Agri Picks Report November 21, 2024: Geojit Financial Services

commodities

Geojit Financial Services's report on Daily Agri Picks

The government is considering lifting the suspension on futures trading of oil, oilseeds, and pulses, according to two senior government officials. "Representatives from the National Commodity & Derivatives Exchange have visited the government several times and made their representations. Current discussions are pointing towards the lifting of futures trade suspension from oilseed derivatives and pulses. However, any lifting of the suspension of paddy and wheat futures seems unlikely," the first official said. In 2021, the government imposed a ban on derivative trading in seven commodities--non-basmati paddy, wheat, chana, mustard seed and its derivatives, soybean and its derivatives, crude palm oil, and moong--for a year to check rising inflation. The ban was extended consecutively each year till December 2024. According to the second official, "There has been a considerable lobby from the NCDEX over the lifting. We also understand that the exchange is on the brink of shutting down if we do not allow futures to begin. However, the government will only take a decision basis where we stand in terms of market maturity and volatility. On that front, government is thinking of lifting the ban on oil, oilseeds, and pulses futures as it seems to be the right time." "We have already imposed import duties on oil. We think it is the right time for Indian market to grow," the official said, adding that while discussions are being held, a final decision will only be taken by the Inter-ministerial committee, headed by Home Minister Amit Shah. The government has recently permitted trading of yellow pea futures contracts on NCDEX, effective Oct 16. Moreover, a significant NCDEX lobby is pushing hard for the trade to be resumed. The NCDEX, after meeting with the government, will also send their representations to SEBI next week and press them to revoke the suspension of futures trade in the seven farm commodities, a top official of the bourse said. Exchange officials also seem optimistic of the government allowing futures trade in oilseeds and its derivatives, as India mostly imports to meet its cooking oil requirements. Last November, the government allowed the NCDEX to launch futures of crude sunflower oil. However, it did not remove the ban on mustard seed and its derivatives and soybean seed and its derivatives. The ban also continues on crude palm oil futures. Major oilseed producers like the Solvent Extractors' Association and Mustard Oil Producers Association of India have too been actively demanding the relaunch of futures trading. Against the overall demand of 25 mln tn of edible oil, India imports around 15 mln tn of edible oil from Indonesia, Malaysia, and Brazil where derivative trading is active. Soybean and palm oil prices on the Chicago Board of Trade and Bursa Malaysia Derivatives are considered benchmarks, respectively. Recent studies by the Birla Institute of Management Technology and Indian Institute of Technology, Bombay have concluded that futures trading will help discover prices domestically, reducing reliance on international price signals. The study highlighted the need for careful analysis of international price movements and trade patterns, as the ban on these commodities has hurt farmers, farmer-producing organisations, and other value chain participants.

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