MCX to unveil new sugar contracts from Oct 17

MUMBAI: The Multi Commodity Exchange of India (MCX) has announced the launch of a new modified Sugar M grade and Sugar S grade contracts with a six-month trading horizon. Trading in modified sugar contracts would be available from October 17, ’06. All the contracts will start on 21st of every month and expire on 20th of every contract expiry month.

The main reasons for modification are to provide longer period of contracts for better price discovery and also to facilitate participants to lock in their hedge positions for a longer period. Sugar S grade has been made Kolhapur-based as being the major production hub. This will facilitate the mills to discover price near the producing area.

Whereas, for Sugar M grade the price discovery is mainly done at the consumption centres. MCX ex-Delhi Sugar M contract facilitates such price discovery.

“MCX sugar contracts are advantageous to both buyers and sellers, who are giving and taking delivery at any of the delivery centres of their preference. The final settlement in case of delivery would be on par basis for that delivery centres,” an MCX official said.

As per the (modified) contract specifications, daily price limit is 4%, initial margin 5% and tick size Re 1. Trading unit is 10 metric tonne and delivery unit is 10 tonne. Quality specification basis for both M and S grade of Sugar would be 100 -175 ICUMSA.

Basis price for sugar M-30 grade is ex-warehouse Alipur, Delhi and the additional delivery centres are Kolkata and Kanpur, while the basis price for Sugar S-30 grade is ex-warehouse Kolhapur and additional delivery centres are Vashi, Ahmednagar, Nasik, Vijaywada, Surat, Indore, Bangalore and Coimbatore.

Domestic sugar production is expected to touch 235 lakh tonnes for ’06-07 season. Domestic consumption for the season ending ’06 has been pegged at 198 lakh tonnes, according to industry sources.