Natural Rubber Prices - Behaviour and Volatility: Evidence from Indian and International Markets

Abstract

Natural rubber (NR) is a strategically important agricultural commodity in India and the global market, and its prices are characterised by significant variability, posing income risk to producers and market participants. The present study examined the behaviour and volatility of NR prices in domestic and international markets with the objective of analysing long-term trends, seasonal patterns, cyclical movements, irregular variations and price instability. Monthly price data for different grades of Ribbed Smoked Sheet (RSS) in the Kottayam market of India and RSS3 in the Bangkok market were analysed for the period from 1985 to 2025 using classical time series decomposition techniques along with intra-annual and inter-annual volatility measures. The results revealed a strong secular upward trend in NR prices across all grades, with a pronounced peak during the global financial crisis period (2008–2012), followed by a decline and subsequent recovery after 2020. Seasonal price behaviour remained stable over time, with higher prices during monsoon months due to reduced tapping activity and lower prices during periods of increased supply. Cyclical fluctuations intensified in the post-liberalisation period, particularly in the international market, reflecting stronger integration with global trade. Volatility analysis indicated that both intra-annual and inter-annual price instability increased across Period I (1985–1994), Period II (1994–2003), and Period III (2003–2015), with the highest volatility observed during Period III, while inter-annual volatility consistently exceeded intra-annual volatility. The international RSS3 series exhibited greater volatility than domestic prices, highlighting higher global market sensitivity. A moderation in price volatility during Period IV (2015–2025) coincided with the implementation of the Rubber Production Incentive Scheme, suggesting its stabilising influence. The findings indicate that although NR prices have increased over the long run, volatility remains an inherent feature of the market, underscoring the need to strengthen price stabilisation mechanisms and improve market intelligence systems to mitigate income instability among rubber growers.