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FMC suspends launch of lean season contracts in soybean

05 Apr 2012 Evaluate

The commodity markets regulator - Forward Markets Commission (FMC) - has decided to suspend the launch of lean season contracts in soybean. The ban, which has been imposed to curb the excessive volatility in Agri-commodities markets, will stop trading on NCDEX and ACE Derivatives and Commodity Exchange (ACE).

The move has been necessitated by the fact that Soybean prices have surged 23% so far this year, to trade at Rs 3,062 a quintal, compared to Rs 2,492 a quintal on January 2. The volatility in price is because of the lean season arrival of soybean to mandis, which has dried up. A very small quantity of 1.8-2 million tonnes is left with processors who are not keen on releasing it into the markets.

Also the demand of soymeal - a derivative of soybean - has been consistently rising in the global markets. Until now, Iran was getting supply of soymeal from the US. With the political tension between the two countries, Iran has stopped purchases of soymeal from the US and diverted orders to India. As a consequence, global soymeal price surged substantially.

Soybean, a kharif crop, is sown in May and harvested in the beginning of October. With the ban in force, both ACE and NCDEX are likely to lose substantial volume and turnover. However, it is expected that business might shift to other counters in agri space.

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