Agri futures volumes hit new low

Written by Dhimant Bhatt | Mumbai, Jan 28 | Updated: Jan 29 2008, 05:48am hrs
The daily average futures trading volume of all the major agri-commodities on the National Commodity & Derivatives Exchange Ltd (NCDEX) has dropped sharply and touched a lowest level of Rs 1,659.46 crore (single side) in December 2007, thanks to the governments intervention in the futures markets.

This is the lowest futures trading volume of the exchange in the last two years.

NCDEX, the worlds third largest agriculture futures exchange, trades total 52 commodities. Of which, about 40 commodities traded on the bourse are active agricultural commodities that include guarseed, jeera, pepper, chilly, turmeric, sugar, soya oil and chana.

The government took a series of action to curb the excessive speculation in agri-commodities in the beginning of the calendar year 2007. As a result, trading volume dropped constantly on the national bourses.

Some key steps taken by the government include member & client level position limits reduced in black pepper (June 2007), margins increased in jeera & pepper (April 2007), increased positions limits in chilli (March 2007), ban on wheat & rice (February 2007), ban on urad & tur (January 2007), increased total minimum margins in maize, guargum & seed and reduction of position limit in maize (December 2006).

Average daily turnover of the exchange is falling constantly since April 2007 because the government took a series of stringent measures to curb excessive speculation in the agri-commodities futures. As a result, trading volume in agri-commodities was declining day-by-day due to uncertainty in the market. Most of traders and market participants were reluctant to do trading in agri-commodities, an analyst with a leading broking house said. Average daily turnover of NCDEX declined sharply by 55% to Rs 1,659.46 crore recorded in December 2007 from Rs 3,734 crore reported in April 2007, beginning of the current financial year.

The sharp fall in average daily and monthly turnover during the April-December 2007 period was reported mainly in the major five agri-commodities i.e. guarseed, jeera, pepper, chilly and chana as these five agri-commodities contribute nearly 52% of the total daily turnover on the exchange and more than 80% of the total turnover on the exchange is derived from agricultural commodities.