Futures suspension in farm goods may not go just now

Written by Sanjeeb Mukherjee | Arun S | New Delhi, Aug 28 | Updated: Aug 30 2008, 04:55am hrs
Although the countrys headline inflation is showing some signs of cooling off, the government is seemingly not keen on revoking the suspension of futures trading in four farm commodities immediately.

According to official sources, the suspension of futures could even be extended to quell any inflationary expectations arising out of speculative trading. The suspension of futures in rubber, soyaoil, potato and chana for four months will come up for review on September 6. Inflation for the week ending August 16 dropped to 12.40% mainly due to lower prices of food and fuel.

However, the sources added that the forward markets commission (the regulator for commodities market) is strongly against any extension of the suspension.

Recently, FMC chairman BC Khatua wrote to the government to revoke the suspension of futures in four commodities on the grounds that there has been no tangible impact on the spot market prices of these commodities.

Sources said the recent order extending the power to states to impose stock limits on wheat, rice, pulses, edible oils and oilseeds is also an indication that the government has gone all out to curb hoarding.

Futures trade could be a tool for traders to hoard key agricultural commodities, they said. The government in a series of measures to tame inflation has already banned exports of non-basmati rice, wheat, edible oils and maize and also scrapped the import duty on crude edible oils, and lowered for cotton.

Meanwhile, according to data compiled from traders and industry officials, in the first three months of the suspension, prices of rubber, soyaoil and chana showed an increasing trend, while only that of potato fell and that too because of bumper harvest.

Rubber prices have risen by around 13.99% since May to around Rs 13,633 per quintal. Refined soyoil increased by around 6.66% between May and August, while that of chana jumped by 6.5%.

Only, potato prices have dropped by almost 26% since May mainly because of a bumper harvest.

Traders said in case of prices of four commodities, futures in which were banned last year, barring wheat all have become dearer in the last one-year.Wheat prices have dropped mainly due to bumper production and record procurement by state-agencies, a Delhi-based trader said.