The Hindu Business Line : Flour millers see no benefit from futures trade

Bangalore, Feb. 7 Roller flour millers, the major consumers of wheat in the country, are not worried about the freezing of futures trade in foodgrains, particularly wheat.

“Futures trade is to hedge risk for producers and buyers. We have over 1,100 flour mills in the country and 2,000 chakkis (grinding mills) who deal in wheat. But we are dependent on our buyers. When they are hedging their positions, we do not feel compelled to take part in futures trade,” said Mr Vinod Kapoor, Chairman of the organising committee of the fourth international seminar on wheat.

“The major deciding factor in wheat price is demand-supply. We don’t see futures market following fundamentals. There is a consensus among roller flour mills that we will not take part in futures trading,” said Mr M.K. Dattaraj, President, Roller Flour Mills Federation of India.

Reasons

One of the reasons why the millers are not interested in futures is that apart from the procurement period, the wheat market is “fairly unregulated”. “All regulations of wheat trade are present only during the procurement between April and June. After that, the farmers are free do anything with their stocks and even sell without paying tax,” Mr Kapoor said. “Such circumstances do not hold prospects for us in futures trading,” he said.

Mr Dattaraj said 2007-08 did not witness any unprecedented rise in wheat prices, despite the absence of a forward market.

“We have put forth our views to the Abhijit Sen panel which is examining futures trading in foodgrains,” Mr Kapoor said. “On the other hand, a section of growers want futures trade. We have nothing to say on that and it is entirely up to them,” he said.

The Centre, worried over rising prices of wheat and pulses, froze futures trading in wheat, rice, urad and tur in March last year. The Finance Minister, Mr P. Chidambaram, in his budget speech, said a panel headed by Dr Abhijit Sen would go into futures trading in essential commodities. Initially, the panel was given two months time but till now, it is yet to finalise or submits its report.

Bourses such as the NCDEX and the MCX are keen on revival of futures trading in grains and pulses as the freeze has affected their turnover.

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