Rubber prices began rising even before futures debut
It’s a war against inflation, and rubber has fallen victim to it. Commodity experts feel that of the four products, refined soya, chana, rubber and potato banned for futures trading on Wednesday, restrictions on rubber could have been avoided.
By Bhargav Trivedi, |
AHMEDABAD: It���s a war against inflation, and rubber has fallen victim to it. Commodity experts feel that of the four products, refined soya, chana, rubber and potato banned for futures trading on Wednesday, restrictions on rubber could have been avoided. This is because, rubber is not an essential commodity and has no direct impact on WPI.
Price of rubber has been on the rise even before future trading began. The prices of RSS-4 quality rubber rose from Rs 26 per kg to Rs 44 per kg from 1998 to 2003. From 2003 onwards, rubber was caught in a bullish trend. The post-2003 period was good for farmers as they managed to reap positive returns on rubber. This can be better understood through statistics.
In 2000, for example, the RSS-4 quality rubber cost was Rs 32 per kg. Against this, the selling price was Rs 30 to Rs 31, implying that the returns were negative for farmers. In 2001, the situation worsened, but improved after 2002 when the selling price stayed higher than the production cost. In 2008, the selling cost rose to Rs 100 as against the production cost of Rs 44.
In India, futures trading in rubber took off at the National Multi-commodity Exchange, which is the first online commodity exchange in the country. Prior to this, trading was carried out only at Singapore and Tokyo commodity exchange.
The dominance of tyre companies eventually weakened and farmers could reap the benefit of price movement in global market. The products were then stored in CWC warehouse and the farmers could carry out futures trade after getting a warehousing receipt. PNB and Federal Bank even provided 80% loan, said NMCE MD, Kailash Gupta. ���The correlation between NMCE and Tocom Future prices is as high as 86%,������ he added. Said a member of the Kerala-based Co-operative Rubber Marketing Society said: ���The ban on future trading would lead to return of old pattern where users would once again have their say.������ A cartel of tyre manufacturers and big traders is once again active in purchasing rubber.
Said Cochin-based brokerage house, Geojit Securities commodity head C P Krishnan: ``Rubber price has a direct relation with crude price as it is an important ingredient for synthetic rubber. Because of rise in synthetic rubber price, the demand for natural rubber has increased���.
������ ������ Unseasonal rain also affected the price, leading to drop in production.
Price of rubber has been on the rise even before future trading began. The prices of RSS-4 quality rubber rose from Rs 26 per kg to Rs 44 per kg from 1998 to 2003. From 2003 onwards, rubber was caught in a bullish trend. The post-2003 period was good for farmers as they managed to reap positive returns on rubber. This can be better understood through statistics.
In 2000, for example, the RSS-4 quality rubber cost was Rs 32 per kg. Against this, the selling price was Rs 30 to Rs 31, implying that the returns were negative for farmers. In 2001, the situation worsened, but improved after 2002 when the selling price stayed higher than the production cost. In 2008, the selling cost rose to Rs 100 as against the production cost of Rs 44.
In India, futures trading in rubber took off at the National Multi-commodity Exchange, which is the first online commodity exchange in the country. Prior to this, trading was carried out only at Singapore and Tokyo commodity exchange.
The dominance of tyre companies eventually weakened and farmers could reap the benefit of price movement in global market. The products were then stored in CWC warehouse and the farmers could carry out futures trade after getting a warehousing receipt. PNB and Federal Bank even provided 80% loan, said NMCE MD, Kailash Gupta. ���The correlation between NMCE and Tocom Future prices is as high as 86%,������ he added. Said a member of the Kerala-based Co-operative Rubber Marketing Society said: ���The ban on future trading would lead to return of old pattern where users would once again have their say.������ A cartel of tyre manufacturers and big traders is once again active in purchasing rubber.
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So, small traders had no options but to sell whichever price he offered the buyer. Following futures trading, small producers would sell their products through rubber co-operative marketing society in Kerala. There are 400-500 active societies involved in futures trading. Said Cochin-based brokerage house, Geojit Securities commodity head C P Krishnan: ``Rubber price has a direct relation with crude price as it is an important ingredient for synthetic rubber. Because of rise in synthetic rubber price, the demand for natural rubber has increased���.
������ ������ Unseasonal rain also affected the price, leading to drop in production.
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