Rubber prices continued to decline during the month of November as well at the Colombo auctions. Crepe rubber (1X) started at Rs.208 per kg and fell down to Rs.130 per kg during the latter part of the month. Similarly, RSS 1 prices started at Rs.180 per kg and dropped to the level of Rs.150 per kg with little or no interest shown by the buyers. Due to this declining trend in NR prices at the auction, the local buyers in rubber growing areas are uncertain as to which price they should buy rubber. Hence, the farm gate prices are very much lower than the auction prices and furthermore certain growers are unable to sell their produce. In some areas RSS is purchased at Rs.80 per kg but on the understanding that payments will be made later once the local buyers are able to sell their rubber.
This is a grave situation which will have a negative impact to the rubber industry of the country. Hence, it is very important that prompt action is taken to address this situation. As per the views of the brokers the demand for NR at the Colombo auctions is very low. This is attributed to the world recession. Further, the price trends at the Colombo auction are similar to the world market trends. The Singapore rubber prices too have dropped significantly during the month of November.
In the light of the above situation, strategies to protect the rubber industry in the country have to be identified and implemented.
Certain emerging economies in the world, i.e. China, India are less affected by the world recession. Further, they are large consumers of NR. Government-to-government bilateral agreements could be used to create a market and to enhance the demand for our NR. We are importing NR to cater to the needs of certain product manufacturing industries. If this is still continuing we will need to stop to protect our local growers.
The gap between the Colombo auction and farm gate prices is very high. This needs to be narrowed to acceptable levels. Since there is no established system for the state to get involved in buying of rubber to increase the competition for the raw material witn the country the role of the government in this regard is minimal. Perhaps this objective may be achieved through the “Thurusaviya Fund” which was established to help growers in the marketing of their produce. If the price stabilization fund established some time back had existed to-date the government could have supported the growers during this poor trading period. We should not forget the need for such a fund when rubber prices improve in the future.
As mentioned previously according to brokers the demand for NR is in a declining trend.
As we all know, rubber is now in the cropping months. It will continue till end January 2009. Hence, this situation will definitely lead to an over supply situation in the country unless demand for natural rubber increases dramatically. All growers should make a concerted effort to overcome this situation through reduced tapping by refraining from tapping on one possible tapping day each week and by not tapping in all new clearings though the required growth standards are achieved.
The situation with regard to trading of NR is currently very dynamic and changing rapidly. Hence, the strategies need to be implemented to suit any prevailing situation will also differ. Having an advisory group representing all relevant sectors and meeting when the situation demands will help to generate and up-grade the strategies needed to guide all stakeholders in the NR industry. The need of the day is a concerted effort by all parties concerned to implement strategies identified to protect the NR industry of the country.