The Multi Commodity Exchange (MCX) has received an approval from the Securities and Exchange Board of India to launch future trading in Arecanut, which is one of important cash crop in India. The exchange is planning to launch futures in August, in midst of the season.
Arecanut is mainly divided into two varieties White and Red. Red variety is a boiled one which is used for manufacturing Gutka. The red variety has a mix is called Rashi and it contains all the varieties such as Api, Bette, Gorubulu etc. The traders price according to the content of each of these varieties. Api is considered as a best quality variety so it gets more price. Even this variety has different sub varieties.
M Suresh Bhandary, managing director, The Central Arecanut and Cocoa Marketing and Processing Co-operative Limited (CAMPCO) said that one need to wait and watch how MCX would be handling this since unlike other commodities, this commodity cannot be stored and sold and it got lot of varieties.
Gutka makers and producers of scented supari makers are potential hedgers on buy side while farmers can hedge their crops. The futures are expected to help as Arecanut has five harvesting season in a year.
Bhandary says that the arecanut price is now more depend on the imports, which is growing both legally and illegally. While, the Government had put a cap of Rs 250 per kg, imported Arecanut is sold at Rs 220 per kg, he alleges. At this time the prices would have been Rs 280-290 kg, but the prices at around Rs 230, says Bhandary.
When futures are launched, how will this price cap like restriction is reflected in futures is to be seen.
India is world’s largest producer of Arecanut and largest consumer also.it imports 8-10 per cent of requirement to meet demand. The commodity’s production in India dropped in 2018-19 to 7,73,000 tonnes in 2018-19 from 8,33,000 MT in 2017-18. The drop was mainly due to yellow leaf disease, which impacted the production in South. Area of cultivation also dropped to 4,47,000 ha from 4,97,000 ha. India’s yield is much lower than that of China and Burma.
In India, over 75% of the production is in Karnataka and Kerala only. Assam is another big producer.
Arecanut is mainly used for chewing purposes. It is a main content of Pan and Gutka. The consumption demand for red Arecanut is mainly from Gutka industry (80%).
It’s also used as raw material in manufacturing of scented supari and also paints. In southern India mainly Andhra, Tamil Nadu and Karnataka it’s consumed along with beetle leaves as raw nuts. It also an integral part of Hindu socio-religious ceremonies.