Futures trade in wheat re-launched after regulatory nod

India's commodity exchanges have resumed futures trading in wheat after a gap of over two years, following permission from commodity market regulator Forward Markets Commission. All three commodity exchanges - the National Commodity and Derivatives Exchange, the Multi-Commodity Exchange, and the smaller National Multi Commodity Exchange - on Thursday launched futures trading in wheat.

Wheat futures were suspended from trading in February 2007 under pressure from the then influential Left parties, which feared that speculation in exchange-traded futures had distorted the physical market prices of essential food items and led to runaway inflation. Agriculture futures trade fell from 36 per cent of total trade in 2006/07 to a mere 12 per cent in 2008/09, mainly due to bans on trade in wheat, rice and two varieties of lentils.

Multi-Commodity Exchange, which is part-owned by Fid Fund (Mauritius) Ltd - an affiliate of Fidelity International - and NYSE Euronext, is India's biggest commodity exchange by trade turnover. Joseph Massey, managing director of MCX, said the contract will be available for trading from Thursday and there are no major changes in the contract specification.

Rival National Commodity and Derivatives Exchange, part-owned by Goldman Sachs, has also re-launched futures trade in wheat. NCDEX, which commands about nine-tenths of India's agricultural futures trade, will launch contracts between June and November, an official said. The NMCE too has restarted trading in wheat futures.

Wheat futures may help exporters to lock in their price risks at a time when Indian wheat is expensive to comparable qualities in the global trade. ''We have received a very positive feedback. However, the industry felt it would have been better if the clearance had come three to four months earlier when the harvest season was at its peak,'' the NCDEX spokesperson said.

Both NCDEX and MCX will launch six contracts expiring between June and November. The exchange had a turnover of Rs 200 crore-400 crore in wheat futures before the ban was imposed. ''Though the arrival may end in June, we are confident that there will be trading interest from exporters and big corporate houses,'' said the NCDEX spokesperson.