Spices

Centuries ago foreigners invaded India to plunder her for her riches. And one of her wealth has been the spices she reaps. Yes, India has been known for her produce of spices, which is also one of the primary products traded in the commodity market. Amongst all the spices grown here, those largely traded on the exchange are:
Cardamom
Cumin seed (Jeera)
Pepper
Red Chili

Cardamom
Cardamom is termed as the ‘Queen of Spices’. This is because it is regarded as the most exotic of all spices. On an average, India produces approximately 11,600 Million tons of this spice, annually. Of its produce almost 90 per cent is consumed domestically, and the rest is exported to Saudi Arabia and Japan.

Jeera
In India cumin seed is known as jeera. It is a popular spice with medicinal, or clinical value. Apart from adding to the taste of cooked meals it is also used consumed as:
-A cure for stomach aches
-A diuretic
-A stimulant
-An astringent
-An antispasmodic

India is regarded as the largest producer of jeera, in the world. It holds the same status as a consumer. Annually, experts estimate that the country produces an average of 1.5 Lakh metric tons of this spice.

Pepper
India is known to produce an average of 70,000 tons of pepper, per year. The country exports on an average 18,000 to 20,000 tons of pepper every year. This fluctuates depending on the world’s demand.

Red Chili
Though the red chilies are believed to have originated in South America, yet India is considered to be the largest producer of this spice. It is also the world’s biggest red chili consumer.

What are Commodities?

In common parlance commodities means goods and products of all types. However, the Foreign Currency Regulation Act, as deigned by the Government of India defines commodities as ‘every kind of movable property other than actionable claims, money and securities’.

There is something known as futures trading which is prearranged in the goods or commodities that the Central Government has permitted after much contemplation.

Presently, all commodities produced in the sectors of the following origination have been sanctioned futures trading. This has been done under the guidelines provided FCRA to the exchanges.

The sectors are:
-Agricultural, which encompasses plantations
-Mineral
-Fossil

All national exchanges have been recognized and authorized to function by the Central Government. The national commodities exchanges are permitted to conduct trading of the permissible commodities listed here:
Cereals
Pulses
Ginned cotton
Un-ginned cotton
Oilseeds
Oils
Oilcakes
Raw jute
Jute products
Sugar
Gur
Potatoes
Onions
Coffee
Tea
Rubber
Spices
Fibre
Petrochemicals
Energy
Bullion, which includes
Precious metals such as gold and silver
Non-ferrous metals

Pulses

Pulses are a part of the staple diet of India. It is an important food-type as it has the highest protein content in comparison to the other foods consumed. The pulses that are listed in the commodities exchange are:
-Chana
-Masur
-Tur
-Urad
-Yellow Peas

Chana

There are two types of the Chana pulses:
-Desi
-Kabuli
The desi chana is largely grown in this country. Annually, India is estimated to produce anywhere between 4 to 7 Million tons of chana. The disparity occurs due to weather and seasonal cycles. It is claimed that India accounts for two-thirds of the of the world’s chana production.

Masur
Lentil, known as masur in India, is regarded as the oldest of all the legume grains to be plated here. It is highly consumed as it is recommended to be the most nutritious of the pulses family. According to expert estimates India produces approximately 40 Lakh tons of masur, annually, contributing to a staggering 25% of the aggregate world production. However, in spite of this, Canada is the world’s largest masur exporter.

Tur
The country’s tur produce ranges between 2.5 to 3 Million tons, every year. However, this is not enough to satisfy the domestic consumption and so the country needs to import anywhere between 4 to 5 Lakh tons of tur, annually.

Urad
Urad is one of the most important pulses used in preparing south Indian rice dishes, and also blended into wheat to make the Indian breads consumed with the main meal. Per annum, India is known to produce approximately 1.4 Million tons of urad. Yet, it needs to import about the same amount to meet up to its domestic demand requirements.

Yellow Peas
In spite of it large scale production of yellow peas, India needs to import this pulse from Canada, Australia, Myanmar and France.

Petro Chemicals

Petro chemical is one of the essential commodities required in every nation – developing and developed.

And the fact remains that in almost all cases the demand tends to outweigh the supply, causing prices to rise, from tie to time. In fact, in India, petrol and diesel prices have seen a constant upswing since the last couple of years.

In India’s commodity market there three major players, so to speak in the area of petro chemicals; these being:

High Density Polyethylene (HDPE)
Polypropylene (PP)
PVC

India is estimated to produce approximately 4,500 Thousand metric tons of petro chemicals, per annum. Of this about 60 to 70 per cent accounts for the production of high density polyethylene (PE) and polypropylene (PP).

The per capita consumption of petro chemicals averages to 4 Kilos, as against the world mean being 20 Kilos, and that of developed nations going beyond 100 Kilos. The reason for this is the constant expansion of the polymer industry, which is slated to be growing at an annual average of 12 to 15 per cent.

Because of demand almost always exceeding the supply the buyers tend to be at the mercy of the sellers. Their bargaining power seems to diminish when dealing with their suppliers. And main price determining factor is cost of raw materials that seems to be highly volatile, mostly tilting towards steep upward swings.

However, on the positive side, in the recent years the Government has been constantly working towards lowering the customs duty on petro chemicals and their raw products.

Plantations

Being an agricultural nation essentially a lot of importance and stress is laid in the various sectors of the industry. In fact, the broader base of agriculture is divided into various sectors in the commodities exchange. One such sector is termed as plantations. Within this, the three primary plantations largely traded are:
-Areacnut
-Cashew Kernel
-Rubber

Arecanut
Arecanut is considered to be the prime commercial crop in this country. Basically this the arecanut palm grows out of this seed. Arecanut comprises of two types being:
-White Supari
-Red Supari

Both the varieties are primarily used in what is known as the Ghutka industry, as well as for religious, social and cultural functions. It is also known for its medicinal value as is utilized as an ingredient in Ayurvedic and veterinary remedial mixtures. According to estimates rendered by the experts, about 10 Million people are employed in the arecanut in this country.

Cashew Kernels
Cashew kernels are number three in the world of edible tree nuts. Cashew trade picked up momentum somewhere in the middle of the 20th century. The cashew is traded in varied grades that are determined by the size, color and other defined quality parameters. India is ranked as the largest exporter, producer and processor of cashew, in the world.

Rubber
Natural Rubber is generally processed and sold in the following forms:
-Sheets
-Crepes
-Blocks
-Preserved Latex Concentrates

However in India rubber is classified as:
-RSS 1
-RSS 2
-RSS 3
-RSS 4
-RSS 5
-ISNR

India is known to produce an estimated 6 to 7 Lakh tons of rubber, per annum.

Online Future Trading

Gone are the days when you needed to go out of the house to trade in shares and commodities. You do not even need to visit a broker’s office to trade and conduct business. This is possible because of the possibility of online future trading. This type of trading is provided by registered companies and brokers, who via the internet conduct trades for the individuals. There are some leading online brokerage firms that have completely changed the trading scenario in India.

The online future trading firm basically hosts a website or portal that permits online trading. To be able to start business, via the internet one is required to register online with the firm. After completing the form-filling formalities the individual is required to pay a certain minimum deposit on which the trading margin is provided. Apart from all this the online future trading company also conducts verification checks on the registering individual.

If the individual’s application has been approved then the company sends across an executive who trains the individual in trading online. He also installs the software that is required to gain connectivity with the actual trading company. The individual can request the online trading company to give him up-to-date research reports, as well as tips on trading.

As per the dates and terms and conditions specified the online future trading company sends the contracts via snail mail or courier’s it to the trading client. The client is required to execute the payment immediately. Most online future trading companies tie-up with a private bank that conducts net-banking, so that the client gives instructions to the bank to transfer funds, as and when required.

To safeguard the client’s interests the online future trading company and the client generally enter a memorandum of understanding that clearly states an upper ceiling on the amount of trading the client can do, and also provides with stop loss options.

Basically, online future trading is making it easier for many to take this up as a parallel earning opportunity without having to leave their main income earning jobs.

Online Commodity Trading

Much to the convenience of one and all online commodity trading is here to stay. Initially prior to the ban on commodity trading it was a different scenario. One that made the so called commodity markets or exchanges look like any other market, minus the regular bargaining that one witnesses. There was no computer systems to document all trades. In fact, it was chaotic and tedious. Yet, if one were to ask the old time commodity traders if they faced any difficulties, they would answer in the negative.

While the day’s trading in the bourse would look chaotic, yet there were no lapses in trades. Buying and selling happened as meticulously as it does today. But then, at that point of time commodity traders were required to visit the market or so-called exchange to carry out their day’s trades.

With online commodity trading things have changed. Today one can carry out their trades from almost anywhere, which includes anywhere in the world. Yes, there are people living in different parts of the world doing online commodity trading with India. There are certain formalities that one is needed to go through to gain membership on the exchanges. But after completing all of that its trading for them.

To be able to indulge in online commodity trading, one essentially needs to be connected to the exchange directly or then a member of the exchange. There are a large number of brokers and brokerage firms that offer online trading of commodities. With this connection one is also trained in the process of making trades on line.

As soon as one makes a trading request it is registered with the host trading party and the process of preparing the contract commences simultaneously. The trading host server also sends back an instant request to confirm the trade.

To register oneself with any online commodity trading firm one is required to fill in an electronic form and mail it back. One is also required to make a certain payment to be able to begin trading. Once all the formalities are completed and company has accepted the payment then the trading can commence.

There are a large number of people, who in spite of having fulltime jobs, yet do online trading to earn additional income. There are also small time brokers who do trades for others, without actually running a full-fledged office. They trade on line for the clients.

Futures Trading

Initially futures trading into being only for agricultural goods. Then it was spread to metals. Thereafter this type of trading began for foreign currencies.

However way into the middle of the 1970s the futures contracts implemented for financial securities such the equity stocks. Apparently the most ancient and biggest organized commodities exchange in the world is The Chicago Board of Trade – CBOT. This was founded in 1848. It initiated futures contracts somewhere in the 1860s.

What is futures trading? Take for instance an agriculturalist who grows sugarcane and is obviously looking towards making profit from his yield. Traditionally he would harvest the crop and sell it in the market when it is ripe.

However, there is a risk involved here – what if the price of sugar reduces at the end of the harvest, for some unforeseen reasons? Obviously his profits reduce, which in drastic cases could also be losses. So how does he safeguard himself?

So as to avoid any such risk the agriculturalist could sell his yield at a rate that is pre-determined, committing delivery on a decided convenient date. Then, no matter what the situation he is paid that amount. This way the sugarcane agriculturalist sells his yield in advance preventing a possible future loss. The risk, however, involved in such a situation is the probability of the yield fetching a very high price in comparison to the contract price pre-determined. In such a case the agriculturalist has missed an opportunity to earn higher profits.

Having explained such a situation, one can understand the notion of futures trades. It is actually buying and selling at a future date, speculating a price.

Metals

The primary metals that are an essential part of the commodities market not only in India, but the world over are:

Aluminum
Copper
Lead
Nickel
Sponge Iron
Steel
Tin
Zinc

Given here is the current market scenario for each of the aforementioned metals.

Aluminum:
In the world, presently India is the estimated to be the fifth largest producer of aluminum. According to experts the country produces approximately 3037 Million tons of this metal. It is stated that in spite of the current rate of consumption, the country has enough reserves of aluminum to last over 350 years. This makes India self-sufficient as far as demand and supply of the metal is concerned. And much to it’s credit the country annually exports an average of 82,000 tons, whereas the domestic consumption barely crosses about 6.18 Lakh tons, presently.

Copper:
India is estimated to produce approximately 4 Lakh tons of copper, which is said to amount to 3 per cent of the world’s copper produce. In fact, according to the experts the country is leading towards becoming an exporter, from being an importer of this metal.

Lead:
The lead production in the country is estimated to be up to the tune of about 82,000 tons. However, this is mainly from its secondary sources. The demand for lead in India is to the tune of approximately 150,000 tons. The main reason for a limitation on the lead production in the country is the fact that there is a relative scarcity of lead ore reserves. And this gap between domestic supply and demand calls for large-scale import and recycling of this metal. India imports its lead supply from China, Korea and Australia.

Nickel:
Nickel is one of the essential metals required for the following industries:
-Engineering
-Electrical
-Electronics
-Infrastructure
-Automobile
-Automobile components and spare parts
-Packaging
-Batteries

Sponge Iron:
In the last couple of years India has found a prominent place in the global output of sponge iron. Presently it is said to account for 16 per cent of the world’s produce. The country is said to produce around 8 Million tons, annually.

Steel:
According to experts, India produces approximately 36 Million tons of steel, annually, placing the nation as the eighth largest steel producer in the world. This exceeds the domestic consumption that is estimated to be 30 million tons, per year. This has made India a net exporter of the metal.

Tin:
India produces approximately 10 tons of tin, per year. This is a very small amount, considering that it requires a minimum of 4000 tons of tin and its alloys, which it imports.

Zinc:
The zinc producing industry is expected to take India to the self-sufficiency level by the year 2010. This would largely be possible as a result of the privatization of the zinc producing industry.

Oil and Oilseeds

In the category of oil, the following are the prime listed in the commodities market and are traded on a regular basis. Following that is a profile on some of them.
-Castor Oil
-Coconut Oil
-Crude Palm Oil
-Groundnut Oil
-Mustard or Rapeseed Oil
-Soy Oil
-Refined Sunflower Oil
-Rice Bran Refined Oil

Castor Oil
Castor oil is commonly is utilized in the form of a raw material to manufacture chemicals that are used in the following:
-Surfactants
-Soaps
-Surface coatings
-Cosmetics
-Personal care products
-Pharmaceuticals
-Perfumes
-Greases
-Lubricants
-Rubber

India is considered the leading castor oil manufacturing nation in the world. The Indian castor plantation yields up to 48 per cent oil, and its annual production varies between 2.5-3.5 Lakh tons. The estimated yearly consumption of castor oil in the country itself amounts to about 80,000-1,00,000 tons. The country is said to exports approximately 2.0 – 2.4 Lakh tons of castor oil, annually.

Mustard or Rapeseed Oil
According to estimates the country produces approximately 1-2 Million tons of mustard or rapeseed oil. In fact, in this type of oil and oilseeds India seems to be comfortably seated in the areas of self-sufficiency. It neither imports, nor exports this oil. However, the production of this oil varies according to the weather conditions.

Soy Oil
India is known to produce approximately1 Million ton of soy oil, annually. However, to meet its demand requirements the nation imports approximately 1.5 Million tons of this oil. The price fluctuations of soy oil are highly volatile and are largely dependent on the global trends.

In the commodities market, usually oil and oilseeds are clubbed together. For this reason, here is a list of the oilseeds that are listed for commodity trading, followed by a profile of some of them.

The essential oilseeds listed are:
-Castor Seeds
-Cottonseed
-Mustard Seed (Sirsa)
-Sesame Seed
-Soy Seeds

Castor Seeds
Apart from castor oil production, the country also heads the list in global producers. The nation produces an approximate of 6 to 9 Lakh tons of castor seeds, annually. It said to export about 50,000 – 60,000 tons of castor seed extractions and in the range of 15,000 – 20,000 tons of castor seed, per annum.

Cottonseed
Amongst all the oilseeds produced in India, cottonseed is considered the oldest and most traditional According to the experts approximately 80 per cent of the cottonseed is surplus production, after being used to make the cotton bales, and is crushed to make oil. The 20 per cent that remains is used cattle fodder