NCDEX to start perishable commodities futures

The National Commodity & Derivatives Exchange of India (NCDEX) is all set to kick start futures trading in onion and potato in two weeks.

"Contracts would be available for trade for July 10 settlement," an exchange official said. The exchange is expected to announce the finalised launch date of these contracts in a day or two.

The Multi Commodity Exchange had launched potato futures on March 9 this year, the only perishable commodity trade on any commodity exchange so far. The contracts have been doing exceedingly well with high volumes being traded.

"Traders were raising eyebrows when the contract was launched because of their hesitation over the success of perishable commodities trading. They were susceptible about how farmers would be able to discover prices in order to maximum profits. But, potato traders are different asset class where prices are discovered with the same enthusiasm as gold, said an exchange source.

The April contract attracted confidence of traders with volumes touching 90,000 tonne in the first week. But, it fell in the second week with customers doubting if delivery would take place in case position squarred off.

Gradually, however, the average volume went on increasing to the sustainable level at around 40,000 tonne. Surprisingly, the open interest also shot up to the tune of 45,000 tonne.

Onion and potato are high risk, high potential commodities where every small producer wants to know prices and the potential for future movement.

Potato is cultivated in all agro-climatic zones in the country. The average annual production of potato is 25 million tonne, of which more than 80 per cent is raised between October and March, under assured irrigation. About 8 per cent of the total production is produced in the hills during April to October, while kharif or rainy potato production constitutes the remaining part of production raised as during the monsoons between July to October mainly in Karnataka, Maharashtra, Himachal Pradesh, Jammu and Kashmir and Uttaranchal.

Currently, there is no government intervention in potato markets either in the form of subsidised inputs or minimum support price leaving. This has market forces dictate the producers and consumers. Due to seasonal production and high perishability, its prices are highly vulnerable.

During harvest farmers sell their produce at very low prices and during times of low production consumers pay higher prices. Middlemen who incur the cost of storing take advantage of these market forces to reap unrealistic profits.

"Futures contracts on commodities exchange would help farmers discover price for futures and help them trade according," an analyst said.