India, Asia’s biggest supplier of soybean meal, barred commodity exchanges from offering new contracts in soybeans to curb speculation after futures posted the biggest monthly gain in more than three years in March.
“In order to curb the excessive volatility in the prices of soybean, the commission has decided not to allow soybean futures contracts scheduled to be launched in the month of April,” the Forward Markets Commission said in a circular to the exchanges published on its website today.
Futures jumped 24 percent on the National Commodity & Derivatives Exchange Ltd. in Mumbai this year, more than the 17 percent gain on the Chicago Board of Trade, prompting demands from processors and edible oil importers for steps to curb speculation. The exchanges raised margins on futures trading in mustard seeds, gram and potatoes last week to cool speculation.
“India’s imports of edible oil are rising as crushing has been low because the price on commodity exchanges is much higher than the spot prices,” Atul Chaturvedi, chief executive officer of Adani Wilmar Ltd., said by phone from Ahmedabad. “It makes more sense today to buy the physical seed and deliver it on the exchange than crush it.”
The most-active May-delivery contract on the National Commodity & Derivatives Exchange fell 0.5 percent to close at 3,126 rupees ($62) per 100 kilograms in Mumbai today. Futures gained 17.5 percent in March, the most since January, 2009.
“Many corporates who are actively trading in the market will lose confidence,” Gnanasekar Thiagarajan, a director at Commtrendz Risk Management Services Pvt. “A decline in trading volume is natural but once the sentiment turns negative, you don’t expect them to come back.”
India meets more than half its edible oil demand through imports. The nation buys palm oil from Indonesia and Malaysia, and soybean oil from the U.S., Brazil and Argentina.
Oilseeds production in India may drop to 30.5 million tons in the year ending June 30 from 32.48 million tons a year earlier, according to the farm ministry. Soybean meal exports may climb as much as 12.5 percent to 4.5 million tons in the year ending Oct. 31, according to Rajesh Agrawal, spokesman for the Soybean Processors Association of India.