MCX, NCDEX to hike margin on sugar, wheat trade from next week

NCDEX is charging initial margin of 4.78% on wheat and 4.41% on sugar, MCX, initial margin is 8.9% on wheat and 5% on sugar

To check price rise, commodity bourses MCX and NCDEX have decided to hike the initial deposit money (margin) to 10% from sugar and wheat traders starting next week.

Initial margin is a minimum percentage of the money that traders are required to deposit with the exchange to trade in the commodity futures.

Following direction from the commodity markets regulator FMC, MCX and NCDEX announced in separate circulars that sugar and wheat futures will attract initial margin of 10% of the value of the commodity with effect from August 6.

At present, NCDEX is charging initial margin of 4.78% on wheat and 4.41% on sugar. At MCX, initial margin is 8.9% on wheat and 5% on sugar.

The exchanges have raised the initial margin to restrict especially participation of speculators and curb price rise in sugar and wheat futures.

"Wheat prices rose by 30% since June 20 and prices are now consolidating on the NCDEX platform. Similarly, sugar futures went up by 27% since the first week of June on the exchange," Commodity brokerage firm JRG Wealth Management analyst Chowda Reddy said.

On NCDEX, wheat price for September delivery is ruling firms at Rs 1,445 per quintal, while sugar prices at Rs 3,645 per quintal today, as per the exchange data.

Sugar prices are going up on reports of a likely dip in production in the 2012-13 marketing year starting October and high global prices. Wheat prices are surging on fears that deficit rains and low level of water storage in dams could dampen the prospects of the crop to be sown from October, market experts said.

The country is estimated to have produced record wheat of 93.90 million tonne this year. Sugar production is expected to be 26 million tonne in the 2011-12 season.

In view of deficient monsoon, likely to hit kharif production, the FMC is keeping a close watch on agri-futures. It has restricted traders by imposing higher margins in farm items like soyabean, potato, soya oil, mustard, chana among others.