India Extends Futures Trading Ban
May 9th, 2008Via: Financial Times:
India has extended its futures trading ban to four more food commodities despite warnings, including from the government-appointed market regulator, that such measures will do nothing to quell inflation.
The regulator, the forward markets commission, acting under instruction from the Congress party-led coalition government, suspended futures trading on Thursday in potatoes, soy oil, rubber and chickpeas for at least four months. Last year it banned futures trading in wheat, rice and two types of dhal.
“The government perceived that suspending a few commodities will perhaps soften price expectations. Though I don’t personally agree with that, that’s how a democratically elected government feels, therefore we had to respect that,” B.C. Khatua, the chairman of the regulating commission, told the Financial Times.
India’s government is taking an aggressive stance on food and steel prices to try to stem inflation, which hit 7.57 per cent last month – well above the official “comfort zone” of 5 per cent. This week steel producers agreed to a third price cut in three months despite rising raw material costs after a meeting with Manmohan Singh, the prime minister. But economists say market intervention will achieve little as most of the inflation is resulting from shortages of supply in global markets.
In addition, the ban on futures was imposed despite a report from a government-appointed panel led by an economist, Abhijit Sen, last month. It studied the ban on wheat futures in February last year and found there was no conclusive evidence connecting futures trading and spot price increases.
My gawd. Am I in tiredness delerium, or did I really read, finally, a voice from across the world from me, MAKES SOME FREAKIN SENSE?
I know, I know. I’m one of the people who post on this site that have thrown cold water on the idea of investing in food futures.
But sheesh. Betting on food futures really does drive up the prices all along the food chain.
YES! There ought to be a law against driving up food prices through the futures exchange.
The futures market has wreaked havoc in the U.S. re natural gas, to name one necessity here in northeast U.S.
This policy makes sense to me. India Rocks!
Whoops!
I was about to post to the oil futures article above – but comments are off –
I quote from Kevin here:
“Leveraged speculation on tangible goods actually makes a mockery of the market system by distorting prices.”
Thank you. Nuff said.