Dhyaneshwar Dhekade is clueless when asked about the future of soyabean even as farmers in his village of Kamargaon in Karanj taluka of Washim district get ready to harvest their crop. Dhekade, who is also the director of the Pariwartan Farmers Producer Company (FPC) in the area, blames the ban on the commodities futures trading on National Commodity and Derivatives Exchange (NCDEX) for the lack of direction.
“Before the ban, we could get a clear indication about how prices would hold, say three months from harvest. That allowed us to either sell outright or offload in tranches. Without any data point, this year is going to be tricky,” he said.
Other than price discovery, Dhekade‘s FPC also used the platform to ‘hedge’ soyabean at a fixed price. Pariwartan FPC happens to be one of the 155 FPCs which used this platform to hedge prices of commodities for a fixed price and deliver the same after a fixed time. “In 2021, our FPC hedged 600 tonnes of soyabean worth Rs 2.5 crore and delivered those successfully after four months. This was a great mechanism for us to absorb price shocks. We hedged out produce when prices were low. That year, our farmers managed to get around Rs 5,000/quintal as against the prevailing price of Rs 4,200/quintal then,” he said.
On December 19, 2021, the Securities and Exchange Board of India (SEBI) banned derivatives trading on several commodities. Chana, wheat, paddy (non-basmati), soyabean and its derivatives, mustard seed and its derivatives, crude palm oil and moong were among the commodities banned till December 2022.
The futures trading platform of the NCDEX allowed commodities to be put on sale, the delivery of which has to be done at a later date. Either of the parties — the buyer or the seller — can exit the trade after paying a small fee. While FPCs like that of Dhekade go for physical delivery, allegations of price manipulation through paper trade have also been levied against the platform.
The SEBI, on its part, banned trades to investigate such allegations. Trade participants talked about the need to control inflation before the elections to the sevens states as the main reason for the ban. The price of pulses and edible oil shot through the roof which saw multiple control measures.
As the ban continues to play out, farmers and FPCs who have regularly participated in the future’s trade or used the platform for price discovery and guidance face uncertainty. Vilas Uphade, director of Latur-based Vilas FPC, in 2019-20 traded around 400 tonnes of soyabean on the platform.
“Other than that, the futures prices showed a fairly reasonable direction on how the prices could be in the days to come. Without such guidance, we have to rely on the nearby mandis or solvent plant operators for price discovery; of course, it hampers us,” he said.
A statistical study carried out by the NCDEX showed that price volatility in the case of all six commodities, barring soyabean, had increased after the ban. For soyabean, prices stabilised because of a good harvest and steps like stock limit and import of 12 lakh tonnes of genetically modified soyameal. Traders who spoke to The Indian Express said the suspension of futures trade has hampered price discovery but market fundamentals would have a better role to play this season. Farmers, on the other hand, have asked for the ban to be removed so that they get an idea of how to hedge or offload their produce soon enough.
