NSEL may launch wheat contracts next week

The National Spot Exchange (NSEL), the spot trading arm of the country's largest commodity futures trading platform, the Multi-Commodity Exchange (MCX), is planning to launch wheat contracts next week.

Its rival NCDEX Spot, the spot trading platform of the National Commodity & Derivatives Exchange (NCDEX), is currently working on the idea and plans to facilitate trading by April-end to cover the rabi crop.

This assumes significance as suspension of wheat from the futures market in early 2007 has left hundreds of participants in a lurch, forcing them to shift to other commodities. The worst sufferers remained flour millers, both from the organised and unorganised sectors. In absence of any real benchmark price, they procure wheat at the open market price to meet their requirements.

The spot trading platform will not only provide a nationwide benchmark price, but also allow the participants to trade in desired quantity for delivery at the exchange-specified centres.

NSEL is currently launching standard mill quality of the Gujarat variety of wheat for delivery in Visnagar and Rajkot, both in Gujarat. It is also planning to extend its delivery base in Maharashtra later in April. "The season's first wheat crop is harvested in Gujarat. Therefore, we propose to commence our operations from Gujarat. This will be extended to other states as the harvesting progresses," said Anjani Sinha, MD & CEO of NSEL.

Wheat can be traded on NSEL in multiples of 1-quintal lots with a maximum foreign matter allowed at 0.7 per cent and moisture up to 12 per cent. Damaged grains are also allowed up to 2 per cent and broken stuff up to 7 per cent.

The exchange has rented two warehouses--one in Visnagar and another in Rajkot--to store grains. Sinha clarified that the stock limits imposed by states would be applicable on traders and not on warehouses as many traders could keep their holding at one particular location.

But the exchange would not allow a trader to cross the state-prescribed stock limit, Sinha added.

NSEL is also planning to launch maize contracts in Bihar in the second fortnight of April with delivery centres in Purnia, Maheskot and Begusarai.

Meanwhile, a senior official of NCDEX Spot confirmed the plans for the launch of wheat contracts. "Although, the planning is in an advanced stage, yet no final date has been decided so far. However, the contract will be launched very soon," he added.