Time for coconut oil futures?The wild swings in coconut prices have reopened the debate on the need for futures trading in coconut oil. According to the Cochin Oil Merchants' Association, the whole industry is facing problems in the absence of a risk management tool to help it guard against price fluctuations. The ability to offer stable prices over a long period of time is one of the essential requirements for sustaining the health of the industry. But some others argue that the issue is coconut prices, not that of it its oil. They point out that it is not coconut oil that determines coconut prices, but several other factors.
Castor oil contracts
When it finally starts futures trading in castor oil a few months down the line, the Bombay Oilseeds Exchange will be the world's first to offer hedging opportunities in a commodity that serves as input for a cross-section of industries. The exchange proposes to provide a separate segment for international trades. The trades conducted on thissegment will be guaranteed and settled through an independent clearing house, the Prime Commodities Corporation of India. The contracts will be denominated in Indian rupees and will have five delivery centres in India--Naroda, Unjha, Palanpur, Rajkot, Kapadwanj (all in Gujarat) and Hyderabad.
Pepper exchange blues
The International Pepper Futures Exchange in Kochi, inaugurated last October amidst great expectations, is still busy negotiating hurdles in the way to international recognition. The main reason for the lack of foreign participation is the current practice of rupee-based deals. If dollar-denominated trade is introduced there will be ready participants from abroad. Currently, most dealers from Europe, the United States and other countries feel that they are open to two risks--the risk of currency fluctuations as well as the volatility in supply of pepper.
Tea could have been better
Although average Indian tea prices at the London auctions have increased over the last year, themaximum gain was reaped by other countries like Kenya. The average London auction prices in 1997 were higher by 19 per cent over 1996 whereas the Indian price increase was lower at 17 per cent. The northward trend in 1996 prices worldwide was reinforced in 1997 with the shortfall in the Kenyan crop. But increases in Indian tea prices were just about half that of Sri Lanka, one of the largest producers. Latest figures reveal that India has exported 176.58 million kg of tea up to November 1997.
Rubber's supply gap
The Rubber Board has projected a considerable widening of the demand-supply gap in natural rubber during the Ninth Plan period. This may help rubber prices firm up significantly in the long run, it feels. The Board has also firmed up plans to bring in an additional 40,000 hectares under rubber cultivation during the period. The production of rubber will increase at an average annual rate of 1.97 per cent to 730,000 tonnes from 579,000 tonnes during the period. On the other hand, consumptionis estimated to grow at a rate of 2.1 per cent to 790,000 tonnes from 615,000 tonnes. The gap needs to be bridged either by imports or by increasing production.
Jute sacking futures
The East India Jute & Hessian Exchange, the only commodity exchange in the east, has changed its bylaws, set up a computer network and introduced a system of immediate reporting of transactions and daily clearance to check speculation as it gears up to resume futures trading in sacking. The basic quality of jute sackings on which all other transactions will be calculated has been changed from B-Twill bags of 1,020 gm to 907 gm. The necessary `in-principle' clearance has been received from the Forward Markets Commission (FMC) but the exchange is waiting for the final notification from the Union ministry of civil supplies.
Exports of synthetic textiles up
Exports of synthetic and rayon textiles for the month December 1997 have increased by a whopping 22.14 per cent over the previous month from Rs 271.49 croreto Rs 331.61 crore. For the period April to December, exports have increased by 19.18 per cent from Rs 2,290.77 crore in 1996-97 to Rs 2,730.14 crore in 1997-98. In volume terms, exports increased from 16,178.46 tonnes to 19,505.21 tonnes. The growth is phenomenal considering the fact that south-east Asian countries have increased their presence in the European and Gulf markets, which happen to be the mainstays for Indian exporters.
Bulk drug prices weaken
Bulk drug prices in the country, which were already depressed, have been facing the onslaught of cheap imports from south east Asian countries and China. Prices currently are at rock bottom and are likely to continue to remain low in the near future. Apart from cheap imports, domestic players, especially from the unorganised sector, have indulged in price undercutting, further contributing to the depression. In response to the large-scale dumping of paracetamol, the government is planning to impose a provisional anti-dumping duty.
Steelmarket weakens
The delay in the next budget and postponement of planned government expenditure owing to the elections may result in a further dampening of steel prices. Steel has been on the decline for quite some time now as there has been a negative growth in domestic demand in the current fiscal year. A slowdown in exports, mainly due to the prolonged crisis in south-east Asia, has been aiding this fall. Oversupply has forced prices in the international markets to fall sharply.
Paper inventory problems
Prices of paper in all segments have continued to show a downward trend, with major companies suffering high levels of inventories. Regular supplies and undercutting by Sinar Mas have only accelerated this trend. Creamwove paper suffered due to the delay in the beginning of the notebook conversion season.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
