Mumbai: India Security and Exchange Agency (SEBI) The year-long suspension in the main agricultural commodity is a crimping the use of risk management tools such as hedging across its food supply chains, spurting cutting inventory as advanced purchases.
Halt Monday, targeting items such as soybeans, vegetable oils, wheat, rice, and beans when authorities move to inflation that cools up increasing, is one of the most dramatic steps in India since launching futures commodities in 2003.
But the prohibition of access to contracts Futures may be fuel volatility in the domestic market by denying traders of important tools for planning decisions, forcing them to cut shares, delaying long-term purchases and sales, and even limiting imports.
“In the absence of the future, the market will still not know anything about the shortcomings and excesses,” said Govindbhai Patel, the implementing partner in the edible oil trader’s research.
“It can create more volatility in price.” The Ministry of Finance did not immediately respond to Reuters requests for comments.
Patel companies, which are used to buy oil that can be eaten for fast and far shipment, and hedging in domestic exchanges, will now only secure their needs for up to 10 days at a time, he said.
“We used to hedge 70% to 80% of our volume.
Because the hedge option is not available, we increase the operation again,” said Patel, a trader for almost five decades.
India is the largest vegetable oil importer in the world to fill more than 70% of its needs, with monthly purchases abroad of around 1.3 million tons.
Futures contracts are very important in ensuring the smooth flow of import, allowing buyers and traders to protect parts of their shipments after the signing of the transaction, said Sudhakar Desai, President of the Association of Indian vegetable oil producers.
“Everyone in the supply chain must change the way they do surgery in the absence of a hedge and indicative price,” he added.
Price discoveries can be legalized with the absence of national futures prices, with potentially weaker levels in the producer and higher in strong consumption areas, Desai said.
Clothing like an alternative investment funds and international traders can switch to foreign markets to protect their risk, said Manoj Dalmia, the head of a proficient broker.
But the alternative is beyond the reach of smaller players who need the approval of the authorities to manage the risk of commodity and currency prices, the word vegetable oil broker based on Mumbai.
The problem for regional processor farmers who buy plants from farmers will also feel the pinch, because they lose advance sales through a futures contract.
Manoj Agrawal, Managing Director of Maharashtra Oil Extraction, said his company could no longer hedge soybeans on the commodity market after buying soybeans from farmers.
“If we cannot hedge the goods, we cannot risk holding large amounts of raw materials,” he added.
“We will operate with limited capacity.” In turn, a lower inventory in stockists and processors can hurt farmers, said Nitin Kalantric, a pulse processor based in the city of Latur in the western state of Maharashtra.
Farmers tend to flood the market with production after harvest, but usually find buyers who are willing among processors and warehouse users who want to build sufficient inventory for a year, said Kalantri.
“If everyone calculated the operation due to uncertainty, farmers would fight in finding buyers and prices could fall.” Soybean farmers are also worried that they cannot use benchmarks in price futures to the sale of time plants.
Access Ready to national futures prices have forced traders offering comparable prices for national farmers.
But without futures there was no way to check the price check, said the farmer Sudhakar Kale, who harvested 2 tons of soybeans in September but held back sales with higher price expectations.
Other farmers, such as Ashish Naphade, said futures prices also helped decide which plants should be sown.
“Futures gives us indication of the possibility of prices when we harvest,” Naphade added.
Banks and financial institutions that lend to the receipt of warehouses said futures help them appreciate stocks so they can determine the size of the loan.
“We must be extra careful now while lending,” said an official with one bank managed by the government.