Speculative trading in futures lifts rubber

Bull run on global cues despite high production.

Natural rubber prices rose further on the back of intense speculative futures trading, despite hectic seasonal production. The spot price of benchmark grade, RSS-4, today touched Rs 97 a kg, higher by Rs 2 than the weekend price.

On Tocom, RSS-3 futures today quoted Rs 3 higher at Rs 92.90 a kg and thereby positively influenced the domestic platforms to attract higher prices.

Local dealers said the current bull phase in global futures trading rubbed off positive sentiment on the domestic futures and spot markets, hence the bull run in the main production season.

"The current stock position in the domestic market is the highest for the past five years and there are no genuine reasons for such a hike in prices except the highly speculative futures market," they added.

At the close of 2006, the local market had a stock of 1,34,000 tonne, which may increase by an additional 20,000 tonne by the end of this month.

As the spot market is fast approaching the magical Rs 100 a kg mark, tapping and processing are now in full swing in rubber producing centres.

Traders said production in other major producing nations such as Thailand, Indonesia and Malaysia "is also going on in full steam and there is no shortage of rubber currently".

Futures counters are in a jubilant mood as March quotations crossed the Rs 100 mark last week. And with the one million-plus growers too very happy, there is exuberance in the rubber growing centres "� the prices are being projected to touch the Rs 150 level by April.

The expectations have led to farmers developing a tendency for stocking, thereby creating a slowdown in the supply of quality sheet rubber to major terminal markets.

Barring this there "is absolutely no reason for the current hype in the market", traders felt.

A section of traders said the "silent campaign" jacking up prices unreasonably would eventually destroy the market if there were a rise in imports. Abrupt releasing of stock would also be fatal to the improvement of prices, they said.

Some even felt that there could be a glut-like situation in the market by March-April. Their fears are based on the current indications on the production and supply front.

Rubber Board estimated combined production of 1,93,000 tonne for December and January. It expects total production in 2006-07 to touch 8,43,000 tonne.

In contrast, total consumption will be around 8,29,000 tonne and the chances of a rise in exports are rather bleak as the price levels quoted by the country will be higher than those in other major global markets.

So unless there is a sharp increase in domestic consumption, there are high chances for a shoot-up in supply during the off-season.