While there is a tight season for Soybeans ahead, the Securities and Exchange Board of India (SEBI) received a letter from the Soyabean Processors Association of India (SOPA) to suspend trading in futures of Soyabean on the National Commodity and Derivative Exchange (NCDEX).

A legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future is known as Futures contract. The NCDEX or the National Commodity & Derivatives Exchange (NCDEX) is a commodities exchange primarily dealing in agricultural commodities in India. It was established in 2003, and its headquarters are in Mumbai. Many of India’s leading financial institutions have a stakeholding in the NCDEX. As of September 2019, significant shareholders for NCDEX included the National Stock Exchange of India Limited, the Life Insurance Corporation of India (LIC), and the National Bank for Agricultural and Rural Development (NABARD).

SOPA chairman, Davish Jain, in his letter, claimed that the excessive speculation in Soybean and soya oil contracts have disturbed the functioning of soya processors.

The letter from the SOPA chairman to SEBI said, “In the last week, soybean prices have increased by Rs 2,500/MT and soy oil prices by Rs 2,840/MT, because of which arrivals have also stopped as farmers do not bring their produce when the market prices are increasing daily. Futures contracts, instead of acting as a benchmark price for spot markets, have become spot market disruptors”.

Soybean prices have been trading well before the government had declared MSP of Rs 3,880 per quintal, even before the oilseeds had arrived in the future markets. According to data, on NCDEX’s platform, October’ deliverable contracts are trading at Rs 4095 per quintal while January’s contracts are trading at over Rs 4,100 per quintal.

In Latur’s market, the oilseed is being traded at an average price of Rs 3,870 per quintal with arrivals yet to pick up. As per estimation by SOPA, this year’s national production of Soyabean is at around 104.552 lakh tonnes against 93.062 lakh tonnes last year.

SOPA chairman, Davish Jain stated that owing to the speculations in future contracts, the business got hurt and the industry will also be likely harmed in the new season.

The letter from SOPA to the SEBI further added, “It is unfortunate that NCDEX is a silent spectator and has not taken any steps to check the speculative activity. Only 1,10,000 MT of Open Interest in Soybean Contract is impacting the 105 lakh MT of crop and badly hurting soybean processors. NCDEX has completely failed to increase participation and has reduced it by increasing transaction charges and open interest charges, and has made contracts highly susceptible to abrupt price movement because of low participation”.

Jain asked for an immediate suspension of futures trading in Soyabean and said that the market surveillance of NCDEX has failed to check the on-way price movement. He further added that SOPA requests for raising the margin to 25 percent so that at least the frivolous speculators stay away from the exchange.