Spotlight. All you want to know about almond futures

In a first of its kind, BSE recently launched the world’s first almond futures contract.

While the market for almond is small in the country, the launch of futures contract is expected to help growers and exporters. Besides, the contract will help almond importers hedge against price fluctuations.

India imports almonds from the US, Afghanistan and the UAE, among others. In 2018-19, India imported about 63 lakh kg of almonds and in 2019-20 imports were 42.52 lakh kg (up to February). Domestic production of almonds is not much; it is restricted to hill States, including Jammu and Kashmir, Himachal Pradesh, and some parts of Uttar Pradesh, Karnataka and Maharashtra.

According to the National Horticulture Board’s third advance estimates 2018-19, almond production was 11,000 tonnes.

Given the better awareness about healthy living, almond consumption could rise in the coming years and increase trade activities, leading to higher demand for the futures contract.

However, whether BSE’s almond futures will gain momentum and sustain investor interest remain to be seen. The exchange has launched four contracts expiring in July, August, September and October. As on July 3, the contract (most active contract — August 2020) had a turnover of ₹1.7 crore.

Contract specifications

BSE’s almond futures contract (BSEALMOND) is traded Monday through Friday between 9 am and 5 pm. The price quoted is in rupee per kg and the trading unit is in 1,000 kg with maximum order size of 20,000 kg.

The minimum price movement (ticket-size) is ₹0.10. The maximum allowable position for an individual investor is 500 tonnes. The expiry date of the contract is the 20th day of the delivery month. Almonds in shell are considered for delivery.

Other quality specifications include: certified crackouts to be of 70 per cent based on the net edible yield and any cracks below 68 per cent is rejected.

The shell should be soft shell, light in colour with a high suture opening.

If you want to trade in almond futures, you have to pay an initial margin, which may increase in future depending on the volatility in spot market prices.

You also have to pay an extreme loss margin of 1 per cent.

A special margin may also be imposed on the buy side or sell side, or both, if the regulator or the exchange finds increased volatility in prices.

BSE almond futures contract is a compulsory delivery contract. The delivery centre is Navi Mumbai (within 100 km radius from APMC (agricultural produce market committee)/municipal limits). The delivery unit is 1,000 kg and delivery period margin will also be imposed.

The tender period (days before the contract expiry that offers flexibility to the investor to decide on delivery) of the contract is the last five days, including the expiry date of the contract.

The tender period margin is 4 per cent incremental margin for the last five trading days on all outstanding positions. After the end of the tender days, all outstanding positions will be marked for delivery at the expiry of the contract. In case of seller’s default, 3 per cent of settlement price and replacement cost will be levied.

Over and above the prescribed penalty, the Indian Clearing Corporation shall take suitable penal/disciplinary action against any intentional/wilful delivery default by seller.

Buyer default shall not be permitted. The buyers are offered sufficient time to decide for delivery. This is where the tender period margin comes into play.

Price drivers

The price of BSE almond futures is quoted from Ex-Navi Mumbai APMC, within 100 km radius. The price quote is excluding all GST, other taxes, duties, levies and charges. Factors such as import tariff or export restrictions, rupee depreciation, consumer preferences to other nuts, weather impact on the crop and global demand and supply influence the price of almonds.

In the wake of Covid-19 outbreak globally, there is an increased health concern among individuals, which could be a positive for almond consumption. However, the trade barriers and slow movement of goods and services could dampen imports.