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India's Rubber Board, growers oppose futures suspension

KOCHI, India (Reuters) - Indian Rubber Board officials and growers on Thursday opposed the suspension on rubber futures, referring to it as a non-essential item and said the price rise was due to strong fundamentals like surging crude and low stocks.

The government late on Wednesday suspended futures trading in soyoil, potato, chana or chick pea, and rubber for four months.

“It’s is not going to benefit anybody,” said Sajen Peter, chairman, Rubber Board, on the sidelines of the International Rubber Conference.

There was nothing abnormal about the present rise in rubber prices and the hike was due to low availability of stocks and firm crude oil prices, he said.

Total stocks in the National Multi Commodity Exchange (NMCE) warehouses fell about 82 percent to 1,204 tonnes in two months to May 7, the exchange data showed.

U.S. crude oil futures touched a record high of $123.93 a barrel on Wednesday and hovered above the $123 mark on Thursday.

“You can ban the domestic market, but you can not control crude oil prices and international market,” said Vibhu Ratandhara, an analyst with Bonanza Commodities Brokers Pvt Ltd.

Natural rubber prices often benefit from high crude prices because investors believe expensive oil will encourage a shift from synthetic rubber, a petroleum product.

The market has matured to a large extent and every delivery price converges with the spot price, said Siby Monippally, member of Rubber Board, and general secretary of All India Rubber Growers Association.

However, officials said, the present contract specifications are not conducive for growers and traders.

“The participation from consumers and growers is very less. We should try to bring in more participation from the growers,” said N. Radhakrishnan, president of Cochin Rubber Merchants Association.

About 90 percent of the price goes to growers and they should be encouraged to participate more in futures, Peter said.

India, the world’s fourth largest rubber producer, has more than one million growers.