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Impact of falling price of Rubber-A case study of Kothamangalam Taluk IJED 16(1) J-
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DOI: 10.35716/ijed/19142

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Impact of Falling Price of Rubber- A Case Study of

KothamangalamTaluk in Ernakulam District
1* 2
O.P. Ali and P.K. Manoj
1
Research Scholar, Research and Development Centre, Bharathiyar University, Coimbatore-641046 (Tamil Nadu), and
2
Assistant Professor, Department of Applied Economics, Cochin University of Science and Technology,University Road,
South Kalamassery, Kalamassery, Kochi-682022 (Kerala)

*Corresponding author's email: opaliodamkulath@gmail.com

Received: December 08, 2019 Manuscript Number: MS-19142 Revision Accepted: March 20, 2020
ABSTRACT
The rubber sector in Kerala is passing through an unprecedented crisis. Falling prices had adversely affected the production and
productivity of rubber in the state. The price instability made the rubber cultivation unattractive now a day. Many farmers have stopped
the cultivation switching over to other crops. This study examined the impact of falling prices on rubber cultivation. This was a pilot
study conducted by the researcher as part of his research work on the rubber economy of Kerala-Presents problems and prospects'. The
primary data were collected from 60 rubber growers of Nellikuzhi and Paiprapanchayath in Ernakulam district through a structured
questionnaire using a random sampling technique. The results revealed that the falling price of natural rubber adversely affected the
rubber production, productivity and thereby the life and livelihood of millions of cultivators in different dimensions. Farmers were
reluctant to care for their plantations regularly, reduced the number of tapping days and some of them had even quitted the cultivation
by switching over to other crops causing increased indebtedness and overdue in bank loans. These adverse situations necessitated both
short-term solutions and long-term policy interventions including the review of import policy to bail out the sector from the crisis.

Keywords
Economic development, livelihood, natural rubber, policy interventions, price instability.

JEL Codes
Q02, Q12, Q13.

INTRODUCTION rubber mainly comes from the state of Kerala. Kerala

Natural rubber is extracted from the milky fluid latex
derived from the Hevea Brasiliensis tree. It possesses
qualities such as stretchiness and flexibility, which make
it useful for a variety of industrial and household uses. The
rubber tree is a native of the Amazon River basin in South
America. It is a unique renewable resource of nature. The
development of natural rubber cultivation in India has
stimulated the economy of the country to a great extent as
it has played a major role in setting up infrastructure
facilities and for employing millions of people especially
in the state of Kerala. Natural rubber occupies a dominant
position among the plantation crops in India. India is the
fifth largest producer of natural rubber in the world.
Natural rubber production in the country during 2018-19
was 651,000 tonnes registered a negative growth of
6.2percent compared to a slight growth of 0.4 percent
during the previous year. India's contribution to natural
©2020 The Society of Economics and Development
contributes to about 75 percent of the planted area and
about 89 percent of the national production. Kerala is the
single largest rubber producing state in India accounting
for 91 percent of total natural rubber production. Kerala
and Tamil Nadu are considered the traditional rubber
growing regions in the country. Kerala holds a near-
monopoly position in the cultivation and production of
natural rubber in India and the state was maintaining this
unique position since the introduction of natural rubber
cultivation in the country.
Falling price and its unstable nature are some of the
serious problems faced by the rubber growers in India
especially after the introduction of new economic policies
in the country. Natural rubber price has witnessed a wide
range of fluctuations for the last two decades consequent
to the variations prevailing in the international market.
Since 2000-01, rubber price again showed an upward

118
 Ali and Manoj: Impact of falling price of rubber
movement, which continued until 2011with some minor
fluctuations, but since 2011, rubber prices showed a sharp
downward trend. With a recorded growth rate of -
33.455percent in the price of natural rubber during 2010-
11 to 2014-15, the present market price (around `120 per
kg) was not even 50 percent of what prevailed a few years
ago. Around 13 lakhs of small rubber cultivators were
facing a severe crisis due to a fall in price.
Continuous fall in the price of rubber had turned the
life of rubber growers' especially small and marginal
cultivators miserable. It had a serious impact on their
livelihood. In recent years, witnessed unprecedented
volatility in rubber prices. Rubber growers in the state
were going through a difficult situation as the price of
natural rubber had crashed down to `120 per kg or below
in recent years which was just half of the price prevailed
before in the market. The declining trend in the prices of
rubber pushed natural rubber production to the lowest in
the country. Rubber growers even find it difficult to meet
the cost of production; as a result, many of them stopped
tapping rubber, which led to a decline in the productivity
of rubber in the country. Some resorted to the unscientific
way of cultivation. There was demand from various
sectors for urgent state intervention to save the
cultivators. This study was conducted as a part of
collecting feedback on the impact of falling price on the
life and livelihood of rubber growers of Ernakulam
district of the state Kerala. The field survey was pilot
study carried out by the researcher a part of his research
work at Bharathiyar University, Coimbatore. The
objectives of the present study was to understand the
impact of the falling price of rubber on the life and
livelihood of the rubber growers of Kerala. Specifically,
the following are the objectives of the present study.
i. To understand the socio-economic profile of the
rubber farmers in Ernakulam district of Kerala, and
ii. To study the impact of falling rubber prices on the
life and lively hood of rubber growers.
Review of Literature
Lekshmi, Mohanakumar, and George (1996)
investigated the trend and pattern of natural rubber prices
in India. The analysis the annual average price of natural
rubber in India from 1968-69 to1994-95 with the
objectives of explaining the trend, identifying the
different phases and direction of price movement and the
contributing factors was carried out. It was concluded that
the natural rubber price in India showed no significant
pattern of consistent movement towards a particular
direction in the long run. Two broad phases (1968-69 to
1984-85 and 1985-86 to 1994-95) of natural rubber price
movement were identified. Wide but less frequent
fluctuations and mild but frequent fluctuations were the
characteristics of the first and second phases respectively.
The study revealed that among the different economic
variables, viz., production, consumption, stock, import
and world price of natural rubber, the production of
119
natural rubber was found to be the most significant
variable influencing the price.
Budiman (2002) analysed the global trend with
respect to the price of natural rubber (NR).Natural rubber
became more of a social commodity affecting the
livelihood of over 30 million smallholders all over the
world and hence the price of natural rubber became the
most significant issue. It was observed that supply and
demand were major factors that influenced the price of
natural rubber and hence the price was more or less
managed well within a certain price band, which
collapsed only in 1999 under the unprecedented Asian
crisis. Even short-term price forecasting of rubber was
difficult due to several interrupting factors such as
currency movements, climatic conditions in major rubber
producing countries, price of synthetic rubber, and market
interventions.
Varkey and Kumar (2013) examined the problem of
price volatility of rubber and its impact on rubber
cultivation and rubber growers. The price volatility was a
recurring phenomenon in the country since the
abandonment of protectionist trade policies in India from
1991. The price volatility in natural rubber increased
during the post-reforms period due to the convergence of
markets. It was observed that the unstable nature of rubber
prices in the late 1990s brought various changes in the
agro-management practices as the farmers started
resorting to various cost-saving measures like reduction
in the application of chemical fertilizers, curtailment of
weeding practices in rubber plantations and spraying of
fungicides and pesticides, etc. The Government of India
introduced Price Stabilisation Fund in April 2003 to
support the farmers including tea, coffee rubber, and
tobacco cultivators and this study mainly examined the
performance of price stabilization funds in mitigating the
problems of farmers including rubber. The study also
employed primary data collected using a multistage
random sampling technique from Kaduthuruthy and
Pampady blocks of Kottayam district of Kerala. The
total120 farmers consisting of 60 each of price
stabilisation fund beneficiaries and non-beneficiaries,
with and without access to finance were surveyed. The
study revealed that the income of the PSF beneficiaries
with access to finance was higher than that of PSF
beneficiaries without access to finance. The study
suggested that the PSF scheme should be redesigned in
such a way that the banks provided loans to beneficiary
farmers at low interest rates and also the scheme should be
tied with insurance and credit and to be implemented as a
package to mitigate the problems of growers due to
decrease prices.
Alexander and Haran (2016) examined the present
position of natural rubber in Kerala, the trend in its import
and export, production and consumption pattern of
synthetic rubber and the effect of the decline in rubber
prices on small scale rubber cultivators. The primary data
from 120 rubber cultivator households of Vallicode
 Indian J Econ Dev 16(1): 2020 (January-March)
Panchayath of Pathanamthitta district through pre-tested
schedules using a random sampling technique was carried
out. The results revealed that the profitability of rubber
depended on the extent of its cultivation. Regarding the
crisis of recent price decline prevailing in the sector, the
results revealed declining prices was forcing a large
number of small-scale rubber growers to abandon
cultivation due to high tapping charges and low prices. It
was suggested that the national policy promoting the
import of rubber should be reviewed to address the
livelihood concerns of over a million rubber growers.
Raju (2016) revealed that natural rubber prices
showed high volatility in the last twenty years. It was
pointed out that a variety of factors contributed to the
instability in prices. The economic slowdown in the
developed and developing countries, a sharp fall in crude
oil prices and subsequent decline in synthetic rubber
prices and depreciation in the currencies in natural rubber
exporting countries had contributed to the decline in
natural rubber prices in the producing countries. The
results revealed that remunerative price affected the
planting decisions and production in India. The decline in
oil prices and the consequent decrease in the price of
synthetic rubber was the major reason for the slump in
natural rubber prices in the international market. The
study suggested a farm income stabilization programme
for the long-run growth of the rubber plantation sector.
Nambiar and Balasubramanian (2016) examined the
impact of falling rubber prices with respect to the
Kottayam district in Kerala. The fundamental factors that
influence the price of Natural rubber in India were
analyzed. The study utilized mainly secondary data from
various sources of rubber board. The impact of fall in
rubber prices concerning farmers in Kottayam district
was undertaken. The data were collected through personal
interview method. The study showed that the living
condition of rubber cultivators was poor. Fall in rubber
prices affected the livelihood of farmers who depended
only on rubber cultivation. Many of them had taken
agricultural loans from banks or other private financing
companies to meet the expenses of rubber cultivation.
Without a minimum profitable price and support from the
government and rubber board, it would be difficult for
rubber growers to continue cultivation.
Ali and Manoj (2017) examined the impact of price
volatility on rubber cultivation in India at a macro level.
The various factors that caused instability in the price of
natural rubber and evaluated its impacts on the
performance of the rubber economy in India. The study
revealed that instability in price had a serious impact on
production, consumption, export and even land-use
patterns in the agriculture sector in India. Due to the
decline in prices, farmers are forced to reduce the
harvesting days, and application of essential inputs like
fertilizers and pesticides and abstained from the proper
maintenance of rubber trees. These developments harmed
the production of natural rubber. The results suggested
120
strategies for the sustained growth of the rubber economy.
Ali and Manoj (2018) sought to trace the major
developments in the institutional credit to agriculture in
India and provided some macro-level suggestions for the
sustained growth of India's agricultural sector by way of
ensuring effective and timely agricultural credit to the
agriculturists.
METHODOLOGY
In the study, the researcher used both primary and
secondary data. The primary data were collected from the
selected rubber growers through a sample survey. Small
Rubber growers from Ernakulam districts constituted the
population of the study. Ernakulum is one of the three
major rubber-producing districts in Kerala as per the data
of rubber board. Ernakulam districts consisted of 8 taluks
in which Thodupuzha, Muvattupuzha, and
Kothamangalam were the three taluks that covered the
largest area under rubber cultivation. Kothamangalam
taluk was selected. From the Regional Rubber Board,
Kothamangalam, three Rubber Producers Societies
(RPS) were identified, namleky Plamudy RPS,
Kottappady RPS, and Mekkappala RPS. With the help of
the office bearers of these RPSs, questionnaires were
distributed among the rubber growers registered under
these rubber producers societies and information was
gathered. At the next stage 20 growers each RPS were
approached using a structured schedule to elicit the
information about the present problem of price fall and its
impact on their life. The detail is provided in Table 1. The
perusal of Table 1 showed that out of 60 respondents, 20
respondents are from Plamudy Rubber producers Society,
20 are from Kottappady RPS and the remaining 20
respondents are from Mekkappala RPS. Among the three
RPS, Plamudy RPS is the best performing RPS with a
maximum number of participants of cultivators.
A simple random sampling method was used to select
the respondents. The secondary data were collected from
the official website of Rubber Board, various publications
on rubber published by Rubber board and other related
agencies. Simple statistical tools like growth rate, ratios,
graphs, tables, etc. were used to analyse the data.
Scope of the Study
This study would provide the researcher an insight
into the main problems of rubber growers such as fall in
price and its impact on the socio-economic life of farmers.
Being a pilot study, pre-testing of the schedule helped to
understand the validity and reliability of the research
instrument used for the field inquiry. The preliminary
study would also useful to evaluate feasibility, time and
cost and to improve the study design before perform a
full-scale research project.
Limitations of the Study
Many of the small farmers had no habit of keeping the
correct records of the accounts related to the production
and sale of the rubber. Hence, the information provided by
them cannot be taken as 100percent accurate. The study
was restricted only to Ernakulam district. Hence,
 Ali and Manoj: Impact of falling price of rubber

inferences about other rubber growing regions may be Table 1. Sample selection
taken with due reservation. District Rubber producer's Frequency Percentage
RESULTS AND DISCUSSION societies
Demographic Features of Rubber Growers Ernakulam Plamudy 20 33.3
Age-wise distribution of the growers
The perusal of Table 2 revealed that out of 60 Kottappady 20 33.3
respondents, more than 60 percent of them belonged to Mekkappala 20 33.3
the age group of 40-50.Another 23 percent belonged to Total 60 100.0
the age group above 50.Thus it was noted that more than Source: As per the research design.
85 percent of the rubber growers in the sample belonged
to the age of 40 and above. The increased percentage of Table 2. Age-wise and gender-wise distribution of the
growers from this age category revealed the fact that most growers
of them were experienced cultivators. Particulars Frequency Percentage
Gender-wise Classification of Growers Age (Years)
Among the respondents, 91.6, and 8 percent were
males and females. In reality, female rubber growers 31-40 8 13.3
constituted even a lesser percentage than mentioned in the 41-50 38 63.3
study because the majority of the females who responded Above 50 14 23.3
to the survey were not rubber growers. At the same time, it Total 60 100.0
was noted that, a large number of females supported their
Gender
male counterparts in rubber cultivation at various stages
of rubber production such as tapping, collection of latex Male 55 91.6
and processing of rubber sheets. Female 5 8.33
Educational status of the respondents Total 60 100.0
The educational status of the respondents revealed Source: Field Survey.
that more than 55 percent of the rubber cultivators were
qualified higher secondary and above whereas 28 percent Table 3. Educational status of the respondents
had completed secondary education (Table 3). Thus the Educational status Frequency Percentage
result disclosed that the majority of the rubber growers
(83 percent) in the state were educated who had Primary 9 15
completed secondary education and above. The Secondary 17 28.3
achievements of the state in the field of education were Higher secondary and above 34 56.6
remarkable and reflected in all spheres of the social life of Total 60 100.0
the people of the state. Source: Field Survey.
Experience in Rubber Cultivation
As high as 36.6 percent had more than 15 years of Table 4. Experience in rubber cultivation
experience in rubber cultivation. Another 30 percent of
Experience in rubber Frequency Percentage
the respondents had 10 to 15 years of experience.
cultivation (Years)
Cumulatively, 66.6 percent of them were cultivating
rubber for more than 10 years. Only 11.6 percent of Below 5 7 11.6
cultivators had less than 5 years' experience (Table 4). 5-10 13 21.6
Distribution of Rubber Cultivators according to Area 10-15 18 30
of Cultivation
Above 15 22 36.6
As revealed earlier studies that the small growers
constituted more than 90 percent of rubber cultivation in Total 60 100.0
the state. The results showed that among the respondents, Source: Field Survey.
28 percent had less than one acre area under rubber
cultivation. The results revealed that 53.6, and 18.3 percent Table 5. Distribution of rubber cultivators according to
of respondents had 1 to 3, and 3 acres or above of land the area of cultivation
under rubber cultivation (Table 5). The majority of the local (Acres)
were not full-time rubber cultivators. Some of them were Area under rubber cultivation Frequency Percentage
running a small business and few of them had casual jobs. Less than 1 17 28.3
Agriculture and animal husbandry were the other major
1-3 32 53.6
source of income for many families. It was found that 18
percent of the respondents who owned more than 3 acres of 3 and above 11 18.3
land practiced rubber growing as their full-time job. Most Total 60 100.0
of the growers had inherited the land from their ancestors. Source: Field Survey.

121
 Indian J Econ Dev 16(1): 2020 (January-March)

Major Problems of Rubber Growers presented in Table 8. The present prices of rubber were not
Almost all the respondents responded that declining at all remunerative due to inadequacy to meet the cost of
price and volatile nature were the main problem. This production as opined by the majority of the growers
phenomenon existed in the market for the last few years surveyed. The majority of the farmers especially those
and its intensity was very high especially after 2012. having area less than 2 acres had opined that rubber
Falling price of rubber affected the life and livelihood of cultivation was not at all profitable. More or less similar
the farmers in different ways. The sharp fall in natural the results were reported by Alexander and Haran (2016).
rubber price caused deep concern in Kerala as the state Feedback of the Rubber Cultivators regarding the
accounted for over 80 percent of the domestic production Impact of Falling Price of Rubber
of the commodity. During the field survey, rubber cultivators were asked
Present Trend in Market Price of Natural Rubber about the problems faced relating to the falling price of
To understand the severity of price fluctuation, an rubber and the impact of market prices on the
analysis of the trend in the price of rubber since 2000 is
given in Table 6. The average market price of rubber in Table 6. Natural rubber price
India was `3036 per 100 kg in 2000-01. There was an (`per 100 kg)
upward moving trend in price until 2011 as the price
Year Actual price Percentage change
increased to `20805 per 100kg during this period.
However, since 2012, rubber prices showed a constant over the previous year
negative trend which was continuing until today. From 2000-01 3036 -
`208per kg, rubber price fell to `113 per kg depicted 2001-02 3228 6.32
around 50percent decline in market price in 2015-16.The 2002-03 3919 21.41
negative trend was continuing with slight variations.
The Natural rubber price in the country showed wide 2003-04 5040 28.60
fluctuations during the last two decades. This wide range 2004-05 5571 10.54
of instability in price affected the rubber cultivation and 2005-06 6699 20.25
thereby the life and livelihood of cultivators in different 2006-07 9204 37.40
dimensions. Earlier, an upward-moving trend attracted
many farmers to rubber cultivation, which made the state 2007-08 9085 -1.30
of Kerala a number one producer of natural rubber in the 2008-09 10112 11.30
country with record productivity of 1841 kg per ha in 2009-10 11498 13.71
2011-12. It reduced to 1813kg per ha in 2012-13 and 1629 2010-11 19003 65.27
kg per hain2013-14. The trend deteriorated after 2014-15.
2011-12 20805 9.48
The productivity of natural rubber was 1437 kg per ha in
2015-16. The growth rate of productivity from 2012-13 to 2012-13 17682 -20.20
2015-16 was -20 percent. 2013-14 16602 -6.10
Feedback of the Growers regarding the Market Price 2014-15 13257 -20.14
of Rubber
2015-16 11306 -14.7
The feedback from the rubber cultivators regarding
the market price of rubber revealed their concerns and 2016-17 13549 19.83
apprehensions, as well as their expectations. Now, these 2017-18 12980 -4.19
concerns were duly ranked based on their relative gravity 2018-19 12595 -2.96
in terms of the weighted scores for the respective are Source: Rubber Board, 2019.

Table 7. Feedback of cultivators regarding market prices of rubber

Particulars Strongly Disagree Neutral Agree Strongly Weighted
disagree agree scores
The present price of rubber is not remunerative. 2 3 1 21 33 260
The market price of rubber is inadequate to meet the 2 4 2 24 28 252
production cost of the rubber.
Constant price fluctuations make cultivation 3 5 2 26 24 243
miserable.
I can stay in cultivation only if I get at least 4 4 3 28 21 238
`200 per kg of rubber.
Often I don't get price given in newspapers. 3 5 4 31 17 234
Source: Field Survey.

122
 Ali and Manoj: Impact of falling price of rubber

Table 8. Feedback of cultivators regarding the impact of falling prices of rubber

Particulars (Opinion regarding the impact of Strongly Disagree Neutral Agree Strongly Weighted
the falling price of rubber) disagree agree scores
Reduced the tapping days to adjust the cost. 1 3 3 23 30 258
Price fall led to indebtedness /dues in banks. 2 2 2 28 26 254
Price fall forced to cut trees and start other crops. 2 2 1 31 24 253
Price fall affected my standard of living. 1 2 2 34 21 252
Planning to quit cultivation, being unviable. 2 3 5 33 17 240
Source: Field Survey.

sustainability of rubber cultivation, their expectations
regarding minimum prices, etc. Their feedback was
ranked using a 5-point scale (Table 8).
The responses of the rubber cultivators under study
regarding the falling price of natural rubber on various
aspects of cultivation, their livelihood like, properly
taking care of rubber trees, the impact of production and
productivity, indebtedness and overdue in banks, the
standard of living, etc. were collected. The major seven
impacts in terms of their adverse implications are
presented in Table 8. It was noted that the falling trend in
prices made even the basic duties like taking proper care
of the rubber trees rather unaffordable for the rubber
growers. Besides, there were very discouraging
consequences like fall in production and productivity,
reduced number of tapping days, growing indebtedness
and overdue in bank loans, etc. These results were in
consonance with the findings of Nambiar and
Balasubramanian (2016).
The declining price of rubber had its worst impact on
the life and lively hood of more than one million
cultivators in the state. It affected the standard of living of
the farmers in the state. Many of them had taken
agricultural loans from banks or other private financing
companies to meet the expenses of rubber cultivation.
Falling price increased their indebtedness. It adversely
affected the consumption pattern and lifestyle of the
growers. The recent newspaper from Kottayam revealed
that there was a sharp decline in spending of the major
rubber producing districts in Kerala especially for
conspicuous consumption. During the period of price
hike, some years ago, luxury cars and construction of
swanky villas were a common sight. Today, the scenario
changed drastically. Falling rubber price affected the
automobile industry, supermarkets, luxury hotels, and
even the retail shops. Earlier, when the rubber price was at
their peak, buying plantation was a costly affair. The price
of land shot up as more and more land got converted into
rubber plantations. However, today, along with the falling
rubber prices, real estate prices were crashed.
Declining prices affected the rubber cultivation in the
state adversely in different ways. Many of the growers
were not taking care of the rubber trees regularly and
stopped application fertilizers and pesticides. Besisdes
regular weeding of the plantation was withdrawn. Recent
reports revealed that frustrated by the sagging price, some
farmers in the statebegsn switching to other crops or
finding jobs in factories and mines, say dealers and
industry groups. Some of them resorted to unscientific
methods of tapping rubber trees. Many farmers reduced
the number of tapping days. As a result, the production
and productivity of rubber in the state showed a sharp
declining trend during the last few years.
Production and Productivity Trend during Price Fall
It is clear from Table 9 that along with slight growth in
the area under cultivation, the period since 2011 witnessed
a sharp decline (-15.7 percent) in production and a still
sharper decline in yield (-16. 9 percent).The declining
production and yield were caused by the unwillingness of
farmers to tap the rubber trees since the prevailing price is
not sufficient to cover their cost of production, though
farmers had an area with trees of tapping age.
Table 9. Growth on area, production, and productivity of
natural rubber
Year The growth The growth The growth
rate in tapped rate in rate in yield
area production
1953-1977 5.13 9.68 4.56
1978-1983 4.40 8.03 3.64
1994-2010 1.55 3.52 1.94
2011-2015 1.19 -15.71 -16.90
Source: Rubber Board Statistics Bulletin, various issues.
CONCLUSIONS
The result of the study revealed that rubber
cultivators in Kerala were going through one of the worst
phases of price fall during these years. The costs of
production increased substantially. There was a sharp
increase in tapping costs over the past few years. The cost
of chemicals, labour, and land development had gone up,
too. The price volatility adversely affected the production
and productivity of rubber in the state. The living
conditions of the majority of them were very poor. Their
earnings from the rubber sector were not sufficient to
meet their expenditure and hence some of them had
already quit the cultivation. The sector was reeling under
crisis for the past three years, forcing a large number of
rubber growers to abandon cultivation due to high tapping

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 Indian J Econ Dev 16(1): 2020 (January-March)
charges and low prices. There was demand from various
corners to frame suitable policies to save the farmers from
the crisis. Stakeholders in the industry sought the centre
and state government's immediate intervention to arrest
further fall in the price of rubber through appeals,
memoranda and even strikes. The import policy of the
government was considered as one of the main reasons
behind the declining price of natural rubber in the country.
In this context, reviewing the import policy to curb import
and improve domestic price was an urgent solution to save
millions of cultivators who mainly depended on rubber as
their livelihood.
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