Commodity Online
MUMBAI: Forward Markets Commission (FMC), the commodity markets regulator had put a ban on the launch of new sugar contracts early this week owing to regulate the prices of sweetener, but the ban does not seem to have impacted the sugar producers as the stocks of such companies remained high on the bourses during the week, rather it has threatened the trading volumes of commexes.
Sugar prices were reported to be on the rise over past eight weeks from Rs.19-20 per kg in retail market to Rs.28-30 per kg recently. Considering such rapid rise in the prices, FMC decided to put a ban on new contracts to be launched, however, the ongoing contracts in the commodity will continue to be traded until their expiry. Clients will be able to square off their existing positions. This means ultimately volumes will drop to zero. The move could hurt many traders in sugar futures.
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The decision to suspend sugar futures came a day after Food and Agriculture Minister Sharad Pawar’s announcement that the government would continue to keep a check on the rising sugar prices. The supply deficit seemed to have hit the sugar industry as India had exported nearly 5mt of the sweetener last year.
Sugar stocks on the bourses traded at higher-end during past week despite the possibility of a fall in commodity prices in near term. Leading sugar makers, Bajaj Hindustan Ltd, Balrampur Chini Mills Ltd and Shree Renuka Sugars Ltd traded with positive gains during the week on the Bombay Stock Exchange.
Shree Renuka Sugars Ltd lost from Rs.134.40 at the start of the week to Rs.125.95 on Friday. Similarly, Bajaj Hindustan Ltd traded at Rs.141 on Monday, but settled at Rs.141.80 with marginal gains on Friday. Balrampur Chini Mills Ltd traded at Rs.88 on Monday but marginally fell to Rs.87 on Friday. The stock price movement reflected that the ban on sugar Futures left sugar stocks grossly unaffected.
Secondly, with prices soothing on account of ban on Futures trading sugar consumers are sure to gain. But with stoppage of trading in Sugar Futures would make a loss of trading volumes on the commodity exchanges.
Experts opined that the National Commodity & Derivatives Exchange (NCDEX), the country’s second largest commodity exchange, is slated to be impacted adversely due to fall in trading volumes. According to them, the volatile nature of sugar reaped high profits to the exchanges through large trading volumes.
Sugar M200 was the seventh largest liquid commodity traded on NCDEX, generating an average daily turnover of around Rs.100-200 crore. As per the latest fortnightly report at the FMC Website, the exchange generated a turnover of Rs.1,746.6 crore between May 1 and 15. While the turnover during the previous fortnight stood at Rs.2,571.3 crore, averaging Rs 171.4 crore daily.
During the first fortnight of the current financial year, the turnover was Rs.2,409.15 crore, registering the contract as the sixth largest revenue maker for the exchange.
The prices of different sugar qualities reported loss in the commodity markets. In Mumbai, price of S30 and M30 for mill delivery declined by Rs.30-40 per quintal, to Rs.2,180-2,200 and Rs.2,215-2,225, respectively. However, according to industry analysts, the prices are likely to decline further by Rs.50 on apprehension of further measures by government.
Sugar prices had witnessed a rise on account of shortage in production, which stood at 14.7mt during the current season, against 26.3mt last year.
