Agri Business

Higher MSP may see Kerala growers produce more natural rubber from April

V Sajeev Kumar Kochi | Updated on February 22, 2021

Currently, as production costs exceed returns, growers are tapping their trees only once a week

Natural rubber growers in Kerala are expecting to tap more rubber from their trees beginning April 1 when a State government order for ₹170 a kg minimum support price (MSP) comes into effect.

Kerala accounts for 90 per cent of the total rubber production in the country.

Also read: Spot rubber holds steady on buyer resistance

Currently, a majority of farmers are keeping off from tapping due to prices hovering around ₹150 a kg, while the cost of production is about ₹175. As production costs exceed returns, growers are tapping their trees only once a week, according to grower community sources.

Prices for ribbed smoked sheet-4 (RSS4) rubber, which is consumed mainly by the automotive tyre sector, ruled at ₹158 a kg during the weekend. In Bangkok, RSS-3, which is equivalent to India’s RSS4, was quoted at ₹174.85 a kg on Monday.

On India Commodity Exchange, rubber for delivery in March traded higher today at ₹160.38 a kg against the previous closing of ₹159.58.

Globally, rubber gained 7 per cent last week, though it has declined almost 1 per cent since the beginning of this year.

The refoliation of trees in Kerala has begun. It is a signal to resume tapping of rubber trees at any time. But the yield will be lower because of the low moisture content in the soil. However, the pre-monsoon showers during February, March and April are expected to increase the yield, the sources said.

PC Cyriac, Working President of the Indian Farmers Movement (Infam), said that refoliation or defoliation of rubber trees is not a major deciding factor as far as rubber production in Kerala is concerned.

“It is the price which is the main component. If the Union Government starts imposing safeguard duty on rubber imports, this would reflect on domestic prices, forcing growers to tap more,” he said.

Kerala, according to him, has the capacity to produce 12 lakh tonnes of natural rubber annually. But low prices have seen production stagnating at around seven lakh tonnes.

His views come on the heels of the Association of Natural Rubber Producing Countries (ANRPC) projecting the commodity’s supply continuing to be low till April in view of farmers not tapping the trees due to annual refoliation of rubber trees.

This will impact global production, which is projected to drop to one million tonnes this month, and 0.9 million tonnes next month, compared with 1.3 million tonnes produced in December, ANRPC Rubber Market Intelligence Report said.

During the lean supply season, the centrifuged latex processing companies offer a premium to encourage farmers to sell the produce in fresh latex form by deviating from the usual practice of selling in the form of cup-lump.

This will ensure adequate supply of fresh latex to run the processing factories and cater to the relatively higher demand for centrifuged latex from rubber glove manufacturing factories. This can provide additional support to the latex market till supply problems clear up, the report said.

The report said that demand for natural rubber would get a boost in the short term especially in the wake of improved momentum in global economic recovery supported by the roll-out of Covid-19 vaccines and stimulus by the US.

The revival of the transport sector following the continued easing of virus spread and relaxation of restrictions across various countries is also a contributing factor to the revival of demand.

The reopening of manufacturing and economic activities in China and the recovery in auto sectors in China and India also reflect the rising market demand, the report said.

However, it perceived some risks due to the outbreak of a new variant of novel coronavirus in several countries that are seen as more contagious and resistant to the vaccines currently in use.

The anti-vaccination movement gaining ground in the US and the extreme weather conditions in the form of snow-storms in various parts of America are hindering both the transportation and administration of vaccines, the report said.

The rise in US Treasury bond yields can make the dollar stronger in the short term, leading to losses in commodities. Besides, the resurfacing of global inflation can compel governments to raise rates by shifting focus from economic growth, the report added.

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Published on February 22, 2021
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