India. SEA calls for allowing futures trading in crude palm and soybean oil

The Edible Oils Association of India (SEA) has once again asked the government to reconsider resuming futures trading in commodities such as crude palm oil and crude soybean oil, BusinessWorld reported.

In December 2021, the Securities and Exchange Board of India (SEBI) suspended futures and options trading in seven agricultural derivatives, including the two commodities mentioned above. SEA claims that due to the lack of trading in commodity exchanges, its members have faced huge problems, including financial losses.

“The industry had hoped that the suspension would be lifted and operations would be smoother, but the continuation of this restriction has further weakened an important risk mitigation tool,” the industry organization said.

According to SEA, a robust futures market is critical to managing price risk, the orderly development of agricultural markets and providing reliable price signals to all stakeholders, including government. Citing unnamed studies, SEA argues that futures trading is not a significant factor in inflation.

“The absence of futures trading deprives the industry of necessary hedging and pricing mechanisms, exposing businesses to greater price volatility and disrupting operations. Moreover, the absence of futures trading also deprives the government of important price signals, leaving an information gap,” the industry organization wrote in a memorandum.

In December 2021, India suspended futures and options trading in seven agricultural commodities – chana, mustard seeds, crude palm oil, mung, rice (basmati), wheat and soybean and their derivatives. The suspension of futures trading has been extended periodically, with the current ban in place until December 20, 2024.

Tags: soybean oil, India, palm oil, restrictions