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Resume Futures Trading in Crude Palm & Soybean Oil: Industry Body to SEBI

Edible oil importers have suffered significant financial losses as a result of a double whammy caused by abnormal volatility in international and domestic prices on the one hand and a weakening rupee on the other.

Shivam Dwivedi
Atul Chaturvedi, President, Solvent Extractors' Association
Atul Chaturvedi, President, Solvent Extractors' Association

Solvent Extractors' Association of India, a domestic edible oil industry body, has asked financial market regulator SEBI to allow futures trading in internationally traded commodities such as crude soybean oil and crude palm oil to resume. The Securities and Exchange Board of India (SEBI) suspended futures and options trading in seven agricultural derivatives for one year in December 2021.

The edible oil industry body said in a letter to SEBI Chairperson Madhabi Puri Buch that the suspension of futures trading in these commodities prevented importers from hedging their price risks in rupee-denominated soybean oil and crude palm oil futures on Indian commodity exchanges.

"In recent months, edible oil importers have suffered significant financial losses as a result of a double whammy caused by abnormal volatility in international and domestic prices on the one hand and a weakening rupee on the other," the letter to the SEBI stated.

After nearly nine months, the industry body believes it is time to reconsider the relevance of those suspensions. In order to justify the suspensions, the industry body examined the price behaviour of all major edible oils and oilseeds and discovered that they behaved in accordance with the larger international fundamentals — something they were doing even before the suspension.

Notably, India is the world's second-largest consumer and the world's largest importer of vegetable oil, meeting 55-60% of its demand through imports.

"We believe that the futures market is not responsible for edible oil inflation, as evidenced by the recent run-up, which had nothing to do with the futures market because it was not operational," it said, adding that a healthy futures market is critical for price risk management.

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