Pakistan plans to introduce futures contracts in cotton, wheat, sugar and corn as early as this year to support growers and attract foreign investment, the head of the National Commodity Exchange Ltd. said.
“Sugar futures may begin in the next two months, while the rest of the three may take till June,” said Samir Ahmed, who is managing director of the commodity exchange. “The contracts will help bring consistency in local prices, benefiting growers. Initially, we will deal with as much as 5 percent of the crop, but later will include entire harvests.”
Pakistan’s deadliest floods this year ruined crops worth 281.6 billion rupees ($3.27 billion), destroying rice, cotton and sugar, Farm Minister Nazar Muhammad Gondal said Sept. 28. By ripping out crops, stores and 4,000 kilometers of roads, the inundation boosted food prices and may push annual inflation to 20 percent, according to Prime Minister Yousuf Raza Gilani. The National Commodity Exchange Ltd. already trades rice, gold and crude oil futures. Trading jumped to more than 20 billion rupees ($231.9 million) this week, the highest since 2007.
“Futures contracts will end the practice of market manipulation in which growers were always paid less than what their crop was worth by influential farmers,” said Zairuf Chhotani, a commodities analyst with IGI Finex Securities Ltd. “Futures will allow the small man to take positions even before the crop is sown, and sell it to the highest bidder.”
Investor confidence in commodities is growing and the bourse also plans to start futures contracts in zinc, steel and copper, Ahmed said in an interview yesterday. With the floods receding, he hopes the waters will reinvigorate the earth.
“There is fertile land and it will bear us more fruit in the coming year,” he said.
The country lost 2.39 million metric tons of rice and 10.4 million tons of standing sugar cane because of the floods, Gondal said in an interview in Islamabad. The nation may also import 2.8 million bales of cotton, he said.
Exports from Pakistan, the world’s third-biggest rice supplier, may plunge 35 percent to 3 million tons in the year started July 1 from 4.6 million tons the previous year, according to Malik Jahangir, chairman of the Rice Exporters Association of Pakistan, on Sept. 1.
Wheat and rice are the two staples for Pakistan’s people, and the government and international relief agencies have found it hard to provide food for affected areas. The United Nations said damage to infrastructure may hurt farmers for years.
The country, the third-largest cotton user, may import 50 percent more this year, said an industry official Sept. 21. Imports may reach 3 million bales, up from 2 million last year, according to Muhammad Arshad, a vice president at the Pakistan Central Cotton committee, a government-supported organization.
The nation is also Asia’s third-biggest sugar user and may import 1 million tons next year after the floods damaged 15 percent of the cane crop, a farmers’ group said this month.
Sugar mills may produce 3 million tons against a target of 3.5 million tons in 2011 because less cane will be available, said Ibrahim Mughal, chairman of the Agri Forum Pakistan. “That means we would need to import 1 million tons of raw or refined sugar to meet demand,” he said.
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