10 March 1998
Indian rubber farmers awash with stocks
INDIAS natural rubber prices are at a four-year low highlighting the desperate situation small farmers have found themselves in.
Small farmers account for 86% of production and the bearish market is largely because of their desperation to liquidate stocks which have climbed to more than 170,000 tonnes, according to traders. This is enough to satisfy industry processing requirements for three-and-a-half years.
The Indian benchmark grade RSS-4 has dropped from Rs32 a kg in December 1997 to Rs26 at the end of last week.
The Rubber Board Indian government agency says production in 1997/98 will climb 41,000 tonnes to 590,000 tonnes but consumption will grow by just 17,000 tonnes to 578,000 tonnes.
The board believes the minimum price for rubber should be Rs40 a kg. Farmers would still incur a loss of about Rs4-Rs5 a tonne at this price. It will ask Indias new federal government to shore up prices through market intervention by procurement agencies. It will also ask that funds are released to underwrite the loss on rubber exports.
- Financial Times 10/03/98 page 37