Business Daily from THE HINDU group of publications
Tuesday, Aug 01, 2006
Agri-Biz & Commodities
Urad futures trading below spot market price
In sharp contrast to a historic open interest of 60,000-70,000 tonnes, the near contract open interest is 6,860 tonnes.
Turnover of September contract 7,680 tonnes (Rs 19 crore) against open interest of 10,290 tonnes.
Volatility in price continues.
Kolkata , July 31
Urad futures contracts are passing through an interesting phase in the commodities market these days.
The narrow commodity, which has attracted investors' attention, is witnessing a sharp fall in liquidity and open-interest position in the near and medium contracts on National Commodity and Derivatives Exchange Ltd (NCDEX), over the last couple of weeks.
Futures market prices for August and September contracts for urad-FAQ (fair average quality) variety are trading below the spot (Akola) market prices.
No significant volumes
The October, November and December contracts of urad-desi variety, which were launched recently and will replace FAQ variety, are yet to register any significant volume.
According to market sources, in sharp contrast to a historic open interest of 60,000-70,000 tonnes, the near contract open interest was 6,860 tonnes on Thursday on a turnover of 7,960 tonnes (Rs 21 crore). The turnover of September contract was 7,680 tonnes (Rs 19 crore) against open interest of 10,290 tonnes.
Irrespective of lack of liquidity, price volatility continues. The prices moved by 4.11 per cent from the previous closing on NCDEX on Thursday.
"Urad (FAQ) is a narrow commodity and is not backed by a dependable spot market price benchmark. Naturally, these contracts are subjected to all kinds of sentiment and speculative interest especially in a relatively illiquid situation," feels Mr Vivek Bajaj of Mars Comtrade.
"NCDEX benchmarks its future prices with spot market at Akola. This market is controlled by limited number of suppliers and there is no dependable price reference," says Mr Anuj Gaud of R R Commodities.
While this answers part of the puzzle behind future prices ruling below spot market, both Mr Gaud and Mr Bajaj are of the opinion that urad (FAQ) stock being months old, there are concerns about its quality According to market reports, there is a rise in sowing area under urad this year coupled with good rainfall.
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