Sugar futures Prices Resume after commodity market relaunch

Sugar futures prices are set to resume from Monday after a gap of 19 months with the commodity market regulator Forward Markets Commission giving the go-head for the re-launch. Following the approval, commodity exchanges such as MCX, NCDEX and newly-launched ACE Derivatives and Commodity Exchange have decided to launch sugar contracts from Monday.

Mr Vijay Kumar, Chief Business Officer, NCDEX, said the exchange is working on the contract specifications.

?We may not make any major change in contract specifications. The exchange was doing a daily turnover of Rs 100-300 crore on sugar contracts before it was banned by the Government,? he added.

The Government banned trading in sugar futures in May 2009 for six months after prices ran up on drop in production. The ban was later extended till September this year. Since then, the exchanges have been waiting to hear from the regulator for re-launching the sugar contracts. Mr P. K. Singhal, Deputy Managing Director, MCX, said the domestic sugar industry will definitely benefit from the re-introduction of sugar futures as the exchanges enable a transparent interplay between demand and supply leading to efficient price discovery that is reflected in the high correlation between the futures and spot prices. To start with, MCX has decided to launch six contracts. The decision of the Forward Markets Commission comes on the back of the sharp fall in sugar wholesale prices at Rs 2,978 a quintal from the record high of Rs 4,050 last year.

The country is expected to produce over 25 million tonnes of sugar in the current season that began on October 1. Production this year is expected to be higher than the domestic demand of about 23 million tonnes, said traders.

Mr Dilip Bhatia, Chief Executive Officer, ACE Derivatives and Commodity Exchange, said: ?Any contract that is being re-launched will take some time to stabilise. However, we expect a good demand for the sugar contracts over a period.? Ace Commodity Exchange initially plans to launch four contracts ? January, February, March and April 2011. The M?grade sugar contract is being launched with Delhi being the basis centre and additional delivery centres at Muzaffarnagar, Bareilly, Sitapur, Kanpur, Gorakhpur and Kolkata.

Shares of sugar companies were trading higher on strong sugar price outlook, three dealers said. Macquarie in a recent note said sugar prices are likely to remain firm in the first half of 2011 because of recent production losses in key sugar producing regions. At 11:35 a.m., shares of Shree Renuka Sugars <SRES.BO>, Triveni Engineering <TREI.BO>, Balrampur Chini <BACH.BO> and Bajaj Hindusthan <BJHN.BO> were up 1.1-4.2 percent.