FMC allows commexes to log into onion futures
Hopefully onions will no longer reduce the government to tears. The Forward Markets Commission (FMC) has allowed both the National Commodity & Derivatives Exchange (NCDEX) and Multi Commodity Exchange of India (MCX) to launch onion futures.
By Nidhi Nath Srinivas, TNN |
NEW DELHI: Hopefully onions will no longer reduce the government to tears. The Forward Markets Commission (FMC) has allowed both the National Commodity & Derivatives Exchange (NCDEX) and Multi Commodity Exchange of India (MCX) to launch onion futures. The NCDEX has also received permission to start a contract in potatoes.
Spuds are already amongst the hottest items on MCX, with an open interest that beats bullion and metals. India is the world’s second-largest onion producer.
Onions have been the focus of the government’s attention since ’05 when soaring prices led to a scarcity and absurdly long queues. However, this was followed by a record crop this season of around 82 lakh tonne, leading to rock bottom prices for farmers. To protect farmers from such volatility, it was thought necessary to launch onion futures.
“Availability of futures will enable better transmission of price signals to farmers. That ought to reduce spot market volatility. Right now, farmers are forced to sell to a handfull of local traders, who immediately stop buying when they see prices rising,” said an NCDEX official.
As onions are highly perishable, growers are usually unable to hold on to their crop for too long. That sharply reduces their risk-taking ability. Both exchanges are now expected to start marketing the onion contract among industry stake holders. However, it remains to be seen whether there will be sufficient volumes traded to sustain two similar contracts on competing exchanges.
In potatoes, NCDEX will not be enjoying first-mover advantage because it has to compete with MCX’s successful existing contract. But as NCDEX will be offering a compulsory delivery multi-centre contract, officials are expecting it to generate wider interest. NCDEX will have delivery centres in Delhi, Agra, Jalandhar, and Farukhabad.
Apart from onions, MCX has also sought approval for launching forward contracts on jute, ginger and kufri jyoti potatoes. Popularly known as Bengal potatoes, kufri jyoti is the dominant potato variety available in West Bengal, the second-largest potato producing state in the country.
The exchange launched futures on the 3,797 variety linked to the Agra mandi in Uttar Pradesh in March ’06. UP is the largest potato producing state in the country.
Spuds are already amongst the hottest items on MCX, with an open interest that beats bullion and metals. India is the world’s second-largest onion producer.
Onions have been the focus of the government’s attention since ’05 when soaring prices led to a scarcity and absurdly long queues. However, this was followed by a record crop this season of around 82 lakh tonne, leading to rock bottom prices for farmers. To protect farmers from such volatility, it was thought necessary to launch onion futures.
“Availability of futures will enable better transmission of price signals to farmers. That ought to reduce spot market volatility. Right now, farmers are forced to sell to a handfull of local traders, who immediately stop buying when they see prices rising,” said an NCDEX official.
As onions are highly perishable, growers are usually unable to hold on to their crop for too long. That sharply reduces their risk-taking ability. Both exchanges are now expected to start marketing the onion contract among industry stake holders. However, it remains to be seen whether there will be sufficient volumes traded to sustain two similar contracts on competing exchanges.
In potatoes, NCDEX will not be enjoying first-mover advantage because it has to compete with MCX’s successful existing contract. But as NCDEX will be offering a compulsory delivery multi-centre contract, officials are expecting it to generate wider interest. NCDEX will have delivery centres in Delhi, Agra, Jalandhar, and Farukhabad.
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Apart from onions, MCX has also sought approval for launching forward contracts on jute, ginger and kufri jyoti potatoes. Popularly known as Bengal potatoes, kufri jyoti is the dominant potato variety available in West Bengal, the second-largest potato producing state in the country.
The exchange launched futures on the 3,797 variety linked to the Agra mandi in Uttar Pradesh in March ’06. UP is the largest potato producing state in the country.
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