After 19 months, sugar futures trading to restart tomorrow

Futures trading in sugar will resume tomorrow after a gap of one-and-a-half years, with the country's top two national exchanges MCX and NCDEX launching new contracts.

The government had banned sugar futures trading on May 27, 2009, to control rising prices of the sweetener. The ban was valid till September 30 this year, following which it was allowed to lapse by the regulator, the Forward Markets Commission (FMC).

However, despite lifting the ban, the FMC did not permit the immediate relaunch of sugar futures trading as it was waiting for realistic estimates of production in the 2010-11 sugar year (October-September).

"We will relaunch sugar futures from tomorrow. We will offer contracts for six months from January to June, 2011," an MCX spokesperson said, adding that delivery would be linked to the Delhi, Uttar Pradesh and West Bengal markets.

In a circular, NCDEX said that three futures contracts for sugar trading would be available for January, February and March, 2011.

"The correlation between the futures contract prices and spot market prices is high. As the exchanges enable a transparent interplay of demand and supply forces, leading to efficient price discovery, the domestic sugar industry will definitely benefit from the re-introduction of sugar futures," MCX Deputy Managing Director P K Singhaln said.

Sugar production is estimated to rise to 24.5 million tonnes in the 2010-11 sugar year, as against 19 million tonnes in the previous year.

Annual demand has been pegged at 23 million tonnes.

Buoyed by increased supplies, retail sugar prices have declined sharply from their peak of nearly Rs 50 a kg in mid- January to Rs 30 a kg at present in the national capital.

India is the world's second-biggest producer and the largest consumer of sugar.