Date:09/05/2008 URL: http://www.thehindu.com/2008/05/09/stories/2008050956011900.htm

Business

Mixed reaction to ban on rubber futures trading

K.A. Martin

ATMA welcomes ban on rubber futures

‘Current price level normal’
Board’s opinion not sought

KOCHI: A day after market regulator Forward Markets’ Commission (FMC) banned futures trading in natural rubber, the rubber community is sharply divided over the impact of the ban on the price of the commodity which touched a record Rs.120 a kg (RSS4) on Wednesday in the domestic market.

Rubber Board Chairman Sajen Peter told The Hindu here that the Board had not asked the suspension of futures trading in natural rubber although its effect as a price discovery mechanism was limited given the high farm gate price for the rubber farmers.

Mr. Peter also said FMC had not sought an opinion from the Rubber Board before the decision to ban futures was taken. He said futures or no futures, rubber farmers were getting remunerative prices for their produce.

The Automotive Tyre Manufacturers’ Association (ATMA) welcomed the ban on rubber futures. ATMA Director General Rajiv Budhraja said the association, representing the consumer industry, also wanted the farmers to take the message from the ban on rubber futures.

Mr. Budhraja said there should be action if there was any hoarding of rubber with the prices still buoyant.

The Rubber Board Chairman said the current price level was quite normal for this part of the year. May and June were natural lean periods. He also said small farmers did not stand to benefit from the current price level as the volume of actually saleable natural rubber being held back was about 25,000 tonnes only.

Indian Rubber Growers’ Association general secretary and Rubber Board member Siby J. Monippilly slammed the decision to ban futures in natural rubber. He said rubber futures was the most mature among commodity futures and by banning it the FMC had hurt the interests of farmers.

He said farmers were getting ‘more than 100 per cent of the market price’ due to futures trading because they were given a mechanism to benefit from the integration of the world markets. Mr. Monippilly said several rubber societies were engaged in futures trading which ensured that the buyers and exporters got the best quality rubber.

The volume of delivery through the futures market added up to 70,000 tonnes over the last five years, he said.

He claimed that only big-time traders and the industry wanted the ban on futures trading in natural rubber. Cochin Rubber Merchants’ Association president N. Radhakrishnan said futures trade was not helpful to the farmers as it had fallen into the hands of speculators. Neither the industry nor the farmers were represented in the futures market, he said. On the correction in natural price experienced on Thursday, Mr. Radhakrishnan said there were vested interests trying to push down prices.