Move to resume rubber futures disappoints traders

The Forward Market Commission's reported move to resume futures trading in rubber after its unilateral suspension has left the trade circles worried as they feel resumption without imposing any restriction to control excessive volatility by speculators will harm the sector.

"The growers were getting average annual prices much below international prices during the tenure of futures trade. Prior to the introduction of futures and after the suspension of futures, the growers were getting comparatively higher prices. The FMC's contention is that if the industry does not need futures, then it should be advantageous to growers," said Mr N. Radhakrishnan, President, Cochin Rubber Merchants Association. The industry consumed over 39 lakh tonnes of rubber in the past five years, whereas the physical delivery effected in futures was to the tune of 75,000 tones during the period. Margin of profit

"A vast majority of rubber dealers are also rubber growers. For the past six decades, they were ensuring timely supplies to the consuming industries keeping a meagre margin for themselves. In the process, the growers have been getting over 97 per cent of the terminal market prices for sheet rubber at their farm gate. The growers in other countries fetched a farm gate price which was 75-85 per cent of the terminal market price," he added. The margin of profit of each spot dealer ranges from 0.5-1 per cent. In this scenario it is not possible for a spot trader to co-exist with the speculators.