Edible oil producers are pushing for the lifting of the futures trading ban for crude palm oil and soybean oil on the commodity exchanges

India’s Solvent Extractors’ Association (SEA), a coalition of cooking oil producers, on Monday called for the lifting of the December 2021 ban on soybean oil and crude palm oil (CPO) futures trading on commodity exchanges to ensure the risk management and price discovery mechanism.

The SEA has said that the ban on futures trading has prevented importers from hedging their price exposure on rupee-denominated soybean oil and crude palm oil futures on Indian exchanges.

“In recent months, cooking oil importers have suffered huge financial losses due to unusual fluctuations in international and domestic prices on the one hand and the weakening of the rupee on the other,” SEA said in a statement. India imports 56% of its cooking oil needs. The conflict between Russia and Ukraine and Indonesia, the largest palm oil exporter, which imposed an export ban in May (which was lifted after three weeks), have impacted global cooking oil prices.

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Atul Chaturvedi, President of SEA, said in a note to the Securities and Exchange Board of India (Sebi) that analysis of the price behavior of the major edible oils and oilseeds suggests they have behaved in line with global fundamentals: “We are the Believes that the futures market is not responsible for the cooking oil inflation as proven in the recent run-up, which had nothing to do with the futures market as it was not operational.”

“India is a major importer of edible oils and hence the supply-demand dynamics in the international market directly affect domestic prices,” SEA said. The resumption of futures trading on commodity exchanges would go a long way in improving the cooking oil supply chain and replenishing depleted buffer stocks. It has said the move would help combat food inflationary pressures. India’s annual imports are around 13-14 million tons (mt). Around 8 million tons of palm oil are imported from Indonesia and Malaysia, while other oils such as soybean and sunflower come from Argentina, Brazil, Ukraine and Russia.

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Earlier, the Central Organization for Oil Industry and Trade (COOIT) and the Mustard Oil Producers Association of India along with a number of Farmer Producers Organizations (FPOs) had called for the futures trading ban to be lifted. COOIT had recently said in its note to the Treasury: “Harvesting of the kharif crop will begin in the next few months and many commodities will come into the Mandis and in the absence of futures markets there is no reference price available that would allow operations to take place on the.” Spot markets difficult”.

To curb inflation, on December 20, 2021, Sebi banned futures trading in wheat, rice (no basmati), chana, mustard seeds, soybeans, crude palm oil and moong for a year. Previously, Mustard Seed and Chana (gram) futures trading were suspended on October 8, 2021 and August 16, 2021 respectively.