NEW DELHI: Bulls are running amok in Indian oilseed and corn futures in anticipation of a ban by the government soon. Since Indian contracts are rising at a time when the world market is cooling off, policies to control inflation may be actually stoking the fire in domestic oils and grain futures.
By continuously going long, a clutch of large players have pushed up soybean, rapeseed and corn futures to record highs in Mumbai and Indore bourses even though the international market has dropped significantly.
“At a time when the international market in soybean, rapeseed and corn has dropped, even those who had short positions are now exiting to go long. Obviously they know something that others don’t,’’ said a market watcher in Mumbai.
These local bulls are betting that when the government bans futures in these commodities, it will ask exchanges to settle their contracts on the basis of prices on the last trading session and not prices in the physical market. That would give punters ample gravy for a profit feast.
Ever since the ban on soyabean oil, there has been a bull run in oilseed because speculators are anticipating a similar ban there as well. In the last three weeks, soybean has shot up Rs 2,500/tonne, rapeseed Rs 4,500/tonne and corn Rs 800/tonne.
The market is under such a sway towards one direction that even a crash in the international market has not been sufficient to ensure a correction. On May 29, Chicago Board of Trade soybean contract dropped 5% by 65 cents, or Rs 100/quintal in rupee terms.
CBoT corn also dropped almost 5% in May. In India, however, soya dropped by just Rs 5/qtl on Friday, while corn actually rose Rs 13/qtl. Rapeseed also bucked the international trend by rising Rs 30/qtl on Friday.
“Things have come to such a pass that soyabean October contract for the new crop is now ruling at a record Rs 23,500/t. One reason is the likely increase in minimum support price for soybean. But that can’t explain this rally. The crop is not even sown yet,’’ said a trader in Mumbai.
While the longs are betting on futures getting banned, the shorts are nervous because they know it would leave them with no exit option. So they are staying away from the market. “No one wants to be caught on the short side of the market when the ban comes,’’ said a trader here.
Market watchers say the only way to halt this rally would be for the government to make it clear that if a ban comes, it would not use merely the last traded price for settling contracts.
“The same method was used in soybean oil, rubber and potato this year and urad and tur contracts last year. Only in wheat the government allowed the contracts being traded to run their course. That ensured an orderly exit of players in the market,’’ a source added.
The biggest problem of this bull run has been the growing disconnect between the physical and futures market. No one in the physical market is willing to do deals at prices in the derivatives market. That has disrupted trading significantly, which may further work to the bulls’ advantage.
“The upward spiral in corn has further fuelled demand by poultry and starch industries to ban futures and the strategy appears to be working well. Either way bulls are ensuring the ban comes soon. They are waiting for the government to fall into this trap,’’ a source said.
By continuously going long, a clutch of large players have pushed up soybean, rapeseed and corn futures to record highs in Mumbai and Indore bourses even though the international market has dropped significantly.
“At a time when the international market in soybean, rapeseed and corn has dropped, even those who had short positions are now exiting to go long. Obviously they know something that others don’t,’’ said a market watcher in Mumbai.
These local bulls are betting that when the government bans futures in these commodities, it will ask exchanges to settle their contracts on the basis of prices on the last trading session and not prices in the physical market. That would give punters ample gravy for a profit feast.
Ever since the ban on soyabean oil, there has been a bull run in oilseed because speculators are anticipating a similar ban there as well. In the last three weeks, soybean has shot up Rs 2,500/tonne, rapeseed Rs 4,500/tonne and corn Rs 800/tonne.
The market is under such a sway towards one direction that even a crash in the international market has not been sufficient to ensure a correction. On May 29, Chicago Board of Trade soybean contract dropped 5% by 65 cents, or Rs 100/quintal in rupee terms.
CBoT corn also dropped almost 5% in May. In India, however, soya dropped by just Rs 5/qtl on Friday, while corn actually rose Rs 13/qtl. Rapeseed also bucked the international trend by rising Rs 30/qtl on Friday.
“Things have come to such a pass that soyabean October contract for the new crop is now ruling at a record Rs 23,500/t. One reason is the likely increase in minimum support price for soybean. But that can’t explain this rally. The crop is not even sown yet,’’ said a trader in Mumbai.
While the longs are betting on futures getting banned, the shorts are nervous because they know it would leave them with no exit option. So they are staying away from the market. “No one wants to be caught on the short side of the market when the ban comes,’’ said a trader here.
Market watchers say the only way to halt this rally would be for the government to make it clear that if a ban comes, it would not use merely the last traded price for settling contracts.
“The same method was used in soybean oil, rubber and potato this year and urad and tur contracts last year. Only in wheat the government allowed the contracts being traded to run their course. That ensured an orderly exit of players in the market,’’ a source added.
The biggest problem of this bull run has been the growing disconnect between the physical and futures market. No one in the physical market is willing to do deals at prices in the derivatives market. That has disrupted trading significantly, which may further work to the bulls’ advantage.
“The upward spiral in corn has further fuelled demand by poultry and starch industries to ban futures and the strategy appears to be working well. Either way bulls are ensuring the ban comes soon. They are waiting for the government to fall into this trap,’’ a source said.
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