Sugar futures took off at their relaunch on India's National Commodity and Derivatives Exchange (NCDEX) on Monday, with interest from end-users and institutions pushing volumes near levels seen in 2009 when they last traded.
The most-active sugar M-grade for January delivery on the NCDEX was trading at 3,037 rupees per 100 kg, after hitting a contract high of 3,079 rupees.
"The response has been good as processors and institutions had been waiting to use this as a risk management tool," said Vijay Kumar, chief business officer at NCDEX. Volume recorded in the front-month contract was at 15,910 tonnes, almost nearing the six-month average of 2009 of 19,050 tonnes. Total recorded volumes were at 19,910 tonnes in the three of the six active contracts.
"Volumes are good, but there is a lack of confidence among participants on the existence of the contract (if) fundamentals turn negative in years to come," said Gnanasekar Thiagarajan, director, at Mumbai-based Commtrendz Research. India banned trade in sugar futures in May 2009 when prices were rising as it faced shortages. The government finally decided to allow them again from the end of September.
India, the world's second-biggest producer after Brazil, was forced to import large quantities in the past two years as farmers switched to other more profitable crops and a severe drought hit cane output in 2009. The government, fighting to control double-digit inflation and protect its core voter base among the poor, has a track record of intervening to control prices. Its latest move was to cut import duties and ban exports of onions.
Interventions mar trading volumes on exchanges like NCDEX, which depends on agri-commodities for most of its business. "I hope it will be a robust contract like oilseeds and volumes may (rise) to 100,000 tonnes a day or 3-3.5 billion rupees per day," said Kumar of NCDEX, which clocks a volume of 35 billion rupees per day on all its contracts.
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