India removed a two-year-old ban on trading in wheat futures on Friday, a move analysts said will help exporters if the futures contract falls to a level that makes Indian grain competitive in the international market.
But bans on some other contracts, imposed in the last two years as some political parties blamed futures trade for rising prices, would remain for now, a director of the futures market regulator said on Friday.
"Forward Markets Commission has removed a ban on wheat futures," Anupam Mishra, a director of the commission which regulates commodity futures in India, said.
"Futures trading in wheat will begin as soon as commodity bourses ready their wheat contracts."
He said no decision had been taken on lifting a ban on futures of rice and two varieties of lentils, which was imposed in early 2007 when inflation was rising.
Joseph Massey, chief executive of Multi-Commodity Exchange, which commands about three-quarters of Indian commodity futures trading, said he hoped to launch a wheat contract next week.
"We are going to seek permission to launch the contract on Monday ... if permitted, the trade should happen immediately."
Last year, the government imposed several curbs on physical and futures trade in commodities to keep a tight leash on price ahead of general elections that were completed this week.
But low inflation, bumper crops and swelling stocks have let the government allow limited exports of non-basmati rice, which was banned last year, while Trade Secretary G.K. Pillai says India will allow export of 2 million tonnes of wheat after elections.
Analysts said opening domestic futures trade may help Indian exporters lock in their price risks at a time when Indian wheat is expensive to comparable qualities in global trade.
"Exporters may hedge on Indian bourse to manage risks of price difference between Indian and foreign wheat," said Harish Galipelli, head of research at Karvy Comtrade Ltd.
Traders say wheat exports would be viable only if the government gives subsidy to traders as Indian prices are currently too high.
But the situation may change as Argentina, one of the main wheat providers in the world, could fail to export wheat in 2010 due to a major drought that has affected output, according to a newspaper report.
India, which sets the price of wheat it buys from farmers, announced a minimum support price for wheat of 1,080 rupees per 100 kg, or $220 per tonne, to ensure adequate returns for farmers.
Traders say this will allow them to deliver wheat in Southeast Asia at about $235-$240 per tonne for grain cultivated near coastal areas but the price of wheat shipped from interior areas would be higher.
A day before the ban on wheat futures was lifted, Black Sea milling wheat was quoted at $235 a tonne, including cost and freight (c&f) to Southeast Asia, while Australian wheat was priced at $265 a tonne and U.S. soft white wheat was $285.
Source : www.centralchronicle.com