Agri Business

Rubber growers, traders tap warehouse route for gains

C. J. Punnathara Kochi | Updated on January 11, 2011 Published on January 11, 2011

Rubber

Take advantage of the price difference in spot, forward markets





As futures prices of natural rubber continue to grow, arrivals at warehouses of commodity exchanges have increased, enabling farmers and traders to rake in increased profits. Arrivals on the NMCE authorised warehouses have increased sharply during the past year.

“We are seeing increased arrival of rubber at the exchange warehouse that increased 89 per cent year-on-year. From 3,480 tonnes as on January 1 last year, rubber stocks have surged to 7,787 tonnes this year. There has been increased participation of hedgers and the open market interest has gone up to 10,503 lots, which is 264 per cent of the daily traded volume on the exchange,” said Mr Anil Mishra, Managing Director and CEO of the NMCE.

This is not surprising as the price difference between the current and futures price for rubber continues to widen. While the January price was Rs 217.99 a kg, the April price has already widened to Rs 237.90 currently. Thus, the grower/trader selling in the forward market can realise over Rs 19 a kg, while delivering rubber to the exchange warehouses. The warehouse receipt would also enable the grower to receive funding from banks.

And there are numerous farmers' cooperative societies and the NAFED that have deposited rubber with the exchange warehouses. Already the exchange has a large number of warehouses in the growing regions in Kerala. But as the storage demand continues to grow, the NMCE is trying to increase the warehouse space to accommodate more stocks, Mr Mishra pointed out.

At the last Trade and Settlement Committee meeting of the NMCE held at Kochi, the stakeholders had agreed to the idea of tendering from exchange empanelled reputed sellers godowns that were to be converted as accredited warehouse for delivery in order to reduce the cost. The NMCE is working hard to implement the scheme.

Delivery

Commodity exchanges are not ideal for giving and taking delivery the world over where only one to two per cent of the delivery takes place. However, they become buyers or sellers of last resort at a time of crisis, a press release from the NMCE said. Delivery is a tool which keeps the prices aligned with physical markets and keeps a curb on manipulators.

The NMCE along with the Forward Markets Commission had recently conducted a training programme for the members of the All India Rubber Industries Association at New Delhi and Jalandhar to educate its members on ‘How futures market is going to solve their problems of price risk management through hedging'. Prof. K.K. Abraham, President of Pala Marketing Cooperative Society said: “Online trading in the NMCE has been a great help to rubber marketing cooperatives and rubber dealers since it kept the price buoyant, thereby doing great service to rubber growers.”

Mr Siby Monipally, Member of the Rubber Board said: “By the introduction of futures trading in rubber and other agricultural commodities, an efficient, transparent and parallel system is in place to further the interest of the farmers and cooperatives.”

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Published on January 11, 2011
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