MCX grapples with low volumes in agri futures

Multi-Commodity Exchange (MCX), the country’s top commodity bourse that has an indomitable space in energy and metal futures, is grappling with the problem of sluggish agricultural commodities volume, which remain lower than its rival National Commodities and Derivatives Exchange (NCDEX).

Of 26 farm commodities, futures trading in 17 with delivery in March, April, May and June showed zero volume, according to MCX data.

Investors’ participation remained thin in commodities like maize, jeera, guarseed, cotton seed, red chili, gur, mustard seed and 10 others since the launch of March and subsequent contracts in December, an analysis of the data showed.

Experts attributed the ‘mindset of investors’ and the current global economic recession for the thin volume in agri futures on the MCX platform.

“It is very difficult to change the mindset of investors as many of them still believe MCX is good for metals and energy futures, while NCDEX for agricultural commodities,” Hyderabad-based Karvy Comtrade brokerage Research Head Harish G said.

Volumes were not picking up on MCX despite there being no difference in contract specifications of agricultural futures on MCX and NCDEX, he said.

A Delhi-based analyst said that agri futures were not performing across the globe due to the economic recession, which has reduced demand for commodities. Investors who had parked huge funds in commodity markets in 2008 have started exiting.

According to a brand strategist, amid a difficult economic situation, it is a challenging task to establish a brand image and brand identity from agri futures as MCX’s unique selling point still remains metals and energy. Nevertheless, MCX has a couple of agri-commodities such as refined soya oil, mentha oil, cardamom, crude palm oil, jute and cotton, which have better volumes than NCDEX.

The March contract of refined soya oil generated a volume worth Rs 887 crore so far. Mentha oil had a volume of Rs 147 crore, while jute and cardamom had Rs 89 crore and Rs 54 crore respectively, the data showed.

Vandana Bharati, analyst with Delhi-based SMC Global Brokerage, said that the dynamics of agri futures were different. The speculative element was more in farm commodities than in metals and energy. Moreover, agri investors like to trust and trade on an exchange that has good linkages in spot markets, he said, adding that gold, silver and crude oil were the major volume drivers on MCX.