Speculation in agriculture a good thing

April 17, 2013

Speculation in agriculture
Speculation in agriculture

Most times speculative forces are considered bad, but sometimes they can be good too, particularly in a quiet market like Agricultural Futures Exchange of Thailand.

Since 2004, the exchange has been trading in three futures – natural rubber, white rice and tapioca starch. While trading of the last two has been inactive due to government subsidies, rubber has attracted low turnover even though Thailand is the world’s largest rubber exporter.

To Chatri Sahavejjabhand, president of AFET, it is time to reach out to investors in general, not just rubber traders and exporters.

“As liquidity is our priority, we hope to draw some speculators from the stock exchange to AFET,” he said in an interview. “The investor base must be expanded as trading in rubber futures started some nine years ago, but with little liquidity, as most traders now are rubber business operators and hedgers.”

Under this plan, three securities companies – Asia Plus Securities, Phillip Securities (Thailand) and KT Zmico Securities – are joining AFET this month. Globlex Securities is waiting for its turn.

With their participation, the number of AFET branches will be expanded to 44. The number of marketing officers will also rise to 202. As of October 2011, only six brokers joined AFET, operating eight branches manned by 57 marketing officers. With 4,000 trading accounts, only 800 were active.

“Securities firms’ clients are familiar with futures. [From oil, gold and dollar futures], they will be drawn to agricultural futures,” Chatri said. “It’s our plan to increase the number of branches to cover all parts of the country, marketing officers to 600 and trading accounts to 10,000.”

To increase liquidity, AFET also plans to cut down the size of tapioca starch futures to 10 tonnes per contract from 50 tonnes at present.

Aside from the expansion of investor base, Chatri who took presidency in October 2011, has won the board of directors’ approval to start trading corn and soybean futures in Thailand in 2013. Prices will be based on the quotations at Chicago Mercantile Exchange. To make contracts more attractive, the size is expected to shrink from Bt200,000. The contract with CME for the quotations will be signed later.

In March, AFET also signed a memorandum of understanding with Singapore Mercantile Exchange, which may pave the way for the trading of AFET futures on the SMX platform.

On product, Chatri envisages the inclusion of ethanol in the trading platform. Talks are underway with PTT, Bangchak Petroleum and Mitr Phol Group – the major users and producers of ethanol.

He noted that if the talks proceed well, ethanol futures should be tradable next year at the latest.

“This should fulfil many people’s dream to make Thailand a hub of ethanol trading,” he said, saying that AFET should cash in on champion agricultural products of Thailand.

“AFET is expected to introduce many products, but I believe that having a range of small products wouldn’t help much.”

Study is also underway to introduce palm-oil futures, probably traded with the Malaysian quotations.

“There are several products, but to make them successful, we need good analysis and a good information-dissemination system,” Chatri said. Source The NATION

Published: Zarai Media Team

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