Crashing Rubber Market Adds to Despair in Crisis-hit Kerala

Published: 31st January 2016 04:00 AM  |   Last Updated: 31st January 2016 08:12 AM   |  A+A-

Rubbera

KOCHI:It seems only God can save rubber, at least in the near future. When China, the world’s largest consumer of rubber, reported the lowest growth rate in 25 years, the hope of revival of rubber prices once again became bleak.

In 2010-11, the revenue generated from rubber was Rs 14,643 crore. But due to continuous fall in prices, latex could fetch only Rs 6,731 crore in 2014-15 in Kerala. In other words, around Rs 7,900 crore was wiped out from the Kerala market due to the slump in prices, one of the few commodities in which the State enjoys a monopoly. The share of the State in India’s total production came down to 78.7 per cent in 2014-15, compared to 89.4 per cent in 2010-11. As the estimated rubber production in the country in 2015-16 is below six lakh tonne, Kerala’s share may dip further.

Rubber.jpgThere are true planters, with 70-100 acres of rubber cultivation, who are gearing up to ride the rough weather, mainly on account of their volumes. “A couple of years ago, my net yield per acre of rubber plantation was in excess of Rs 1 lakh. This dipped to around Rs 40,000 last year; it may well come down to below Rs 30,000 an acre. Planters who have 50 acres or more, and some with over 100 acres, will try and spread out the diminishing margins by stressing on the volumes game,” says Nebu Pottamkulam, a planter in Kottayam district.

On April 5, 2011, rubber fetched Rs 243 per kg, the highest-ever price. It’s now Rs 94 a kg (January 30, 2016), pushing 10.5 lakh rubber farmers in the State to an uncertain future. This is a fall of 61.32 per cent in just under five years. The revenue from rubber has now become a quarter of what it was five years ago. The impact of this massive revenue loss is visible across all sectors, ranging from real estate to jewellery and shopping. For instance, the Kerala government got Rs 900 crore as sales tax in 2011-12 from rubber; the figure came down to just Rs 200 crore in 2014-15. Large rubber estates in the State, mainly in Kottayam, have stopped tapping. “However, with the rubber subsidy scheme of the State government, which has fixed the rubber price at Rs 150/kg, farmers in Malappuram, Palakkad and Kannur have started tapping aggressively,” said Tomy Abraham, president, Indian Rubber Dealers Federation.

Rubberb.JPGThe rubber issue took a political turn in the State as Kerala Congress (M) leader Jose K Mani MP started a hunger strike on January 18 in Kottayam demanding implementation of safeguard duty as per the 19th section of World Trade agreement for rubber.

According to S C Nair, a rubber farmer and analyst, the fate of two lakh farmers, who shifted to rubber in the State in the past decade, hangs in the balance. A couple of years ago, around two tonnes of rubber were always in stock with traders in Kottayam. Now they do not even have 50 kg. The inflated and incorrect figures reported by the Rubber Board were a major reason behind the present crisis, he added.

Cochin Rubber Merchants Association president G P Goyal says the outlook is very bad for rubber due to low demand in North India. The situation is not likely to change in the near future. In March there may a slight increase of Rs 5-10 a kg due to off-season demand. But it is unlikely to sustain as global prices are low, he added.

Under the rubber subsidy scheme, Kerala government has disbursed Rs 65.39 crore to 2.87 lakh farmers till the second week of January.

Alternatives for rubber

Hearing the names like Guayule and Russian dandelion may cause a heart attack to the 12 lakh rubber growers in the country, 90 per cent of whom are in Kerala. These are potential alternative sources of natural rubber and commercial production of rubber using them has already started in the US and Europe. Global tyre makers like Bridgestone Corp and Continental AG have started producing tyres using natural rubber from Guayule and Russian dandelion. Indian tyre maker Apollo Tyres is also part of the research team in Europe, which is trying to produce a tyre from Russian dandelion.

Best time

Farmers had the best year in 2011-12 when rubber fetched an average price of Rs 208.50. It even touched a record of Rs 243 in April 2011.

Anomaly in rubber stocks

Based on the opening stock of NR in April 2014, and factoring the key parameters of production, consumption, imports and exports, the closing stock should have been 2.85 lakh tonnes at the end of August, 2014. However, the figures published by the Board was 1.85 lakh tonnes. In effect, 1 lakh tonnes have been ‘adjusted’ without any explanation.

RUBBING IT IN

The International Rubber Study Group says the price of rubber will remain low till 2025

Guayule and Russian dandelion are alternative sources of natural rubber and commercial production of rubber using them has already started in the US and Europe

A ‘slowing’ China will have a negative impact on prices since it is the largest consumer of rubber

Crude price has been hovering around $27 per barrel, at a 12-year low. This will boost the intake of synthetic rubber, which will also affect rubber prices

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