Commodity futures market regulator Forward Markets Commission (FMC) is confident that the skew between spot and futures prices in potato will cease once the diversion from physical markets to cold storage reverses. The regulator had recently asked MCX and NCDEX to look into the rise in potato, sugar, turmeric and rubber to see that over-speculation in these commodities had not led to runaway prices.
“We were particularly concerned about a 15% discrepancy between spot and futures prices in potato. The futures of the other three commodities are simply reflecting the spot market fundamentals and the skew between spot and futures of potato was not as much in the other commodities,” said BC Khatua, chairman FMC.
On Wednesday, the differential between spot and futures (April contract) prices on MCX was 3.9%, while on NCDEX it was around 9% (the contract expires on April 20 as against April 15 on MCX). However, the spot-futures differential was 24% on both exchanges for the May contract.
“I do not think May futures prices at around Rs 900 levels are sustainable. The movement of crop from the physical market to the cold storage has led to a hardening of prices but this will reverse once cold storage are full and supplies are provided from there,” he said.
Mr Khatua attributed the rise in potato prices to a 5 mt shortage in the current year crop (estimated at 25 mt) compared with the previous year’s crop of over 30 mt which saw prices crash and farmers reducing acreage area. The commodity was banned from futures trading in May last year following a rise in inflationary expectations in the economy.
