The Hindu Business Line : Global prices propel domestic rubber to record high

WITH the benchmark RSS-4 grade touching its highest-ever price of Rs 69 a kg in the domestic market on Saturday, natural rubber has become the hottest commodity in the market in recent times.

Since January this year, natural rubber prices have surged by about 25 per cent, or about Rs 15 a kg. The trade is now looking at the RSS-4 grade touching Rs 70 a kg. In fact, there is already a talk in the market that some deals have been struck at Rs 70 a kg, though this is not confirmed.

The previous highest price for the RSS-4 grade was recorded in last July when the prices touched Rs 67.50 a kg.

This year's bull run in the rubber market is mainly due to the rub-off of the rising international prices. In Bangkok, the corresponding RSS-3 grade is trading at Rs 76 to Rs 77 a kg.

Another factor that pushed up the prices in the local market has been shortage of rubber. Heavy rains in the rubber-growing areas in Kerala have affected tapping, thereby reducing the output. Kerala produces over 90 per cent of the country's natural rubber.

It is estimated that the stock position by the end of this month could be only 68,000 to 70,000 tonnes, which is just about a month's consumption by the industry. The country's natural rubber production this fiscal is expected to be 7.8 lakh tonnes, while the consumption is projected to be 7.92 lakh tonnes. In order to bridge this shortfall, tyre companies and other natural rubber users resort to import rubber.

Though the prices are ruling at record levels, the million-plus small farmers, who have an average holding size of half a hectare, are unlikely to reap the benefits, as they may not be tapping the trees these days due to heavy rains.

The small farmers cannot afford to stack up their produce to cash in on during a boom time. They sell their rubber on a weekly or fortnightly basis. Nevertheless, last year and this year they have had a continuous run of good prices.

Tyre industry sources say a price increase of Rs 10 a kg would translate to at least an additional Rs 400 crore in procurement cost annually. Since the peak-tapping season will start from August and continue for the next four months, rubber supply is expected to increase and prices may ease. But traders said they do not expect prices to fall below Rs 65 a kg in August, even if international prices begin to come down by then.

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