National Commodity and Derivatives Exchange (NCDEX) is to introduce trade in paddy futures for the first time.
The leading agri commodity exchange will have trade for the globally accepted Basmati paddy, the Pusa 1121 variety, from July 10.
With the introduction of the new contract there is expected to be an effective risk management tool to the market participants and provide them a fair price discovery platform. This becomes relevant as this variety is among the highly volatile one.
The exchange will have Karnal in Haryana as the basis delivery centre Sonipat will be an additional delivery centre. The trading and delivery lot size will be 10 tonnes with compulsory delivery option. Often trade in futures has little delivery making the trade engage participants who make this a mere trade tool.
Futures trade has been devised to safeguard market price risks. As a hedging instrument, it should help commodity participants to fetch better price realisation for their grain produce and enhance their income.
According to the exchange studies, global rice production is about 501.5 million tonnes and India with a production of around 116 million tonnes has a share of about 23 per cent. Global basmati rice production is about 8-9 million tonnes of with India chipping in about 5.5 million tonnes and the rest comes mainly from Pakistan. India produces about 5 per cent of basmati out of its total paddy output.
NCDEX MD and CEO Vijay Kumar said, “It has been our constant endeavour to provide a stronger, broad-based product offering, which will add economic value to agri businesses. The addition of paddy (Basmati) – Pusa 1121 futures contract to the grain product basket is aimed at offering an exhaustive and wholesome risk management offering to the market. We are encouraged by the continued support of the grain industry and look forward to the successful launch.”
Exchange EVP business head Kapil Dev, EVP Business, NCDEX said, “Indian grain industry, which has been growing at a steady rate year on year, is exposed to high price risk. It uses wheat, maize and paddy as inputs for measuring demand and supply trend of grains and any adverse price movement can erode whole profit margin. NCDEX already has wheat and maize futures on its platform. Addition of paddy will improve decision-making of the value chain.”