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Thursday, August 11, 2022

Futures market helps Rubber prices from crashing further: Anil Mishra-NMCE

KOTTAYAM/MUMBAI (Commodity Online): Rubber prices have fallen sharply in the first month of new year but the fall would have been greater in the absence of a robust futures market in the country, according to Anil Mishra, Managing Director of National Multi Commodity Exchange (NMCE).

Prices for natural rubber RSS 4 grade fell from 16350 per 100 kg to 15200 per 100 kg so far this month and had there been no futures market, the farmers would have been deprived of getting better prices and price level woudl have been much lower than the current prices of rubber, Anil Mishra said. The futures market is turning out to be the buyer of last resort. Deliveries in the NMCE designated warehouses have been rising continuously in all its 7 warehouses located at CWC Ernakulam, CWC Aluva, CWC Kakkanad, CWC Kakkanchery, CWC Kankijikode, CWC Kozhikode and CWC Trichur. The warehouse stock of Rubber has increased by 3379 MT during December 2013.

Domestic Rubber futures prices have been moving in tandem with the international prices which is falling as the global markets are reeling under supply pressure and falling demand more particularly from China. In Thailand, the rubber prices for RSS 3 grade has fallen from Rs 155.48 per 100 kg to 145.47 per 100 kg in Indian Rupee terms so far this month. Duty free advance licenses held by the companies may continue to put pressure on domestic prices till the end of current financial year. The rise in import duty is not going to have adverse impact on the import immediately but only at the later months. Since consuming industries are holding a comfortable imported inventory, the demand in the domestic market may remain sluggish in coming few months.

At Tokyo Commodity Exchange, rubber futures for June delivery has climbed from five month lowsto a high of 258 Yen per kg but fell back to 255.4 yen per kg on Wednesday.Inventories monitored by the Shanghai exchange rose to 190,158 tons on Jan. 9, the highest level since 2004, data from the bourse shows. China is the world’s largest consumer of the commodity used in tyres. Rubber free-on-board fell 1.3 percent to 77.25 baht ($2.36) a kilogram yesterday, according to the Rubber Research Institute of Thailand.

The Indian futures market has been getting continuous support by the participation of hedgers who are hedging their physical Rubber in the futures market by taking short positions and delivery on the Exchange designated warehouses. Had there been no futures market the farmers would have been deprived from getting better prices and price level would have been much lower than the current prices of Rubber. Stakeholders are participating in the Rubber futures on NMCE for taking advantage of calendar spread/arbitrage which is around Rs.200-Rs.250. Farmers are taking advantage of better prices in far month contracts where the return is more than 12%.

There are total 72 clients who have positions in rubber futures on NMCE. Out of 72, 46 clients are having their short position which speaks of wide participation and no cartelization, according to NMCE.

“By the introduction of future trading in rubber a parallel, efficient and transparent trading mechanism is in place. Where the farmers is getting 98% of farm gate price” -Siby Monippally member Rubber Board, General Secretary Indian. Rubber small growers Association Said.

Source: Commodity Online

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