US may chase big punters, making farm goods cheaper
The US government’s attempt to rein in index funds and mega punters in agriculture futures is striking fear in the hearts of Indian speculators as well.
By Nidhi Nath Srinivas, TNN |
NEW DELHI: The US government���s attempt to rein in index funds and mega punters in agriculture futures is striking fear in the hearts of Indian speculators as well.
Indian soyabean futures have plunged on Ncdex on the news that US commodity markets regulator may tighten the screws on large funds that hold majority of long positions on Chicago and New York exchanges.
Cotton, sugar and corn are the other commodities where Indian prices could react to tighter policing in the US as they are directly linked to US futures.
The portion of each commodity market held by index funds and swap dealers varies from 40% in cattle futures to 15% for other agricultural commodities.
Soyabean futures on Ncdex hit the lower circuit on Wednesday after spiralling continuously for more than a month. "Ncdex crashed because CBoT was down. Today, there has been a marginal recovery. Traders fear that once the Commodity Futures Trading Commission (CFTC) cracks down on index funds and pushes them to unwind positions, prices may drop sharply there," a Mumbai trader said.
Marketmen in the US and India are worried because CFTC has said it will require investors and index funds to disclose more information about their holdings in agricultural markets after farmers and processors alleged speculators had inflated food prices.
"In a globally-integrated market, it is regulatory action in the US than attempts by Indian FMC that would have the maximum impact on pulling down prices," a market watcher said.
CFTC says it will grant fewer exemptions to speculative-position limits related to agricultural index trading and plans to provide more detail on trader holdings starting next month.
CFTC is simultaneously working on ways to improve risk-management choices for farmers and agricultural businesses, including developing alternative financial tools and a plan for the clearing of agricultural swaps, according to a Press release.
Cotton traded on IntercontinentalExchange Inc���s ICE Futures US unit rose to a 12-year high of 92.86 cents a pound on March 5, then fell as much as 26% by March 20 to 69.02 cents.
That should vindicate the Indian textile industry, which had been equally affected by the US futures volatility.
In a letter to the textiles ministry in April, the Cotton Association of India had complained that the market operators had disturbed the equilibrium of the domestic cotton economy, which needs to be corrected.
"We feel a declogging process with an eye to restoring the flow of supply to consumption and exports is necessary," it had stated.
Indian soyabean futures have plunged on Ncdex on the news that US commodity markets regulator may tighten the screws on large funds that hold majority of long positions on Chicago and New York exchanges.
Cotton, sugar and corn are the other commodities where Indian prices could react to tighter policing in the US as they are directly linked to US futures.
The portion of each commodity market held by index funds and swap dealers varies from 40% in cattle futures to 15% for other agricultural commodities.
Soyabean futures on Ncdex hit the lower circuit on Wednesday after spiralling continuously for more than a month. "Ncdex crashed because CBoT was down. Today, there has been a marginal recovery. Traders fear that once the Commodity Futures Trading Commission (CFTC) cracks down on index funds and pushes them to unwind positions, prices may drop sharply there," a Mumbai trader said.
Marketmen in the US and India are worried because CFTC has said it will require investors and index funds to disclose more information about their holdings in agricultural markets after farmers and processors alleged speculators had inflated food prices.
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"In a globally-integrated market, it is regulatory action in the US than attempts by Indian FMC that would have the maximum impact on pulling down prices," a market watcher said.
CFTC says it will grant fewer exemptions to speculative-position limits related to agricultural index trading and plans to provide more detail on trader holdings starting next month.
CFTC is simultaneously working on ways to improve risk-management choices for farmers and agricultural businesses, including developing alternative financial tools and a plan for the clearing of agricultural swaps, according to a Press release.
Cotton traded on IntercontinentalExchange Inc���s ICE Futures US unit rose to a 12-year high of 92.86 cents a pound on March 5, then fell as much as 26% by March 20 to 69.02 cents.
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That should vindicate the Indian textile industry, which had been equally affected by the US futures volatility.
In a letter to the textiles ministry in April, the Cotton Association of India had complained that the market operators had disturbed the equilibrium of the domestic cotton economy, which needs to be corrected.
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"We feel a declogging process with an eye to restoring the flow of supply to consumption and exports is necessary," it had stated.
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