The Hindu Business Line : FMC steps in to rein in maize prices

, In a bid to hold back rising maize prices, the Forward Market Commission (FMC) has told NCDEX and MCX to impose additional margins and curb open interest positions in maize futures contracts.

In turn, the two commodity exchanges have marked up additional margins on the long (buys) side from 4 per cent to 9 per cent on all running maize contracts - December, January and February. From Friday, the total margin stands at around 20 per cent including an initial margin of 7.63 per cent and exposure margin of 3 per cent.

Open positions

The exchanges have also cut total open positions in maize futures contracts to 30,000 tonnes for members and 10,000 tonnes for clients (retail players). The open position for the near month (December) has been limited to 6,000 tonnes for members and 2,000 tonnes for clients. It will be from December 21 for contracts expiring in January 2007 and thereafter.

Export demand

In the last month, prices of maize have risen by Rs 100 per quintal to Rs 742 per quintal on the Nizamabad (Andhra Pradesh) spot market following strong export demand. India annually exports about 3 lakh tonnes of maize to Bangaladesh, Sri Lanka and Nepal.

"Maize prices have been going up dramatically over the last few days on reports of a drop in production to 12.41 million tonnes against a demand of 14 million tonnes. FMC's move may scare away small investors from taking fresh positions. However, prices volatility will come down," said Mr Ashish Shukla, an analyst with a private broking firm.

Penalty on offenders

MCX has also warned members against increasing their positions during the last five days of expiry of contracts except for international commodities such as zinc, copper, aluminium, led, tin, nickel, crude oil and natural gas.

Traders have been told that any financial gains made through violation of open position limits during the last five days will be withheld and an additional penalty of Rs 2,500 per day will be levied.

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