After the long drawn depressing phase, the rising prices of natural rubber in the early months of the current fiscal seem to have brightened the prospects of the sector as the farming community has reportedly geared up to increase production.
“The present surge in prices at Rs144/kg for RSS IV grade vis-a-vis Rs 128/kg in the corresponding period last year has revived the hopes of farmers that would help achieve an additional production of about two lakh tonnes this year”, said George Valy, president of Kottayam Rubber Dealers Federation. Last year's production was 6.4 lakh tonnes, he said.
The process of installing rain-guards are underway in majority of the small and marginal holdings and around 20 per cent of the untapped area out of the total 5.5 lakh hectares have been made ready to start production in this fiscal. “Those who abandoned tapping due to low prices are coming back and the emerging trend would push up production to touch 7-8 lakh tonnes this year”, he told BusinessLine.
The additional two lakh tonnes production would itself translate into a revenue of Rs 3500 crore to rubber farmers in this current year, he added. However, Valy said that rising prices have resulted in supply constraints in the market as farmers are holding on their stock on anticipation of further increase in the rates. The availability will improve once the rubber price touch Rs150/kg. The present climate is ideal to start tapping as many of the growing regions received one or two summer showers, he added.
Drought in China
According to official sources, the present surge in price can be seen as a short term positive market sentiment following factors like concern of domestic supply in China due to drought in Yunnan province. Besides, China has announced levying import duty on mixture rubber at the same rate applicable to natural rubber. Currently import duty on mixture rubber is nil. Chinese importers are importing maximum mixture rubber before the present duty comes to effect.
Apart from this, Thailand's decision to cut natural rubber exports and increase in crude oil price are also contributing factors for rising rubber price, the sources added.
Domestic production
However, Rajiv Budhraja, Directror General, Automotive Tyre Manufacturers Association said that the arrivals in the market have been poor in April and May and tyre companies have not been able to meet even a small percentage of their requirement even after picking the entire domestic quantity, thus increasing dependence on imports. The production has entered the off-season phase and understandably, tapping has come down in Kerala in view of extreme heat conditions.
It is highly unlikely that the domestic production and availability will significantly improve this year. Quoting Rubber Board data, he said 30 per cent of the tapping area remains untapped in Kerala. In fact tyre industry expects rubber production to be, at best, at the same level as last year unless production in North East comes up in a significant way, he said. Prices are determined by demand supply mismatch and that underlies the current pricing trend, he added.