Impact of production consumption, exports and stocks on the price of natural rubber in Sri Lanka

Abstract

The relationship between price of Natural Rubber (NR)with factors such as:production,consumption,exports and stocks are important in identifying the nature of competetion and therefore reveals the market structure for NR.This paper examines these relationships and also the seasonal variation of these factors,using time series statistical tools,viz Cross Correlation Functions (CCF)and seasonal indices. There is a marked seasonality in production with values below average during April to October (2nd and 3rd quarters).Prices tend to fall when the production rises.A similar phenomenon was observed between price and exports.However,the effect of production or exports on price is mild. A similar pattern of seasonal variation was observed for consumption and stocks of NR.More rubber is consumed during the latter part of the year.An accumulation of stocks was observed towards the end of the year.However,price of NR was not significantly related to consumption or stocks.This is mainly due to the fact that only a few buyers influence prices through their purchase and by adjustments of stocks as in an oligopolistic market.