Futures trading on grains may resume in Jan

MUMBAI: With futures trading expected to resume in soya oil, rubber, potato and chick peas (chana), the commodity market regulator Forward Markets Commission (FMC) is hoping that the futures trading ban on wheat, lentils and rice could be lifted by January next. Sometime in early ���07, the government had banned futures trading in these products on the ground that it was pushing up spot market prices.

FMC chairman BC Khatua has submitted a report 10 days ago to the government, explaining the rationale for lifting the ban. "Supply-side pressures are easing and acreage is also up in most commodities. We are hopeful that trading may resume before February-March when harvesting of the new wheat crop starts," Mr Khatua said.

Of the four commodities, urad was the most actively traded on the futures bourse NCDEX, churning out a daily trading turnover of over Rs 400 crore. In comparison, wheat and tur generated daily volumes between Rs 70 and Rs 90 crore, while rice contracts saw very little volumes.

Pulses Importers Association president KC Bhartiya on Tuesday met FMC chairman and urged him to lift the ban on pulses trading since prices in the wholesale markets were down by 25-50%. "Traders can use the commodity bourses to hedge their exposure in pulses that are mainly imported from Myanmar," he said.

Earlier, an expert committee headed by Abhijit Sen was constituted to study the impact of futures trading on agricultural commodity prices. Wheat, urad, tur and rice were among the products that were considered in the report.
However, the report was inconclusive on the possible impact of futures trading on spot prices. Since futures trading is a recent phenomenon and a string of the variables impact spot prices, it was difficult to ascertain a definite correlation.

Interestingly, though, Mr Sen���s supplementary note to the report said that in case of wheat there was some evidence that "futures trading may be associated with factors that can impede the operation of the public system of grain procurement, storage and distribution."

When contacted, Mr Sen said that when the report was submitted wheat prices were ruling very high and it wasn���t the right time to lift the ban. "Though wholesale prices had come down retail prices were still high.". He further added that the government should adopt a consistent approach in respect of its policies on futures trading in these commodities.