India lifts ban on wheat futures as stockpiles climb
Monday, 18 May 2009
MUMBAI, May 17 (Bloomberg): India, the world's second-largest grower of wheat, lifted a three-year ban on futures trading in the grain after record purchases from farmers boosted reserves.
"We have revoked the suspension and have communicated the same to the exchanges," Rajeev Agarwal, a member of the Forward Markets Commission, the regulator, said in a phone interview.
A slump in the nation's inflation rate to a 27-year low and forecasts of record rice and wheat crops this year have helped quell protests by political parties against futures trading in farm commodities. Prime Minister Manmohan Singh's government in December lifted a seven-month ban on trading rubber, soybean oil, potatoes and chickpeas.
"The situation that prompted the ban no longer exists," Agarwal said in Mumbai.
Wheat output may total 77.63 million tons, second only to that of China, in the year ending June, the farm ministry said May 12. Output last year was a record 78.6 million tons. The rice harvest may be 99.37 million tons.
The government has bought 22.29 million tons of the grain from local farmers since purchases began April 1, approaching last year's record 22.69 million tons. Stockpiles may reach 30 million tons by June 1, or 40 per cent of consumption, the U.S. Foreign Agricultural Service said in January.
Farmers received a record 10,800 rupees ($218) a ton as the ruling Congress party prepared for elections that ended May 13. Votes will be counted tomorrow.
Exports of as much as 2 million tons may be permitted after results for the polls are announced, Trade Secretary G.K. Pillai told reporters yesterday. Overseas shipments were halted three years ago to bolster domestic supplies.
Resuming futures trading may help the National Commodity & Derivatives Exchange Ltd., partly owned by Goldman Sachs Group Inc., to stem a decline in the turnover of agricultural goods.
Turnover in farm commodity futures dropped by a third to 6.3 trillion rupees in the year ended March 31 because of the ban. Curbs on soybean oil, rubber, potatoes and chickpeas were imposed in May and extended in September by three months.
Ending the ban "will benefit the farmers as well as the industry," said Joseph Massey, managing director of the Multi Commodity Exchange of India. The bourse, which counts Citigroup Inc. and NYSE Euronext among its shareholders, accounts for more than four-fifths of all commodities traded on exchanges.
Domestic traders, producers and consuming companies are the main participants in India's commodity exchanges, compared with the 13 million people in the country who trade stocks. Overseas funds aren't allowed to trade commodity futures.
"We have revoked the suspension and have communicated the same to the exchanges," Rajeev Agarwal, a member of the Forward Markets Commission, the regulator, said in a phone interview.
A slump in the nation's inflation rate to a 27-year low and forecasts of record rice and wheat crops this year have helped quell protests by political parties against futures trading in farm commodities. Prime Minister Manmohan Singh's government in December lifted a seven-month ban on trading rubber, soybean oil, potatoes and chickpeas.
"The situation that prompted the ban no longer exists," Agarwal said in Mumbai.
Wheat output may total 77.63 million tons, second only to that of China, in the year ending June, the farm ministry said May 12. Output last year was a record 78.6 million tons. The rice harvest may be 99.37 million tons.
The government has bought 22.29 million tons of the grain from local farmers since purchases began April 1, approaching last year's record 22.69 million tons. Stockpiles may reach 30 million tons by June 1, or 40 per cent of consumption, the U.S. Foreign Agricultural Service said in January.
Farmers received a record 10,800 rupees ($218) a ton as the ruling Congress party prepared for elections that ended May 13. Votes will be counted tomorrow.
Exports of as much as 2 million tons may be permitted after results for the polls are announced, Trade Secretary G.K. Pillai told reporters yesterday. Overseas shipments were halted three years ago to bolster domestic supplies.
Resuming futures trading may help the National Commodity & Derivatives Exchange Ltd., partly owned by Goldman Sachs Group Inc., to stem a decline in the turnover of agricultural goods.
Turnover in farm commodity futures dropped by a third to 6.3 trillion rupees in the year ended March 31 because of the ban. Curbs on soybean oil, rubber, potatoes and chickpeas were imposed in May and extended in September by three months.
Ending the ban "will benefit the farmers as well as the industry," said Joseph Massey, managing director of the Multi Commodity Exchange of India. The bourse, which counts Citigroup Inc. and NYSE Euronext among its shareholders, accounts for more than four-fifths of all commodities traded on exchanges.
Domestic traders, producers and consuming companies are the main participants in India's commodity exchanges, compared with the 13 million people in the country who trade stocks. Overseas funds aren't allowed to trade commodity futures.