Commodity OnlineNEW DELHI: Potato farmers and traders have opposed the temporary suspension of potato futures. They said that there was no basis for doing so when there was a glut in the market and prices had declined due to bumper production.
As an immediate fallout of the ban on futures trading of potato, industry experts fear the prices of the commodity may crash because of absence of price discovery mechanism.
"When we knew the MCX price, at least we were able to tell the traders the rates at which they should buy. Now it will be decided at mandis," a trader said.
At MCX open interest in potato futures of Agra variety was 50,000 tonnes and that of Tarkeshwar (West Bengal) 35,000 tonnes. Open interest in futures trading is the total number of outstanding contracts on a day that have not been liquidated.
Industry experts said prices may start declining and ultimately crash in a couple of months. Uttar Pradesh and West Bengal governments have purchased potatoes at Rs 2.50 a kg to help farmers.
"It was because of futures trading that potato prices did not crash as at the exchange platform they were ruling at Rs 4.50 per kg. The prices may now start declining and ultimately crash in a couple of months," said a market analyst.
"There will be no impact because most of the people trading in futures market don't actually take delivery of the commodity. They do it for hedging the risk," a leading trader said.
Potato prices are now ruling at Rs 7-10 per kg at retail markets in many places in the country due to higher production in Uttar Pradesh, Gujarat, West Bengal and Bihar due to non-availability of adequate storage.
Potato production in the country is estimated at 29.3 million tonnes in 2007-08 crop season as compared to 27. million tonnes in the previous year.
