Mumbai: The sudden decision of the market regulator to suspend potato futures trade for four months, clubbing it with other sensitive items, has foxed analysts and traders who fear that the prices, already low because of a supply glut, would now crash.

“Since the beginning of the harvesting season in February, potato prices in spot as well as futures market have fallen by nearly 25% and with the suspension, they are likely to fall further,” said a commodity exchange official.

On Wednesday, Forward Markets Commission suspended futures trade in potato, chana, soyoil, and rubber for four months until September 6.

“Suspension of potato from futures trading by FMC is just a political decision and completely ‘illogical’,” an Agra-based trader said.

Futures trade in chana and soyoil was suspended as their prices had risen sharply, but the rationale behind the suspension of futures trade in potato was not clear as its prices have fallen considerably due to large output, the official said.

“On account of higher output, prices came down gradually but did not crash as the exchange platform served as a tool to stabilise prices. But with no futures trade, we might see a sharp fall,” the official said.

Currently, potato prices in Agra, one of the main trading centres in India, are ruling around Rs 200-400 per 100 kg, compared with over Rs 600 a year ago.

“Prices are seen falling further by another Rs 100 (per 100 kg) this month,” said Satinder Pal Sethia, an Agra-based trader.

Also, many who were trading in futures market will not be able to hedge their positions now and will have to bear the brunt of the suspension, according to trade experts.

In the current season, potato production in India is likely to rise sharply by 20-25% from around 23-25 mln tn last year due to increase in the area under cultivation.

Farmers had sown more potato this season because they got good returns for their produce last year, traders said. The total availability of potato stock in Agra spot market was very high currently, at over 10 million bags (1 bag=50 kg), said Sethia.

“The market was flooded with the crop and potato stocks have far exceeded the total storage levels in warehouses,” he said.

In Agra, the number of cold storages has increased to 250 from 180 earlier, said Ritesh Agarwal, an Agra-based trader. On an average, each warehouse can store 200,000 potato packets (1 packet= 50 kg) and the stocks in these cold storages have exceeded the capacity by 10%, said Agarwal.

Source : DNA