National Commodity & Derivatives Exchange Limited Launches Groundnut Expeller Oil And Groundnut Futures Contracts

Groundnut is one of the largest oilseeds produced in the country. The Groundnut Expeller Oil and Groundnut (in shell) Contract will provide a window for Indian traders, processors and exporters to hedge their price risk. Groundnut (in Shell) futures contract will also meet exporters requirements to hedge the HPS groundnut price risk. It is the first time in the commodity sector that both Groundnut Expeller Oil and Groundnut (in shell) future contracts are available for trading on a national platform. With the launch of these contracts NCDEX has become an Exchange to offer the whole basket of futures contract in the edible oil complex.

The total production of Groundnut (in shell) in India is approximately 45 – 50 lakh tonnes. The total market size of Groundnut (in shell) is about Rs. 11,000 crore and Gujarat’s contribution to the market size is about one third. The total annual production of Groundnut Expeller Oil in India is approximately 10 lakh tonnes. The total annual market size of Groundnut Expeller Oil is about 5,000 crore.

The Basis Price for Groundnut Expeller Oil is ex-warehouse Rajkot (Gujarat), exclusive of sales tax/VAT. The initial contracts available for trading would be for expiry in the months of March 2006, April 2006 and May 2006.

The Basis Price for Groundnut (in shell) is ex-warehouse Junagadh (Gujarat), exclusive of sales tax/VAT. The initial contracts available for trading would be for expiry in the months of March 2006, April 2006 and May 2006. The Saurashtra region of Gujarat produces the maximum quantity of groundnut crop in the country. Hence the basis centres for the price discovery were chosen as Rajkot and Junagadh, respectively for Groundnut Expeller Oil and Groundnut (in shell).

These futures contract are expected to provide good opportunity for participants to hedge their price risk as the annualized volatility in Groundnut Expeller Oil is almost 39.34 per cent and the Annualized Volatility in Groundnut (in shell) is almost 25.62 per cent.

Mr. Tapan Mishra, Assistant Vice President, NCDEX said, “The launch of Groundnut Expeller Oil and Groundnut (in shell) is a significant step for the Exchange and to the participants in the market. Both products are new to the commodity exchanges. It is the first time that Groundnut Expeller Oil and Groundnut (in shell) are being launched in any commodity exchange. As seen in the case of Soybean, the traders as well as the grass root level millers will benefit since they can hedge their price.”