Trade bodies urge restarting commodity futures ahead of kharif harvest

They say lifting of ban is in the interest not only of farmers and consumers, but also processors and downstream industry

With the harvesting of kharif crops about to start in the next few months, a clutch of trade bodies and farmer groups have approached the authorities to lift the ban on futures trading of various agricultural commodities.

The Central Organisation for Oil Industry and Trade (COOIT) and the Mustard Oil Producers Association of India (MOPA), along with some Farmer-Producer Organisations (FPOs) recently wrote to various stakeholders to lift the ban on futures trade in the interest of farmers, consumers, processors and downstream industry.

Prior to that, the product advisory committee on turmeric had rejected calls for banning futures trade in the commodity on the grounds that it has ‘not found’ any unusual movement in price of the commodity.

Meanwhile, the mustard producers’ association said in its letter that the ban on mustard seed and other edible oil futures complex has prevented market participants from hedging their risks despite sharp fluctuations in the international markets during the past eleven months.

It said global edible oil markets have fluctuated by 10-12 per cent in a day on some occasions. In the past it has been seen that whenever international edible oil markets moved up sharply, the price surge was not passed on to domestic consumers as futures acted as a buffer.

“The government banned mustard futures somewhere around December 2021 and (kept it in force) till May 2022. There wasn’t any pull-back in open market prices of edible oils, proving that futures markets provide stability to domestic prices and running contrary to the belief that a ban helps in curbing speculative activity,” the letter said.

Both COOIT and MOPA said in their respective presentations that the world over, futures markets are allowed to function smoothly in severe adverse conditions.

“India is ‘price taker’ in the edible oil market, not ‘price maker’ and hence banning edible oil futures does not have any impact on spot prices,” the associations said.

The bodies said farmers and other players in the value chain are sitting on 8-8.5 million tonnes of oilseeds stocks at present while the next kharif crop is expected to be about 13 million tonnes of major oilseeds. If rabi also turns out to be good, then India should be looking at oilseed supplies of 35 million tonnes by March 2023.

“Opening the futures markets will ensure that farmers get a good price for their produce,” the bodies said.

COOIT said that harvesting of kharif crops will start in the next few months and many commodities such as soybean, groundnut and sunflower will start coming into the mandis and in the absence of futures markets a reference price isn’t available which will make operating in the spot markets difficult.

Some FPOs which are working in the agriculture space have also asked the government to restart commodities futures which have been under ban since August 2021.

NCDEX to relaunch coffee futures from Sept 30, 2022

NCDEX will launch the Robust Coffee futures from September 30 after approval from the SEBI. The exchange in a note to its members recently said that futures contracts in robusta cherry Coffee expiring in the months of February 2023, March 2023 and April 2023 would be available for trading from September 30,2022. Contracts for further expiries shall be launched as per the enclosed contract launch calendar.

	Commodity	Date of Suspension
1	Chana	Aug-16-2021
2	RM Seed (Mustard)	Oct -8-2021
3	Soybean	20-Dec-21
4	Soy Oil	20-Dec-21
5	Crude Palm Oil (CPO)	20-Dec-21
6	Moong	20-Dec-21
7	Wheat	20-Dec-21
8	Paddy (Non-basmati)	20-Dec-21

Source: Trade and Market Sources
 

NOTE: Chana and mustard seed futures were first banned on August 16 and October 18, 2021. But, there was no timeline. Later when other commodities were banned on 20 Decemeber, chana and mustard were again included, this time with a firm timeframe of one year or 12 months