India: MCX plans to launch futures contract in onions

Multi Commodity Exchange (MCX) is planning to launch futures contract on onions based on spot prices of the Nasik mandi in Maharashtra.

Onion was enlisted by the Forward Markets Commission (FMC) for futures trading earlier this month to help find better prices to farmers.

India is the second largest onion producing country in the world with over 40-lakh-tonne annual production. MCX has already approached the FMC for the requisite approval.

One of the most prominent onion producing zones in the country, Maharashtra had a bumper crop in the last season resulting in plummeting of prices to 50 paise a kg. But, according to available reports, prices are now hovering at around Rs 2-2.50 a kg.

Apart from onions, MCX has also sought approval for launching forward contracts on jute, ginger and kufri jyoti potatoes. While onion, jute and potatoes are high on the exchanges priority list for launching forward contracts, MCX is particularly bullish about the prospects of expanding the scope of its potato futures by adding new varieties.

Popularly known as Bengal potatoes, kufri jyoti is the dominant potato variety available in West Bengal, the second largest potato producing State in the country. The exchange launched futures on the 3797 variety linked to the Agra mandi in Uttar Pradesh in March this year. UP is the largest potato producing State in the country.

According to available information, the 3797 variety has 70-75 per cent price correlation with kufri jyoti. Accordingly, the spot market in West Bengal has aligned itself with the futures on 3797.

The 3797 potato futures is currently recording an average daily turnover of Rs 30-35 crore and an open interest position of 1.3 lakh tonne.

Source