The Agricultural Futures Exchange of Thailand (AFET) expects interest in rice futures to pick up sharply over the next several months, with trading volume likely to jump to as high as 1,000 contracts per day during the September and October settlement period.

While turnover for Thai Hom Mali 100% grade B and White Rice 5% contracts has been moribund over the past several months, AFET executives note rising interest among rice traders and mills to open accounts with commodities brokers. Requests for exemptions to position limits have also increased, as large rice traders look to the futures market as a hedging tool against future price fluctuations.

AFET president Nitus Patrayothin noted that 45 bidders participated in a 300,000-tonne auction of Hom Mali rice by the Commerce Ministry earlier this month, with 190,000 tonnes awarded.

The unpurchased 110,000 tonnes of Hom Mali rice, drawn from government stockpiles, will likely be reoffered for sale together with 460,000 tonnes of white rice later this year.

"We are definitely seeing signs of increased interest in the AFET, both from general investors and players in the rice trade," Dr Nitus said.

"The rice market will definitely pick up toward the end of the year, and we could see volume jumping to more than 1,000 contracts per day."

Increased interest can be attributed not only to gains in the local and global economy, but a policy shift by the government to reduce direct price intervention in the rice market in favour of futures contracts as a hedging tool.

Still, turnover this year is unlikely to match the records set last year, when daily trade rose to nearly 1,650 in mid-2008 amid a global boom in commodities prices.

Of the 45 bidders in this month's government rice auction, 12 are large players in the market, including Asia Golden Rice, Sandee Rice, Thai Ha, CP Intertrade and Patum Rice Mill. The Commerce Ministry has announced that 11 bids were accepted from the auction, but has yet to name the winners.

According to the Thai Rice Exporters Association, Hom Mali was quoted last week at $979 per tonne, up from $961 the month before.

Dr Nitus said the gains in the global economy had also helped stimulate activity in other commodities. Turnover for rubber contracts rose as high as 700 contracts per day last week, driven in part by gains in global oil prices and signs of improvement in the automobile sector.

Source: Bangkok Post