Ahead of a likely tight soyabean season, the Soyabean Processors Assocation of India (SOPA) – the umbrella body of soyabean processors in the country – has written to the Securities and Exchange Board of India (SEBI) to suspend futures trading in soyabean on the National Commodity and Derivative Exchange (NCDEX).
In his letter, Davish Jain, SOPA chairman, claimed excessive speculation in soyabean and soya oil contracts has disturbed functioning of soya processors.
“In the last week, soybean prices have increased by Rs 2,500/MT and soy oil prices by Rs 2,840/MT, because of which arrivals have also stopped as farmers don’t bring their produce when market prices are increasing daily. Futures contracts, instead of acting as a benchmark price for spot markets, have become spot market disruptors,” the letter said.
Even before the arrival of the oilseed, soyabean prices in futures markets have been trading well before their government declared MSP of Rs 3,880 per quintal. October’ deliverable contracts on NCDEX’s platform are trading at Rs 4095 per quintal while January’s contracts are trading at over Rs 4,100 per quintal, according to data.
At Latur’s wholesale market, the oilseed is trading at an average price of Rs 3,870 per quintal with arrivals yet to pick up. SOPA has estimated a national production of 104.552 lakh tonnes (lt) of soyabean as against 93.062 lt last year.
The speculation in futures contracts, Jain said, has hurt the business and will harm the industry in the new season.
“It is unfortunate that NCDEX is a silent spectator and has not taken any steps to check speculative activity. Only 1,10,000 MT of Open Interest in Soybean Contract is impacting the 105 lakh MT of crop and badly hurting soybean processors. NCDEX has completely failed to increase participation and has reduced it by increasing transaction charges and open interest charges, and has made contracts highly susceptible to abrupt price movement because of low participation,” the letter read.
Asking for an immediate suspension of futures trade in soyabean, Jain said market surveillance of NCDEX has failed to check on-way price movement. “We also request raising the margin to 25 per cent so that at least the frivolous speculators stay away from the exchange,” he said.
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