He told FE that in the wake of the Spices Board request to suspend cardamom futures trade, following charges by growers that there was gross price differences between the futures and market prices, the trade could not be simply suspended which under the jurisdiction of the Forward Markets Commission (FMC). On the contrary, he had sought details of the present auction system and the bye-laws to look into issues of overlapping and find if the two systems were being manipulated. Discussions could be held so that the system would work smoothly. Decision on including more varieties could be considered based on in-depth studies.
Spices Board chairman CJ Jose said that in the wake of fears among growers that the lower futures prices were impacting open market prices, the board had suggested suspension of futures trading till the issue was resolved. The board had suggested broadbasing the variety list which would make things simpler for the farmer as also the trade. It was also for use of current years production for physical delivery in the exchange when the fact was that heldover stocks were being delivered. The current years stock was expected to be 60-70% more than last years. By default, the heldover stock was being delivered, he added. The exchange had already initiated steps on this front and presently there was little delivery.
Any form of trade introduced should be of help to the grower and the board would take all steps for this, Mr Jose asserted.
In the case of futures trade, the system was in place after necessary research and it was being held on the basis of the licence issued by the Forward Markets Commission. There could not be an agreement on what price the commodity should be sold. And just because the price fell, the blame cannot be put on futures trade, Mr Gupta said. It was a transitory period and things would certainly settle. And even after suspension the price fell, what action would be taken, he asked.
The decision to go in for the 6mm variety was based on larger availability. In the case of the 8mm variety, there was a short supply and the market would get squeezed. A decision on including more varieties could be taken only after further studies, he added.
According to the market, when the average auction price was Rs 275 a kg, the futures quoted at Rs 200. Growers alleged that a small group involved in the futures trade was behind this shooting down of prices. According to trade sources, trade in just the 6mm variety called the Alleppey green bold (AGB) was cause for concern as price comparisons were being made with the other 7mm and 8mm types. Also, the exchange delivery specifications were quite vague where the traded variety included the deep green, green and light green types and delivery was generally being made in the light green types to benefit the trader.