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Futures trade in rice
Financial Express
The huge market of rice — the country’s flagship commodities, estimated at over Rs 139,07,600 crore (2001-02) — will turn vibrant with futures trading in these foodgrains set to commence next month. Till February this year, futures trade in foodgrains was banned under the Forward Contracts (Regulation) Act.

The Ahmedabad-based National Multi Commodity Exchange (NMCE) plans to offer trading in futures of foodgrains from next month, having received approval from the Forward Markets Commission (FMC) for rice futures.

Rice futures are expected to vastly help the government emerge out of the minimum support price (MSP) and procurement price mechanism, which costs the exchequer heavily. Even the Food Corporation of India (FCI), with Rs 12,000 crore-plus annual cost of holding foodgrain stocks, can lower its burden by effectively making use of foodgrain futures.

After clearing the NMCE application for rice and wheat futures, Union consumer affairs minister Sharad Yadav reportedly said, “wheat-rice futures will ensure their price standardisation across the country,” adding, “in such a scenario, pricing would become more realistic. The ministry’s assessment is that collection and dissemination of information about prices from all major mandis will help farmers get better prices and reduce arbitrage.”

According to Mr Srinivasan, the government can move out of the MSP/price procurement game and prompt farmers to protect themselves by undertaking the price-hedging mechanism through futures and face market forces.

For this, the government can ask FCI to part-finance the cost of futures trading contracts for the first two years and thereafter ask them to be on their own. Prompting farmers to undertake futures trades and part-finance their cost of futures trading will, therefore, be vastly beneficial to the government.

With this, the protected and subsidised farmers in some states, too, could be made to face the market forces as farmers in other states. Players in these two commodities, including wholesalers and bulk consumers like bread and biscuit-makers, will also benefit from futures trading by hedging their price and commodity risks.

It was in February this year, that the Cabinet Committee on Economic Affairs (CCEA) lifted the ban on 54 items, including all cereals including rice. These commodities had so far been listed under Section 17 of the Forward Contracts (Regulation) Act, 1952, which prohibits futures/forward trading. Now they will be moved to Section 15 of the same Act, under which futures trading can be carried out through recognised exchanges.

MGR Archive 29.11.2003
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Region Type Price  
Russia Rapan $ 700
USA Jupiter Rice $630
USA Calrose #1 $830
USA Calrose #1 Paddy $480
EU Prices Baldo €660
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