Tur, urad, pulses, wheat, rice...the list of banned commodities for futures trading is growing day by day.
The Forward Markets Commission's decision to ban futures trading in wheat and rice came after the Central government decided to rein in inflation at any cost.
Shaken by the backlash received in Punjab and Uttarakhand Assembly elections the government apparently was going all out to curb inflation despite Agriculture Minister Sharad Pawar's strong opposition against ban on futures trading.
Unlike last time when it banned the futures at one shot, creating difficulties for traders, the government took a more practical view this time by opting for a more gradual phase-out. The existing contracts will expire on maturity and positions will be allowed to be squared off. If any position remains after that, these will be taken care of at the price on the day of settlement.
That is for the immediate measures. But the bigger issue of whether futures trading should continue in essential commodities or not will be settled once and for all, with the government setting up a committee to look into the issue.
However, this news has sent shivers down the spine of traders across India. They fear that the committee may take an unfavourable view on futures in essential commodities. Indications available suggest that the decision to phase out the futures in wheat and rice was prompted by the government's bid to buy peace with the Left parties.
Left parties have always been against futures trade and they wanted it to be banned. However, ministers like Sharad Pawar have been supporting futures trading because in certain areas it helped farmers.
The finance ministry apparently was not keen to extend the banned list but had to give in due to stiff opposition from the Left.
A decade ago, the then government had ignored the Kabra Committee's suggestion that essential commodities should not be part of futures trading. Traders say there is no reason to be concerned about futures now as things have improved with a transparent trading mechanism in place.
Meanwhile, the downslide in wheat prices continued unabated on persistent offerings by stockists against slowdown in buying by rolling flour mills after the futures ban.
Atta, maida and sooji also ruled weak in line with wheat. Sources said banning of futures trading in wheat and rice on the NCDEX and other exchanges mainly led to a persistent fall in commodity prices. Sources said the downward march in wheat prices likely to gather momentum in coming days.
However, gur prices firmed up on the wholesale gur (jaggery) market in Mumbai following scarcity of stocks amid better offtake by local parties and closed in positive zone. Sources said paucity of ready stocks triggered by increased buying by stockists and local parties mainly pushed up gur prices.
On the other hand, gur prices in Muzzafar Nagar and Murad Nagar gur mandies remained flat due to rain. In Delhi, gur pedi hardened from Rs.1275-1300 to close at Rs.1300-1350 a quintal on restricted supply against increased offtake.
Cardamom prices hit
In Kumily, cardamom prices fell an average Rs 5 a kg at Wednesday's weekly auctions held by Cardamom Processing and Marketing Co due to rise in supply.
Arrivals this week rose to 65 tonne compared with 52 tonne a week ago, and this had weakened sentiments, Sabu Kalluvettikuzhiyil, a dealer and grower of cardamom, said. Summer rains in cardamom growing areas the past few days also heightened expectations of rise in supply, he said.
More than rains, cloudy conditions had dampened sentiment on prices firming up, he said. Though more than 80 per cent of the 2006-07 (March-April) cardamom crop has already been harvested, prevailing climate with good moisture levels may aid the remaining crop, sources in Rajakumari, a cardamom producing area in Kerala's Idukki district, said.
Demand from exporters staying flat at 5 tonne also kept sentiment down, dealers said. Top quality 8mm bold grades fetched a high price of Rs 475 a kg compared with Rs 470 a week ago.
Rubber
Tokyo rubber futures slipped to a one-week low on Thursday as technical selling pounded the market, still reeling from the previous day's battering.
The benchmark rubber contract for August delivery closed the morning session at 272.5 yen ($2.30) per kg, down 4.6 yen or about 1.7 per cent from Wednesday's close of 277.1 yen, when it finished down by the 10-yen daily limit. Prices initially climbed as high as 281.8 yen, only to reverse and sink to a low of 272.3 yen.
Palm oil
Malaysian crude palm oil futures were little changed in thin trade on Thursday, with the market awaiting news on the export situation in the coming days. Dealers said shipments were likely to pick up after a seasonal slowdown.
The benchmark third-month May contract on the Bursa Malaysia Derivatives exchange was down 3 ringgit at 1,957 ringgit ($559) a tonne at the end of the morning session.