planting from 1997 to 2000 was expected to reflect in the forthcoming years.

However, on the positive side, replanting was projected to increase due to boom in planting in major producing countries.

However, rubber prices could turn volatile on a couple of factors such as depreciation of the dollar or speculation.

Futures ban

Referring to the extension of ban on rubber futures, Mr Peter said he was in favour of futures but the margins should be capped at one per cent on either side.

Stating that the country topped in yield of natural rubber, he said there was a drop in yield last year due to weather problems and plantation workers being affected by chikungunya.

High Domestic prices

Referring to complaints that global prices were lower than domestic prices, Mr Peter said during 2006-07 and 2007-08, domestic prices were above global prices on 68 and 48 days only, respectively.

Currently, against domestic price of Rs 141 a kg for RSS4, the global equivalent RSS3 is quoted at Rs 132.15 in Bangkok.

“The buyers failed to step in when domestic prices were lower by as much as Rs 15 a kg during May. It forced growers to export and has led to the current situation,” he said.

The Rubber Board Chairman also opposed any cut in the customs duty for rubber, saying users such as tyre manufacturers had the option to import under advance licence against export of tyres.

Duty-free imports of rubber during 2007-08 made up 97.5 per cent of the total 85,000-odd tonnes, he pointed out.

Coffee prices RISE

The Coffee Board Chairman, Mr G.V. Krishna Rau, in his address, said arabica prices had increased by 22 per cent and robusta by 33 per cent in the last one year.

During 2008-09 (July-June), global coffee production was projected to be 129 million bags (of 60 kg) against 118 million bags last season.

“A nine-million bag drop during 2007-08 from the previous season led to a comfortable price situation.

Next year, production is likely to increase, mainly due to better Brazil and Vietnam crop,” he said.

Prices to be firm

However, consumption, which was pegged at 124 million bags last season, was expected to touch 127 million bags, Mr Rau said, adding, “Prices may remain firm but not at artificial levels reached in the case of robusta”.

“Robusta prices were up since the dollar depreciated but now the trend is reversing. Some correction will take place but the fall will not be sharp,” he said.

The country’s coffee production has been maintained at 2.93 lt against 2.62 lt last year.