Natural rubber prices have declined in the Kottayam market over the past couple of days largely on global cues and partly due to the unusually weak South-West monsoon in Kerala.

The near absence of rains is helping uninterrupted harvesting. Nearly 70 per cent of India’s natural rubber supply comes from Kerala. As per the usual pattern, harvesting gets interrupted during the period from June to August every year, due to the continuous south-west monsoon rains. In sharp contrast with the usual pattern, rains are almost absent or unusually weak since the beginning of June this year.

Unattractive profit

The recent gains in rubber prices should have encouraged a section of farmers to reopen untapped trees for tapping and increasing the frequency of harvesting to the extent possible. In the Kottayam market, the price for the benchmark grade RSS4 stood at ₹176.50 per kg against ₹178 between June 10 and 14. Around 30 per cent of mature rubber trees have been left untapped largely due to unattractive profit margin, said Jom Jacob, analyst in global rubber industry.

Covid resurgence in China hits global demand

In the international market, he said prices have turned bearish since June 10 largely in response to the most recent resurgence of Covid cases in Shanghai, Beijing and a few other cities in China that have prompted the authorities to re-impose the restrictions. China is the largest consuming country accounting for 42 per cent of the global demand for natural rubber. The most-recent Covid resurgence and restrictions can further hold back the global demand prospects for natural rubber. Key Asian rubber futures markets have seen large sell offs and prices nose-diving over the past three trading days.

Apart from the Covid restrictions in China, the sell offs in futures are due to a large extent by the US inflation. The new restrictions in China, economic repercussions of the Ukraine war, red hot inflation, prospects of aggressive rate hikes by Federal Reserve, and the dollar’s hardening make speculative investments riskier and unattractive.