The National Commodity and Derivatives Exchange (NCDEX) shut down twice on Saturday, causing several commodity prices to plummet to their lower circuit breaker. The panic among commodity speculators fuelled by rumours about a possible payment crisis triggered a meltdown in several speculative positions.

Although the bourse says that the shutdown was due to technical problems, informed sources say that at least two brokers, one from Delhi and Mumbai have suffered losses of Rs 35 crore and Rs 15 crore during the day. While this is not a big crisis, the plunging prices reflect excessive speculation in the commodities market; on the ground, this excess is evident in soaring retail prices across a range of grain, oil, pulses and now potatoes.

If onion prices in the past had cost the Bharatiya Janata Party (BJP) a State election, the Congress led government literally has the hot potato to contend with. Tuber prices in the retail market have shot up from around Rs 12 a kilo to over Rs 20 and still rising. There are also reports about large scale hoarding by retail traders in anticipation of short term profit.

The steep rise in commodity prices is a global phenomenon; but it is interestingly predicated upon the expectation of insatiable demand from the booming economies of India and China. A commodity analyst from a Swiss bank is quoted by an international website saying, “If you agree with me that China, India and the other nations will continue to grow at double digit rates, then you will agree that demand for many commodities from oil to copper to name a few will remain strong, driving prices higher”.

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