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Indian natural rubber output likely to drop as farmers suspend tapping

By Rajendra Jadhav

MUMBAI, Oct 17 (Reuters) – Indian natural rubber output islikely to drop over 10 percent in 2014/15 from the previous cropyear, hit by heavy rain in key growing regions and as farmerssuspend tapping due to lower prices, the head of the country’stop producer said.

Falling output amid rising demand from the local autoindustry would force the world’s fifth biggest rubber producerto increase overseas purchases of the tyre making material.

That could support international prices that plunged morethan 30 percent this year on worries over a slowing economy intop buyer China, with Indian natural rubber prices touching afive-year low earlier this month.

“A few farmers have given up tapping. They won’t resumeunless prices recover substantially,” N. Dharmaraj, chiefexecutive at Harrisons Malayalam Ltd, told Reuters.

“Production will be down by at least 10 percent. Prices arenot encouraging farmers to increase tapping.”

The spot price of India’s most traded RSS-4 rubber (ribbedsmoked sheet) has fallen over a quarter so far in 2014 to 12,250rupees ($200) per 100 kg at the major market of Kottayam in thesouthwestern state of Kerala.

“Production usually peaks in the December quarter, but thisyear farmers are not interested in tapping. If we loseproduction now, it can’t be compensated for in the Marchquarter,” said George Valy, president of the Indian RubberDealers’ Federation.

India’s natural rubber production dropped 7.6 percent to844,000 tonnes in the 2013/14 crop year, which ended last March.

In the first half of the year that started in April, thecountry’s output fell 2.3 percent from a year ago to 337,000tonnes, while consumption rose by 3.6 percent to 509,085 tonnes,according the state-run Rubber Board.

A senior official at the Board said it would be forced torevise down an earlier forecast that put production at 885,000tonnes this year.

HEAVY RAIN

Tapping in the last three months has been disrupted by heavyrainfall as many farmers have not used rain guards this year,Dharmaraj said.

Rain guards are typically pieces of plastic that surround atree’s trunk above the tapping panel. Farmers sometimes fitguards ahead of the June-September monsoon season, although theycan be put off by the extra cost.

The southern state of Kerala, which accounts for more than90 percent of the country’s natural rubber output, received 6percent more rainfall than normal during the June-Septembermonsoon season.

The impact will be felt even in the January to March quarteras trees have lost large numbers of leaves due to heavy showers,Valy said.

The slowdown in production has been widening the gap betweenlocal demand and supply, prompting tyre makers to import more.

Tyre firms, the biggest consumers of natural rubber, havebeen boosted as Indians buy more vehicles amid optimism aboutthe economy under the new government of Narendra Modi.

Car sales are expected to rise between 5 and 10 percent thisfiscal year, according to the Society of Indian AutomobileManufacturers.

Natural rubber imports in the first six months of thecurrent fiscal year jumped nearly a quarter from a year beforeto 225,652 tonnes.

Industry officials had forecast imports could surge to arecord 400,000 tonnes in 2014/15, but now believe they could gobeyond that.

“The production trend and cheaper availability in the worldmarket suggests imports could be more than 400,000 tonnes,” saidDharmaraj.

India, which buys most of its natural rubber from Thailand,Malaysia, Indonesia and Vietnam, imported 325,190 tonnes in thelast fiscal year to March 31.(1 US dollar = 61.5500 Indian rupee) (Reporting by Rajendra Jadhav; Editing by Joseph Radford)

– Reuters

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