Thursday, September 25, 2014

Gloomy outlook for plantation sector


The price of rubber remains low despite a low supply. Tokyo rubber futures hit a fresh 5 year low on 24th September on persistent fears of weak demand from China, China economic data was not as good as expected and weak oil prices also weighed on the market.

Thai Democrat Party called on Prime Minister Prayut Chan-o-cha to implement its five point proposal to urgently resolve price crisis facing rubber growers. Deputy leader Nipit Intarasombat said the government was on the right track to address the falling rubber prices, its policies are designed as a long-term solution. It depends on the government to decide if it wants to protect the farmers or the asphalt industry. Promoting use of rubber in road construction will raise costs, but its benefits are greater than shoring up the rubber prices.

The government should establish a policy guaranteeing that rubber is used in road construction and repair projects. The policy should stipulate that the rubber come from fresh supplies, not from the government’s stockpiles.

Prime Minister Gen Prayut thanked the rubber growers for their decision to call off a rally planned on 8th October. He has promised the government will take measures to boost prices, such as promoting the domestic use of rubber products, providing loans to rubber cooperatives and slowing rubber production.

The former Rubber Board Chairman said the production of natural rubber in the country is 8.5 lakh tonnes while the actual demand is about 9.25 lakh tonnes, but the volume of rubber imported was several times more. The excess rubber imported has been stockpiled by the rubber based companies including tyre manufacturers. This has helped them crush the local rubber producers.

A discrepancy of around one lakh tonnes of natural rubber has surfaced in the stock level data provided by rubber board at the end of August month. The industry finds that an anomaly in the calculations will affect all the stakeholders in the sector. Indian Rubber Growers Association has refuted the allegation made by Automotive Tyre Manufacturers Association and other organisations, regarding stock of natural rubber in India. The issue does not carry any relevance at this point of time, when rubber prices are low. The issue of stock was raised by ATMA deliberately to divert attention from core issues that the rubber sector in India is facing.

Prices are likely to go from bad to worse when the rainy season ends. Today, the benchmark RSS4 grade rubber closed at `.120.50 a kg at Kottayam, while RSS3 grade closed at `.96.08 a kg at Bangkok and Malaysian SMR20 closed at `.88.68 a kg. On National Multi Commodity Exchange October 2014 futures closed at `.119.75 a kg, November at `.118.55, December at `.118.67 and January 2015 at `.118.79 a kg. On Tokyo Commodity Exchange, October 2014 futures series closed at ¥166.8 a kg, November at ¥170.6, December at ¥174, January 2015 at ¥177.6, February at ¥179.6 and the contract for delivery in March 2015 closed at ¥180.9 a kg. Tommorrow the market is expected to trade between ¥180 & ¥186 a kg for March contract and most probably may close on higher side.

Read lot more in Rubber4U – 1st October 2014 issue
For 2014-15 Rubber Forecast, http://rubber4u.com/Public/RForecast.pdf

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