Role of Futures Market in Potato

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Role of Futures Market in Potato  
Mr. Sanjit Prasad V.P. MCX
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MCX ACHIEVEMENTS

• Live Trading Since November 10, 2003
• Average Daily Turnover Rs.7,500 Crores (US
  1,666.60 Mn)
• Highest Daily Turnover - Rs.17,987.65 Crores
  (US 3,997.25 Mn)
• Operations from 500 centers with over 1400
  members
• 9000 Trading Terminals (TWS)
• Two national level agri marketing and
  infrastructure initiatives National Spot
  Exchange for Agricultural Produce and National
  Bulk Handling Corporation

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MCX Key Shareholders
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PotatoFact Sheet

• Mainly a Rabi crop but grown round the year
• Summer crop- March-April-----------Aug-Septemb
  er
• Autumn crop- August-Sept.---------Dec.-
  January
• Spring crop- January-Febr.---------May-June
  
• Grown mainly in UP, Punjab, Haryana, West
  Bengal,
• Madhya Pradesh, Bihar, Andhra Pradesh, Tamil
  Nadu
• and Gujarat
• Average production between 240 260 lakh tons
• Average area under potato is 12 16 lakh
  hectares
• India ranks 5th in Production in the World

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PotatoProduction in India

• The area covered under potato has increased to
  16 lakh hectares, higher than the last years
  area of 15.5 lakh hectare.

Area sown Under Potato
Source Joint Director of Agriculture,
respective states
The area has increased by about 4, and with the
crop condition and the weather being favorable,
the output is expected to rise by about 20-25
lakh tons over last years production of 250 lakh
tonne, provided the pest (blight) is kept within
control.
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PotatoProduction in India
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PotatoPrice Movement

• Factors influencing Potato Price movement
• Variation in domestic acreage
• Pest and disease attack
• Frequent changes in weather condition during
• growing season
• Demand from food processing industries
• Transportation charges

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Daily Price Movement of Potato Agra(March 2006
onwards)
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Daily Price Movement of Potato Tarkeshwar(Septemb
er 2006 onwards)
Potato Spot Price
510
500
Spot Price
490
480
470
Price (Rs/ Qtl)
460
450
440
9/9/2006
5/10/2006
9/10/2006
3/11/2006
7/11/2006
13-09-2006
16-09-2006
20-09-2006
23-09-2006
27-09-2006
30-09-2006
12/10/2006
16-10-2006
19-10-2006
23-10-2006
27-10-2006
31-10-2006
10/11/2006
14-11-2006
Date
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Advantages

• Advantages for stockists
• To sell future contract against physical stock
  and protect against price fall
• Advantages for financiers
• To hedge by selling future contract
• Advantages for buyers
• To buy future contract against physical
  requirement
• Advantages for traders
• To make supply commitment by buying future
  contract
• To sell futures against buying commitments or
  against physical stock

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Quality specifications
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Potato Contracts
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MCX Potato Contracts

• Agra Potato Contracts launched for trading on 9th
  March 2006
• Tarkeshwar Contracts launched for trading on 9th
  Sept.2006
• Compulsory Delivery contract
• Agra- March to Oct.
  Tarkeshwar- March to Nov.
• Three contracts March, April May are running
  concurrently
• OI gt 50,000 tons
• Peak OI in Agra gt 1.75 lakh MT in Trk. gt 40,000
  MT
• DDR to be calculated on the basis of average of
  last 3 working days of the contract
• Quotation Rs./Q Rs.100 per
  quintal Cold Storage cost
• Lot size of 30 tonnes
• Teji Mandi Re.1/-
  Har-Jeet Rs. 300/-

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Bonanaza For Badla FinancersPotato October
Contract
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Potato November Contract
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Delivery Process

• Compulsory Delivery contract, with penalty of 5
  for non-compliance
• Agra 30 cold storage Hoogly 10 cold
  storage
• RF instrument installed at all the chambers
• NBHC for QC Collateral Mgmt.
• Potato to be brought 10 days before expiry of the
  contract
• Delivery period 11 to 15th of the expiry month
• QC validity of three months
• QC charges Rs.650 per lot

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Going Forward

• Agra Tarkeshwar to have 10 tp 12 LMT of OI
• Excellent opportunity for Viyaj Badla,
  negligable cost of carry
• Arahatiya to buy form MCX platform
• Cold Storage people to hedge their position
• Large retail stores keen to buy or hedge on MCX
  platform
• Good investment instrument
• Bond v/s Futures
• Volume of around 500 crore per day

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Thanks!