Nation Current Affairs 10 Feb 2016 Rubber economy in cr ...

Rubber economy in crisis

DECCAN CHRONICLE. | K P SETHUNATH
Published Feb 10, 2016, 6:25 am IST
Updated Feb 10, 2016, 6:25 am IST
Kerala accounts for 90 per cent of natural rubber output in the country.
The upswing in natural rubber prices, which started in 2005,  reached the peak in 2011 with the price crossing `200 per kg before the  downward trend began towards the end of 2012. Kerala accounts for 90 per cent of natural rubber.
 The upswing in natural rubber prices, which started in 2005, reached the peak in 2011 with the price crossing `200 per kg before the downward trend began towards the end of 2012. Kerala accounts for 90 per cent of natural rubber.

KOCHI: A slew of experts and policy makers will deliberate on what lies ahead for  natural rubber  at a meeting in Goa on March 10 and 11.   Some 600  delegates from India and abroad will attend the India Rubber Meet, the third in the series to be organised by Rubber Board,  which will discuss the theme ‘Rubber scenario; what lies ahead,’ in the backdrop of  the  downtrend in the price of the commodity for the past three years.

Kerala accounts for 90 per cent of natural rubber output in the country and the question uppermost in the minds of nearly a rubber million farmers in the state is whether there is any light at the end of the tunnel. It is also the toughest  question to answer even for the most optimistic person.  

 

The price of natural rubber, like all other commodities, is susceptible to periodic boom and busts known as  commodity cycles. The upswing in natural rubber prices,  which started in 2005,  reached the  peak in 2011 with the price crossing Rs 200 per kg before the  downward trend began towards the end of 2012.

The sharp rise in crude oil prices, high demand in China and the upswing in most other commodities triggered the increase  in natural rubber prices. The scorching pace of the price rise  was not sustainable in the long term as the price registered over  100 per cent growth in a span of five years.

 

“We cannot put a specific time-frame for the trend of a commodity cycle for natural rubber or any other commodity, but we can safely say that the trend in natural rubber (NR)  price is intimately connected with crude oil price,” Mr Jom Jacob, deputy director of Rubber Board, said.

The high in crude oil price has  a psychological impact on NR price as the punters in the commodity market use the same for taking speculative positions. “So though there is no evidence of synthetic and natural rubber being used as interchangeable by the industry,  the trend in crude price was always a key determinant in shaping NR price,”  Mr Jacob said.

 

According to Mr Jeby Mathew of the New Rubber Farmers’ Forum, a body of rubber growers, all is not lost for the rubber growers. “The present situation is likely to change by the end of the year or early next year,”  he said.

A report by Bloomberg, a global news agency, has projected that the price of crude oil is likely to crawl up by $40 per barrel in 2017 and $60 per barrel by 2018  after stabilizing at $30 per barrel in 2016.  

The crude oil price rise will impact  the fortunes of  NR, said Mr. Mathew.  A revival in crude oil price will be the result of the overall upswing in the macro-economic situation, he added.

 

The fall in production in the domestic market and the curbs imposed by the major rubber producing countries such as Thailand, Indonesia and Malaysia in exports will also have a salutary effect on the fortunes of the commodity.

A few others in the sector, however, remained sceptical about the export curbs by Thailand, Indonesia and Malaysia having any impact on the price situation.

“The promises made in the joint statement by these countries are generally not honoured at the individual level. Moreover, any supply shortage by these countries will be filled up by the supply from Vietnam and Cambodia,”  said a person familiar with the global NR supply situation. Vietnam has already emerged as the third largest NR producer with over a million tonne production after Thailand and Indonesia.

 

The only hope for a change in the price situation in the domestic market is the revival of prices in the international market. The average price in the domestic market is higher by Rs 10 compared to the international price.

The price of RSS-4 grade, the top grade preferred by the industry, is Rs  91 in the domestic market while the similar quality in Bangkok was quoted at Rs 83. Unless this gap is filled, the  revival of prices in the near term looks bleak.

...
Location: India, Kerala




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