Traders finally show appetite for isabgul contracts

Isabgul seed (psyllium seed), produced and traded largely in Unjha (Gujarat) and bordering areas of Rajasthan, has suddenly emerged as the top performer on the Ahmedabad-based National Multi Commodity Exchange Ltd (NMCE).

NMCE launched isabgul seed futures on February 13, 2006. The Unjha-centric traders had never actively used the exchange platform. Still, the commodity, with three active contracts on the NMCE platform, was first included in the list of top 10 traded commodities between May 1-15, according to data compiled by the commodity market regulator, the Forward Markets Commission (FMC).

Again, isabgul led the entire trade in terms of turnover during the following fortnight, to generate total revenue of Rs 1,000 crore, followed by Rs 721 crore in the June 1-15 fortnight. With a total crop size of 1.7-1.8 million bags (1 bag = 75 kg), it has suddenly become the hot pick on the futures platform, which surprised many. In fact, at least five leading traders from Unjha denied having interest in isabgul seed, while they confirmed hedging their risk in cuminseed and other spices on NMCE.

“Our members are not interested on trading at the exchange platform when trade is running smoothly through the spot market. We can analyse market sentiment better then anyone else and, hence, require no such platform. Some traders from other parts of the country or commodities might be trading in isabgul seed,” said Narendra Patel, President of the Isabgul Processors Association, an Unjha-based trade body having a membership base of 350-odd.

India contributes about 98 per cent of the world’s output of isabgul seed and isabgul husk. Isabgul husk, which finds most popular use as a medicine to treat stomach disorder, is exported to many developed and developing countries. Total isabgul seed production is estimated to rise by 50 per cent this year, due to favourable climatic conditions, to 1.7-1.8 million bags this year, as against 1.1-1.2 million bags last year.

According to NMCE, isabgul seed’s total turnover was Rs 6,437 crore (508,290 tonnes) in 2007-08. It rose to Rs 13,019 crore and Rs 29,190 crore in 2008-09 and 2009-10, respectively.

Said an Unjha-based trader, S D Agarwal, said: “We never traded in isabgul seed due to the absence of a global link. Since isabgul is largely produced, processed and traded only in India, traders cannot assume any realistic price level. Therefore, trading in such a commodity is a highly risky affair.”

NMCE is the only exchange offering futures trade in isabgul seed.