Commodity Market Sas

8/7/2019 Commodity Market Sas

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Commodity Market


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What is Commodity?

A commodity is anything for which there is

demand, but which is supplied withoutqualitative differentiation across a market.

In other words, copper is copper. Rice is rice.


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What is Market?

A market is where buyers and sellers:

meet to exchange goods and services

usually in exchange for money

The market may be in one specific placeor

not exist physically at all


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What is Commodity Market?

At Where raw or primary products exchanged,

in which they are bought and sold in

standardized contracts.


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History

1875 : Establishment of Bombay Cotton

Trade association.

1900 :Gujarat Vyapari Mandali

1919 : Calcutta Hessian Exchange


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Continue

1952 : forwards contracts (regulation) Act

1952

1953: Forward Market Commission

1960 : banned on most of future commodity

trading.

1980 : again permitted this future trading


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Commodity market in pre-independence

Cotton markets:

Bombay,Karachi,Ahmedabad,and Indore.

Wheat markets:Bombay, Hapur, Karachi, Lyallpur,Amritsar, Okara and Calcutta.

Groundnut markets:

Madras and Bombay;

Linseed markets:

Bombay and Calcutta;

Jute and Hessian markets:

Calcutta;

Bullion markets:

Bombay, Calcutta, Delhi and Amritsar

Sugar market:

Bombay, Calcutta, Kanpur and Muzaffarnagar.


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Reports and Policy

UNCTAD and World Bank joint MissionR

eport:" India: Managing Price Risk inIndias Liberalized Agriculture: Can FuturesMarket Help? (1996).

National Agricultural Policy, 2000,

Guru Committee: 2001


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Growth of Commodity Market

2003: Watershed year in the history of

commodity future market.

54 commodities were opened up for trading.

Establishment of three new nationalexchanges with online trading & professionalmanagement.


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Contd.

Starting with 7 commodities till 1999, trading

is available in95

commodities.

More than 3000 members registered withexchanges.

More than 20,000 terminals spread over800towns of the country.


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Contd.

Volume increased to Rs 33,753,36 crore in

2007 from Rs. 66,530 in 2002.

Various training programme and certified

coursed are also available.


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Ministry of consumer affairs

FMC

Commodity Exchange

National Exchange Regional Exchange

NCDEX MCX NMSE NBOT 20 OTERS

Structure of Commodity market


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Forward Market Commission

(FMC) headquartered at Mumbai, is a regulatoryauthority which is overseen by the Ministry ofConsumer Affairs, Food and Public Distribution,Govt. of India.

It is a statutory body set up in 1953 under theForward Contracts (Regulation) Act, 1952

Advises Central Govt regarding recognition ofassociations.


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Major Exchanges in India

National Commodity & Derivatives

Exch

angeL

imited (NCDEX)

Multi Commodity Exchange of IndiaLimited (MCX)

National Multi-Commodity Exchange ofIndia Limited (NMCEIL)


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Other Exchanges

Rajdhani Oils and Oilseeds Exchange Ltd.

Delhi Ahmedabad Commodity Exchange Ltd Bhatinda Om & Oil Exchange Ltd.,

Batinda.Bikaner Commodity Exchange Ltd

Bikaner First Commodity Exchange of IndiaLtd,Kochi

Haryana Commodities Ltd. Sirsa

India Pepper & Spice Trade Association.Kochi

National Board of Trade. Indore


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Contd..

Surendranagar Cotton oil &

Oilseeds Association Ltd,

The Bombay CommodityExchange Ltd.Mumbai

The Bullion Association Limited,

Jaipur

The Central India Commercial

Exchange Ltd, Gwaliar

The Chamber Of Commerce.,

Hapur

The Cotton Association of India

Mumbai

The East India Jute & HessianExchange Ltd, Kolkata

The Meerut Agro CommoditiesExchange Co. Ltd., Meerut

The Rajkot Commody ExchangeLtd.

The Spices and Oilseeds ExchangeLtd ,Sangli

Vijay Beopar Chamber Ltd.,Muzaffarnagar


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Commodities

Fibres and Manufacturers: e.g. Kapas,Silk

Spices: e.g. Turmeric,Pepper Edible Oilseeds and Oil: e.g. Sunflower oil

Pulses: e.g. Masoor, Urad

Energy Products: e.g. Crude Oil, Natural Gas

Vegetables : e.g. Potato Metals: e.g. Silver, Gold, Nickel

Others: e.g. Gur, Sugar, Rubber


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PERCENTAGE

34%

4%59%

3%

NCDEX

NM E

MCX

OTHER

REGIONAL

EXCHANGE

Indian commodity market share(in terms of turn over)


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Participants in Commodity FuturesParticipants in Commodity Futures

Farmers/ Producers

Merchandisers/ Traders

Importers

Exporters

Consumers/ Industry

Commodity Financers

Agriculture Credit

providing agencies

Corporate having price

risk exposure in

commodities


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Price discovery for commodity players

A farmer can plan his crop by looking at pricesprevailing in the futures market

Hedging against price risk

A farmers can sell in futures to ensure remunerativeprices

A processor/ manufacturing firm can buy in futures to

hedge against volatile raw material costs

Benefits of Commodity Trading


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Contd..

An exporter can commit to a price to his

foreign clients

A stockist can hedge his carrying risk to

ensure smooth prices of the seasonal

commodities round the year


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Volume

Year Rs (Crore) % Increase

2002 66,530 -2003 1,29,364 94%

2004 5,71,759 341%

2005 2,155,122 276%

2006 2,739,340 27%

2007 33,753,36 23%

2010 (E) 74,156,13 (E) 30% (E)


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Trading Volume

V o l u m e

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

1 2 3 4 5 6

Ye ar

R

ror

Rs. Crore


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Group-wise Value of Trade

Commodity

group

2004-05 2005-06 2006-07 2007-08

Bullion, metals 1.80 7.79 21.29 26.24

Agriculture 3.90 11.92 13.17 9.41

Energy 0.02 1.82 2.31 5.00

Others 0.00 0.02 0.001 0.00

Total 5.72 21.55 36.77 40.65


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Percentage to totalV

olume (2007-08)

% of Volume

64.55

23.15

12.3 0

Bullion, metal

AgricultureEnergy

Others


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Contribution of Agriculture commodity

in WPI and CPI Inflation

12 food grain items in WPI index with 5.01%

weight. (S

pecially Rice & Wheat)

High Inflation: Major part consists of

Gram & Urad: 30%Wheat: 14%

Rice -4.7%


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Contd.

Weight of Food grains is much higher in CPI.

That is 69.15%. It consists of:

Cereals: 40.94%

Pulses: 3.39%


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Conclusion

Good option to diversify portfolio.

Price prediction can easily be done for thefuture.


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Conclusion


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Documents

Commodity Market Sas