Effect of Seasonal and Cyclical Variation in Prices of Natural Rubber in India

Natural Rubber (NR) an agricultural product is an important raw material in a broad spectrum of industries such as automobile and pharmaceutical. NR sector has its local and global dimensions. Thus the trend and pattern of natural rubber price in India: an, exploratory analysis. Annual average price of natural rubber (NR) in India during the 18 year period from 2000-01 to 2017-18 was analyzed with the objectives of delineating the trend, identifying the different phases and direction of price movement and the contributing factors. Hence, the present study explores the seasonal and cyclical trend in domestic and international prices of natural rubber in India. The month wise seasonal index in domestic and international price of natural rubber was calculated by moving average method. It was lowest in the month of January and November and highest in the month of July and June in domestic and international market respectively. Thus, the farmer could not receive the better price by postponing the sale of produce during the month of September to February to later month of the year. The analysis of cyclical indices in both domestic and international price shows that there is an uneven cycle both in domestic and international market of natural rubber. The NR price in India did not show any significant pattern of consistent movement towards a particular direction in the long run.


Introduction
Demand for Rubber is most evenly distributed over the years but due to abruption of production during monsoon, supply shrinkage occurs.During rain tapping of rubber trees disrupted and production falls, consequently prices would rise at that time, unless there is an acute economic depression or similar negative factors.Hence, the present study explores the seasonal and cyclical trend in domestic and international prices of natural rubber in India (from 2000-01 to 2017-18).Natural rubber price a host of factors have kept sentiments down in the international market throughout the year due to continued global uncertainty, economic slowdown in China, speculation on sharp fall in crude oil prices and possible substitution from NR to petroleum derived synthetic rubber and depreciation in the currencies of major natural rubber exporting countries have exerted downward pressure on international NR prices.

Scope of the study
According to Indian Rubber Board, the demand for natural rubber has been consistently exceeding supply.Still we are not able to exploit the full potential of this crop especially in view of low productivity in our country (CAGR= 0.28%, Rubber board of India, kottayam 2015) compared to other producing countries.The NR is subjected to wide price fluctuations in the domestic as well as international markets.Hence, the analysis of seasonal and cyclical trend to effective forecast the future price and demand for NR in the emerging markets.Based on this area, current study concentrate on objective i.e. to work out the seasonal and cyclical trend of domestic and international prices of natural rubber.

Methodology
To analyses the seasonal and cyclical trend of domestic and international prices of natural rubber, 18 year of period (2000-01 to 2017-18) was selected for the study.And the data are collected from different secondary source.

Estimation of Seasonal Indices of Monthly Data
Most widely used method of measuring seasonal fluctuations i.e. method of moving average was used to calculate seasonal indices.To measure the seasonal variations, prices were calculated employing twelve months ratio to moving average method.The seasonal indices were calculated by adopting the following steps: 1. Generate a series of 12 months moving totals.
2. Generate a series of 12 months moving averages: A series of 12 months moving averages is generated by dividing 12 months moving totals by 12.
3. Generate a series of centred 12 months moving averages.This step involves taking averages of pairs of two subsequent 12 months moving averages and entering between each pair.There are no corresponding moving averages for the first six and last six months.
4. Express each original value as a percentage of corresponding centred moving average.The percentage of moving average represents indices of seasonal and irregular components combined.
5. The next step involves removing the irregular component.
6. Arrange the percentages of moving averages in the form of monthly arrays.
7. Next, the average index for each month is calculated.
8. These averages are to be adjusted in such a way that their sum becomes 1200.This can be done by working out of correction factor and multiplying the average for each month by this correction factor.The correction factor (K) is worked out as follows: Where, K is correction factor and S is sum of averages indices for 12 months, multiply K with the percentage of moving average for each month to obtain the seasonal indices.

Estimation of Cyclical Indices
The residual method of estimating cyclical movement in time series was used for estimating cyclical indices, after eliminating the seasonal variation and trend components.This is accomplished by dividing (Yt) by corresponding (S) for time't' symbolically.These deseasonalized data contain cyclical and irregular components and are plotted against time for examining cyclical behaviour.If there is any existence of cycle, periodicity of cycle is noted.
Analysis of long-term movements (trend) for estimating the long run trend of domestic and international prices of NR, the method of least squares estimate was employed.This method of ascertaining the trend in a series of annual prices involves estimating the co-efficient of intercept (a) and slope (b) in the linear functional form.The equation adopted for this purpose was specified as follows.Annual trends of domestic and international prices for the international markets were computed and compared.The goodness of fit of trend line to the data was tested by computing the coefficient of multiple determinations which is denoted by R2.

Results and Discussion
Variation between international and domestic rubber prices is a key factor that impacts domestic production, exports and 1200 K= S imports.Natural Rubber is a perennial crop, which requires about 6 to 7years from the date of planting to harvest.The production of Natural Rubber peaks during October to January and from February to September the production will be comparatively low.Even then the crop is available throughout the year with some seasonal variations.To understand the seasonality effect of supply in prices we have tried to see the month in which price peaks and the month in which price reaches the bottom for each individual commodity separately Natural Rubber.This has the obvious limitation that the month in which price peaks or reaches the bottom does not imply a season.

Seasonal indices for domestic and international price of natural rubber
As we have seen earlier, the production of Natural Rubber peaks during October to January and from February to September the production will be comparatively low.Even then the crop is available throughout the year with some seasonal variations.We would expect ales seasonal variation in price and intra-year instability for Natural Rubber.This is mainly because of the reason that being an industrial raw material with continuous demand and the storability of Rubber to some extent compared to the other two commodities, supply can be inter-temporarily adjusted.Also it needs to be noted that the demand emanates from large industrial monopolies with sufficient market power to influence the price albeit with low intensity with an open market.
The pattern of variation in price within a year is revealed by seasonal indices, computed for each month from 2000-01 to 2017-18.In order to examine the extent of the seasonal variations in prices, the indices of seasonal variations for both domestic as well as international prices were worked out.To identify the long run seasonal variations, time series data relating to monthly price of natural rubber were subjected to the percentage centred 12 months moving average method and it is presented in the table1.The Table 2 reveals that cyclical trend in domestic and international prices of natural rubber.Cyclical trend in domestic and international prices were analyzed to know the variation in prices over the years.In case of domestic prices, it can be observed that there was an uneven 5 years of cycle, also in case of prices in international market, 5 years of cycle were observed.Large fluctuations in the prices will lead to switching over in area of cultivation from one crop to another commercial crop.It is The analytical Table 1 reveals that, the highest seasonal index was found in the month of July, followed by June and May as the seasonal indices were stood at 104.98, 104.86 and 102.99 respectively of every year in natural rubber due to monsoon and resultantly abruption in NR harvest and less arrival of NR.The lowest seasonal index of domestic price was noticed in the month of January with 95.23 which is closely followed by February with 96.15.The seasonal domestic price indices were above hundred from the month of April to September while below hundred was found in the month from October to March where the market arrivals are more in India.
In case of international price of natural rubber the result revealed that highest seasonal index was found in June (105.48)followed by May (105.01) and April (103.84).The seasonal index showed lowest in the month of November (94.36) followed by October (95.47) and December (96.44).The seasonal index above hundred was found in the month of February to July and below hundred was found in the month of August to January.
Seasonal pattern of natural rubber in domestic and international market showed that the price declined from September to February and reached a lowest point in the month of January.After that they rose continuously and reached peak in July in domestic market and June in International market.This does not imply that the Natural Rubber has very high seasonal price effects.Even though the seasonality is quite regular the seasonal difference may be very low as compared to the other crops.This may lead us to the inference that there is high extent of inter-temporal arbitraging through stock holding and a lot of irregular influences on the price of Natural Rubber.This also is not sufficient to reach a definite conclusion regarding the seasonal effect of prices

Cyclical trend of natural rubber
The oscillatory movements in a time series with a period of more than one year are referred as cyclical trends.The indices for the cyclical price variations in natural rubber of domestic and international prices were worked out by averaging the cyclical-irregular data after eliminating the trend and seasonal variations from the original data.Cyclical trend in domestic and international prices of natural rubber is presented in table 2.
suggested that perfect cycle with regards to variation in prices could be observed if the time series data is for larger period.

Conclusion
Natural Rubber being a perennial crop which involves high investment when compared to seasonal and annual crops, price stability assumes more significance in motivating farmers to make investment in natural rubber plantation.In the price behaviour of natural rubber, seasonal variations, and cyclical variations were observed.Seasonal pattern of natural rubber in domestic and international market showed that the price declined from September to February and reach a lowest point in the month of January (95.23) in domestic market and November (94.36) in international market.After that they rose continuously and reach the peak in July (104.98) in domestic market and June (105.48)in International market.The analysis of cyclical indices in both domestic and international price shows that there is an uneven cycle both in domestic and international market of natural rubber.Annul average prices of all the selected crops have been mostly turned out to be in the contraction phase of the cycle indicating long duration slumps than booms.It is also observed that the annual price has been mostly below the trend for this commodities implying that the price of the natural rubber commodities in general is downward biased.

Table 2
Cyclical trend in domestic and international prices of natural rubber