Harrisons Malayalam Gained On Surging Rubber Exports

Dynamic Equities | June 1, 2017, midnight

An integrated agriculture operation giant, Harrisons Malayalam Limited, is India's biggest producer of rubber, South India's major cultivator of Tea and perhaps the largest farmer of Pineapple in the region. It is also a chief processor of other agricultural produce from neighboring farmlands. The company also produces slighter quantities of a variety of other exotic horticultural crops like Areca nut, Banana, Cardamom, Cocoa, Coffee, Coconut, Pepper and Vanilla as well as restricted quantities of Organic tea and Spices.

Today, Harrisons Malayalam share price gained over 7 per cent in trade today, majorly because the rubber export is gaining momentum and the company is among the largest producers of rubber. Harrisons Malayalam is the top 500 performing stock for the quarter by Dynamic Levels.

The Rubber export story:

Due to the price advantage, export of rubber has picked up momentum. The price of natural rubber in India which had been reigning high over international market prices since December 2013 has declined in the third quarter of 2016. From the second week of November 2016, the international prices of natural rubber shot up and are currently perched at higher levels compared to Indian prices.

The rise in international rubber price was because of the increased demand for rubber from China, upward trend in crude oil price, appreciation of US dollar etc. Natural rubber is mainly an export commodity in the major natural rubber producing countries like Thailand,

The abrupt upward trend witnessed in international rubber price is due to the existing speculative trend, owing to the aforementioned reasons coupled with the surge in Shanghai and Tokyo Commodity exchanges in China and Japan. In India, natural rubber is usually not an export commodity and the major share of the rubber produced in the country is consumed domestically. So the reaction to speculative price movements due to reasons not specific to domestic market will be comparatively less in India as compared to other major natural rubber producing countries. However, the Indian rubber prices generally track international prices and the market perpetually adjusts to international prices at once, often with a time lag.

Rubber Board is keen in capitalizing on the price advantage by promoting export of natural rubber. This would raise domestic natural rubber price to the world market levels. This will undoubtedly benefit the companies like Harrisons Malayalam, the ones who produce rubber.

Owing to unattractive relative prices, India's exports have been insignificant since 2013-14. In 2016-17, during April to October period, India's natural rubber exports were hardly 650 metric tonnes. Exports gained thrust in November - December 2016 and it is expected that India's natural rubber export may touch around 5000 tonnes during this year.

Rubber Board has been endorsing the brand "Indian Natural Rubber" for exports, by which the quality of rubber exported from the country is certified by the Board. Eighty percent of the export done so far this financial year was under the brand "Indian Natural Rubber". The branding of natural rubber is instrumental in repossessing the market share of Indian exporters as the exports from India have been negligible during the last three years. Export of the natural rubber is an alternative marketing channel and such efforts will help to maintain consistency in the domestic market price.

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