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Decoding Kerala's 'rubber riddle'

April 24, 2007 11:22 IST

First it beat logic. Now it has beaten imagination also.

We are talking about natural rubber prices in Kerala. It seems even The Da Vinci Code author Dan Brown will not be able to decode the 'rubber riddle' of Kerala. If you want to unravel the plot behind the 'latex puzzle,' read on.

Thanks to some inexplicable reasons, rubber futures contracts are witnessing a steep fall for the past few days. This has also hit the spot marker now with prices of benchmark grade RSS 4 dropping below Rs 90 a kg to close at Rs 87 on Friday.

Grapevine has it that the fall in prices is an orchestrated move by speculators on the futures counters to keep the rates of natural rubber low during the off-season when rubber tapping is almost nil.

This is for the second time the spot market closed below Rs 90 since January 1. Around a month ago, the prices had crashed below the Rs 90 a kg mark.

The spot prices, which slumped below Rs 85 on Wednesday, recovered to close at Rs 87 on Friday. All the futures contracts opened on Friday on a bearish note, following the trend in the previous four trading sessions, recovering later as the trading progressed.

However, the trend has foxed rubber growers and traders alike. They were expecting a rise in prices during the off-season as the rates were hovering around Rs 100 a kg during the main production season (October-December).

Even a fortnight ago, prices were ruling above Rs 90 a kg. At that time traders had blamed farmers for holding back stocks in anticipation of better prices.

According to some growers, the price crash this time around is a deliberate attempt by some groups working to rein in the rubber market.

Several farmers also said the traders' recent call for a 'Rubber Hartal' (April 16) has also added to the price slump. The 'Hartal' call was later withdrawn following a 'clarification' from the Union government.

However, farmers say the call was a deliberate attempt by the traders to force farmers to sell their produce as arrivals had dried up last week. Due to low arrivals, the prices had gone up a bit, causing concern for rubber consumers and traders alike.

Then came the 'Hartal' call and fearing a price slump, farmers rushed in to the market to sell their stock. This further aggravated the situation and the prices, as anticipated by the 'manipulating lobby', witnessed another fall hitting below Rs 90 mark.

Charly Mathew, a rubber grower in Kerala's Kothamangalam taluk, said the 'Hartal' call had served its purpose for the traders and those who wanted to bring down the prices.

He said the reason for the protest call was the Centre's reported move to reduce duty on rubber imports from Thailand as part of a trade agreement. The Rubber Dealers' Federation had said that Union minister Kamal Nath had made a statement in this regard. However, as soon as the protest call was given, the ministry denied any such move and issued a 'clarification'.

But, according to Mathew, by then panic spread among farmers and they started selling their stocks, much to the traders' relief. Mathew further added that right from the beginning the traders were aware of the minister's statement and there was nothing to panic about it.

Moreover, rubber prices have been ruling above Rs 100 in Thailand for quite sometime, making imports almost non-feasible for traders as domestic prices were below Rs 100. He said the farmers have fallen prey to the traders' ploy now and their produce is not getting the right price.

Some Kochi-based traders have also agreed that the reported move to reduce duty on imports from Thailand had created panic in the market, leading to a selling spree in the futures and the spot markets.

Although the government and the Rubber Board had clarified that there was no immediate move to reduce the duty, the sentiment in the market is still low.

In another development, heavy summer showers have triggered tapping in most of the plantations in Kerala and the supply is expected to go up in a short period. This may also cause another drop in prices, with higher supply expected in June and July.

Commodity Online