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    Sugaronline Editorial 20160812

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    shahav
    India is considering banning sugar futures trading to ease rising sugar prices. Sugar prices have risen sharply in India due to drought reducing sugar production in Maharashtra by 40%. While banning futures trading may seem like an easy solution, it risks hindering price discovery and does not address the underlying lack of liquidity in the sugar futures market.

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    Sugaronline Editorial 20160812

    Uploaded by

    shahav
    34 views1 page
    India is considering banning sugar futures trading to ease rising sugar prices. Sugar prices have risen sharply in India due to drought reducing sugar production in Maharashtra by 40%. While banning futures trading may seem like an easy solution, it risks hindering price discovery and does not address the underlying lack of liquidity in the sugar futures market.

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    SugaronlineEditorial20160812

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    India is considering banning sugar futures trading to ease rising sugar prices. Sugar prices have risen sharply in India due to drought reducing sugar production in Maharashtra by 40%. While banning futures trading may seem like an easy solution, it risks hindering price discovery and does not address the underlying lack of liquidity in the sugar futures market.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    34 views1 page

    Sugaronline Editorial 20160812

    Uploaded by

    shahav
    India is considering banning sugar futures trading to ease rising sugar prices. Sugar prices have risen sharply in India due to drought reducing sugar production in Maharashtra by 40%. While banning futures trading may seem like an easy solution, it risks hindering price discovery and does not address the underlying lack of liquidity in the sugar futures market.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Editorial – 12th August 2016

    Just make it stop!


    By Meghan Sapp

    India is trying to tame its sugar prices The biggest concern is the direct impact that
    by potentially ending sugar futures sugar futures have on ex-mill prices, as
    trading. futures trading are intended to be a price
    discovery mechanism. The challenge
    There’s an old joke about a patient who goes therefore is the lack of liquidity in the market
    to the doctor and explains that every time he where price shifts can happen very quickly
    hits himself on the head, it hurts. So the without really indicating a shortage in the
    doctor looks at him strangely and says, “Then national sugar market or the need for prices to
    stop hitting yourself.” jump or slide at a moment’s notice. And
    that’s exactly why the government wants to
    Apparently that is the prescription the Indian nip the problem in the bud. They’ve done it
    government wants to prescribe to ease rising before with garbanzos, another major staple
    sugar prices: to ban sugar futures trading. whose futures were suspended last month
    after raising trading margins 75% failed to
    For some, that may sound like an easy fix to a dissuade speculators.
    problem but for others it whiffs of
    government interference in markets and a Because this is India, there’s always a little
    hindrance for the sugar industry in its twist that makes one smirk. In this case, it’s
    attempts at price discovery. The country is the fact that district administration officials
    feeling the global deficit at home, thanks to sold sugar confiscated from mills for failure
    Maharashtra losing 40% of its production due to pay farmer dues using the NCDEX, getting
    to on-going drought and there’s likelihood much higher prices than they would in local
    that imports aren’t too far off in the distant markets. With those funds, they were about to
    future. pay farmers dues directly much faster than
    otherwise, making everyone happy. Except
    Prices are rising quickly, with Mumbai retail those who then had to pay higher prices at the
    prices up 48% on the year while Delhi prices millgate, perhaps.
    are up 45% on the year so it’s no wonder the
    government is looking for ways to keep the But rather than halting sugar trading as the
    masses from stirring up into a riot over high government proposes, why not look at the
    sugar prices. underlying problem that is the lack of
    liquidity? Why is there so little volume being
    Looking at the global market, sugar futures traded on the market in the first place? Could
    are indeed higher and the bull run is expected the contract terms use adjusting? As a top
    to keep going until the deficit swings back sugar consumer and producer globally, it
    into a surplus but prices, currently hovering makes sense that it should have a functioning
    around 20 cents per pound, are heading in the sugar futures contract that would have the
    direction of the 50 cents or more per kilo liquidity required to ensure proper price
    found in Indian retail markets. There is little discovery. Getting NCDEX to get a contract
    place for the government to hide: sugar prices in place that promotes and encourages use of
    are going to continue rising with NCDEX the contract should and could be in
    sugar futures trading or without it. everyone’s interest.

    © Sugaronline, 2016 www.sugaronline.com 1

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