The Bombay Stock Exchange (BSE) has introduced futures contracts on almonds, marking a major entry into the commodity derivatives market. BSE is now able to serve a larger spectrum of traders and investors by diversifying its portfolio by including BSE almond contracts.
Published on 26 March 2024
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The BSEmade a calculated move when deciding to launch almond futures contracts. Just before India's harvest and holiday season, when almond prices are predicted to increase. India is mostly dependent on imports because of its limited production capacity. Indian importers should find it a useful instrument to protect themselves against almond share price volatility.
Background on Almond Contracts
India imported 131,000 tonnes of almonds worth $666 million in 2019, making it the largest market globally, accounting for 48% of total imports. Traditionally, almond demand in India peaks during the festive season from September to January. The increasing awareness among Indian consumers about the nutritional and health benefits of almonds is driving demand not only during festivals but also throughout the year.
Data indicates that Indian almond imports have grown at an average annual rate of 9.8% between 2007 and 2018, reflecting the expansion of the Indian economy. With rising incomes and a growing health-conscious population, the demand for almonds is expected to continue growing.
California almonds account for more than 75%, while Australia contributes 18% to the Indian market. California's almond exports to India are valued at approximately $650 million. India's domestic almond production is limited to the hill states of Jammu & Kashmir and Himachal Pradesh. Almonds are typically planted in February-March and harvested starting in July.
India primarily imports in-shell almonds due to cost-effectiveness, as labor costs and employment generation make it more economical to import and shell almonds domestically.
Benefits of Almond Futures Contracts
Managing the risk associated with almond prices is crucial due to the market's notable growth of 4.4% between 2007 and 2018. The annualized volatility of almond spot prices over the last three years stands at 13.23%.
In June 2019, India imposed tariffs on almonds and 27 other American products in response to the US ending India's preferential trade status. These tariffs led to an increase of approximately 12 cents per pound for shelled almonds, a 20% rise, and about 4 cents for almonds in their shells, representing a 17% increase. The rupee's annualized volatility is approximately 8.3% based on monthly percentage changes over the last 25 years.
Indian importers and consumers can tackle the market volatility efficiently. The almond share price fluctuates according to supply and demand. For instance, harvest season approaches in September, followed by the festive season, so a surge is anticipated.
Future almond contracts can serve as a hedging tool for market participants. Contactors can lock the almond price according to demands, thus it can ensure that there should be lesser price fluctuations in the global market.
In the future, contractors can maintain stable pricing for consumers. Additionally, consumers can also take advantage of this almond contract, saving them from price hikes during the festive season. Consumers can leverage a stable price for almonds and check BSE almond price today. This will ensure the affordability and availability of the almonds even in high demand.
External factors like the 2012-13 Taper Tantrum episode and the current coronavirus situation also contribute to rupee volatility. Given the fluctuation in almond prices and the rupee, it is essential for all stakeholders in the value chain to hedge almond price risk.
BSE's Expansion Plans in Commodity Trading
Despite the almond market's relatively small size compared to other commodities, BSE has received numerous queries from traders, importers, and consumers not only in India but globally. This interest stems from the fact that these contracts are the first of their kind anywhere in the world. BSE is confident that its platform's wide dissemination of almond prices will be utilized as reference prices for physical market transactions.
BSE is also strengthening ties with various physical market participants to enhance warehouses and other support infrastructure necessary for grading, sorting, and quality certification. The exchange is actively engaging with participants to raise awareness of the benefits of these products and anticipates broad participation in the future.
With a focus on creating a more vibrant and inclusive BSE commodity list market, BSE aims to benefit all market participants, from producers to traders and end-consumers. In addition to providing a platform for stakeholders in commodity markets, including BSE almond to hedge against price risk, the exchange has offered cost-effective and state-of-the-art technology solutions to participants. BSE's strategic plan includes the systematic development of the commodity market through the launch of more unique and innovative products, as well as increased awareness and research, aiming to provide a broader product range to market participants.
Conclusion
In India, commodity trading happens only with specialized commodity exchange. However, the introduction of the BSE commodity list helps diversify the market and reach more players. Imposters can check BSE almond price today on the platform and use it as a tool for hedging against market volatility.
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