Strong yen supports Tocom rubber futures

The rate cut by the US Federal Reserve reverberated on the Tokyo Commodity Exchange (TOCOM). Following the drop in the value of the Japanese yen against the US dollar, rubber futures in TOCOM rose.

In the local market, prices fell 10 per cent in the last few weeks as the yen was strengthening. Stronger yen means cheaper rubber imports in Japan. The bounce may be short-lived as production in India is expected to pick up.

The price tag of the benchmark grade RSS-4, which had dropped to Rs 82 a kilo last week, has opened on a promising note and quoted Rs 84 today.

According to leading traders and stockists, the market might be in a bull orbit for the next couple of weeks and a shift in the pricing pattern is expected only after the Onam festival.

Rubber futures in Tokyo rose from the lowest levels in almost eight months as Japan's currency fell following a recovery in global stocks, raising the value of yen-denominated contracts for the commodity traded globally in dollars.

The Indian market also moved in tandem with TOCOM and both markets have quoted Rs 84, up by Rs 2 a kilo than last week.

Apart from appreciation of Japan's yen, temporary withdrawal of China from the market had also raised concern and hence the last week's drop in prices.

According to reports, China's inventory was high and this badly hit Chinese buying in the last couple of weeks. But China has to stock more rubber as consumption is on the increase thanks to the Beijing Olympics.

On the domestic front, futures counters are once again on an upbeat mood as major operators had bought rubber at very low levels (Rs 82-82.50 a kilo) in the last few weeks. According to traders, the market would be bullish in the current week as operators have to take advantage of the appreciating trend.

Price of RSS-4 grade has appreciated by almost Rs 10 a kilo a few weeks ago and RSS-4 grade was sold to rubber-based units at a price tag of Rs 90-92.50.

Then the market began to collapse and got the much needed support at Rs 82.

Two reasons were cited for the orchestrated panic selling by the growers: Yen appreciation and the low price in Tokyo and the climate change in Kerala.

Even though monsoon plantations are back in action in Kerala after a long absence, tapping is yet to begin because of the absence of labourers.

Several of them have been afflicted with epidemics like Chikungunya in the plantation areas of Kottayam, Pathanamthitta and Ernakulam districts.

The main production season is on the anvil and the current price appreciation might be a temporary one.

The season will start by mid-September and around 40 per cent of the total annual production is being done during September-December period.

After Onam celebrations, production will pick up and hence a major shift in the pricing pattern is expected by then.