Nearly a month after the government lifted the suspension on futures trade in refined soyoil, potato, rubber and chana, an analysis indicates that the price trend is being driven by fundamental factors like demand and supply as pointed out by several independent studies. The government-appointed Abhijit Sen Committee in its report submitted early in 2008 also revealed the absence of any direct connection between prices in the futures market and spot market counterparts.
At the Multi Commodity Exchange (MCX) on Friday, the potato (Tarekeshwar) contract for March 2009 dropped to Rs 425 a quintal from Rs 477 per quintal registered on December 4, the day when trading resumed. This clearly shows that adequate potato stock in the country has sent prices down, which has also been reflected in all subsequent future contracts. At the NCDEX, the potato contract for the March 2009 delivery was Rs 495 per quintal on the day when trading resumed.
Potato output in 2008 in Uttar Pradesh, the country?s largest grower, is estimated to be around 14 million tonne against an average of 10 million tonne. Overall, a bumper output of 25 million tonne is expected during the crop year. Refined soyoil for the March 2009 contract at MCX was Rs 437 per 10-kg, down almost Rs 10 per 10-kg from the December 4 levels.
Experts said that the decline in futures prices has been due to the fall in international edible oil markets and also expectations of a bumper mustard output, which is due for harvest in the next few months.
?Mustard output this year could be more than 6.0 million tonne and given that it has high oil content, local availability should rise, which is precisely what future markets are showing,? a Mumbai-based commodity analyst said. He said that imports would also occur at a much lower price in 2009 because international markets have dropped by more than 50% since their record highs in May.
India imports about 5 million tonnes of crude edible oil mainly from Malaysia, Indonesia and Thailand out of a domestic demand of over 11 million tonne. Since the lifting of the suspension of futures trading on rubber, futures prices for March 2009 have risen marginally to Rs 6,850 per quintal against Rs 5,981 per quintal registered on December 4.
In case of chana, prices went down to Rs 2,048 per quintal for MCX January 2009 contracts while the commodity traded at Rs 2,226 per quintal at the MCX on February 2009 contracts. At the NCDEX, chana February futures contracts traded at Rs 2,025 per quintal. ?Chana output is expected to be good this year because of favourable weather and increase in acreage,? the analyst said. As per latest government data, chana was planted over around 7.84 million hectare till December 25, up from 7.15 million hectare during the same period last year.
The government suspended futures trading in four farm commodities in May to tackle rising prices, despite strong opposition from FMC and other exchanges. However, after extending it by two months, the notification suspending futures trading was allowed to lapse on November 30.