From the Product Manager’s Desk

An important week for commodities as there was a horde of data being released by US. The most important figure was the interest rate hike by FOMC in the US. Contrary to the market expectations of a larger increase in the Fed-rates, the rates were increased by merely 25 basis points, thereby, signaling an end to a 2 year old campaign of rate hikes. This gave a boost to the precious metals and base metal prices.

Agricultural produce such as wheat is also available for trading in the Indian commodity exchanges. ‘Know your commodity’ will cover wheat this week. Happy Reading!

= == = == == = = === = == == = = == = == == = = == = == == = == = = == == = === = ========

Exchange Turnover:  Daily average turnover for the week

            *Average of 5 working days (Monday-Friday)

Know your commodity

Wheat

Wheat is the most widely grown cereal grain in the world. There are over 30,000 varieties of this ubiquitous grain. Cultivated for over 6,000 years, wheat is second only to rice as a grain staple.

Global Scenario

Around the world, 2.5 million square kilometers are used for growing wheat. Indian Wheat Production is 12% of World Production. The major exporters of wheat are United States of America, Australia, Canada, European Union, and Argentina whereas importers include European Union, China, Egypt, Japan, Brazil, Mexico, Indonesia, Algeria, Philippines, and Iraq

Indian Scenario

The market size of wheat in India is over Rs 50000 crores with an annual production of 73 million tonnes. Since wheat is staple food of the farmers themselves, farmers retain roughly 48% per cent of the food grains for food, feed or seed purpose which does not enter into the trading value chain. Of the balance 52% per cent traded and marketed, about 50 per cent is handed by the public sector (the Food Corporation of India assisted by various State agencies) and the rest by private trade. India's presence in the global wheat market depends on the government subsidies without which parity of export of wheat diminish in international markets drastically, with only small exports to neighboring countries like Bangladesh and Sri Lanka.

Uses of Wheat and Wheat Products

Wheat has a wide range of protein and good milling and baking qualities. The primary application of wheat is in making flour. The flour is used to produce bread, rolls, some sweet goods, and all-purpose flour. Wheat is used in making cookies, cakes, donuts, and other fine pastries, pastas, etc.

In India wheat is generally processed to make whole meal atta flour and farina generally called dalia mostly in stone mills and fine flour (maida), semolina (rawa & suji), atta flour, germ and bran.

Most domestic wheat consumption is in the form of homemade chapatis or rotis using custom milled atta (whole meal atta flour), although usage of branded packaged atta marketed by large companies, including some multinationals, is increasing in cities. Most of the Indian wheat is suitable for making atta for chapattis.

Trading

Wheat is traded on MCX and NCDEX in India. NCDEX is a clear leader in this commodity as there is hardly any volume in wheat on MCX.

• MCX & NCDEX Wheat contract size is of 10 MT.
• Prices are quoted on per quintal basis.
• A movement of Re.1 means net gain or loss of Rs.100
• Margin requirement is around 1.5 %, which in today’s terms would be Rs.1300

Current Scenario

National Commodity & Derivatives Exchange (NCDEX) and Multi-Commodity Exchange (MCX) have reduced the position limits on all running contracts of wheat by 50 per cent from 80,000 tonnes to 40,000 tonnes for members and 20,000 tonnes to 10,000 tonnes for clients. The new reduced position limits is applicable from June 30.

The near month position limits would also be reduced to 8,000 tonnes (from 16,000 tonnes) for members and 2,000 tonnes (from 4,000 tonnes) for clients

.

Did you know???

The prerequisites for trading in commodities

• Resident Indian
• PAN
• Associated Bank savings Account / Reliance Mutual Fund (Liquid Scheme) & Reliance Trading Account
  • Demat a/c is not mandatory for trading purposes
    • Mandatory for delivery based positions
  • Commodity demat a/c is separate from equity demat a/c
    • Sales Tax no. is not mandatory for trading
    • Mandatory for delivery based positions