Concern over rubber supply as September output drops 25%

Falling global prices force farmers to move away from rubber production

Both production and stocks of natural rubber have dropped during September, according to the latest data released by the Rubber Board, raising concerns about the availability of the commodity.

A 25 per cent fall in production of natural rubber, from 80,000 tonnes in September 2013 to 60,000 tonnes this year, was recorded. Stocks declines 10 per cent from 223,000 tonnes to 200,000 tonnes during the same period.

There was a continuous fall in the production of rubber beginning June, which posted the steepest monthly falls in recent times. This is a serious concern, according to experts, as the trend in production indicates a negative attitude of growers towards rubber plantations.

The fall in price, which accelerated in recent months, has forced farmers to withdraw from rubber production. As the local price was slashed to Rs 120 a kg, most of the small and medium farmers have now stopped tapping trees since the price is not at all lucrative.

"This is a serious situation, said N.Radhakrishnan, former president, Cochin Rubber MerchantsAssociation [CRMA]. "If the fall in production continues the local market will be in serious trouble. This will increase import to the country as industries have to use rubber."

"There is a standstill situation in rubber trading in Kerala as most industrial users withdraw from domestic market. So the fall in production makes the situation grave and not only plantations but rubber trading will also be in serious trouble," he said.

"The price should be at least Rs 170 a kg, then only can we continue with tapping," said Binu John, a Kottayam-based grower. He said that high labour charge is a serious issue in rubber tapping. Also aged trees have not not re-planted for the last few years because of the fall in prices.

According to experts the supply-demand gap is widening as the Board data says that consumption had increased 6 per cent during September. Monthly consumption in September was 85,500 tonnes compared to 80,550 tonnes in the same month a year ago.

This gap has been widening for the past few months and it is being compensated through bulk imports. The lower price regime in the overseas markets attracts more imports to India.

During the April-September period of the current financial year, 225,652 tonnes were brought, up from 181,700 tonnes in the same period of last FY, recording an increase of as much as 24 per cent.

More imports are likely to happen during the rest of the year, as overseas prices are more attractive currently. SMR grade is available for Rs 88 a Kg while in India the average price is Rs 120. So, even by remitting 20 per cent duty import imported rubber is much cheaper, hence the sharp increase.