Commodity certificates of deposit for barley are being offered for the first time on Iran Mercantile Exchange.
The certificates represented 10,000 tons of animal feed barley from three warehouses and were traded during the Tuesday session.
The barley was sold for 7,600 rials per kilogram, bringing the total value of the certificates traded to 78.4 billion rials ($2.2 million at market exchange rate), Bourse Press reported.
CCDs securitize a company’s product inventory and offer buyers easy ownership of goods without the usual hassles of storage and insurance. Commodities offered as CCDs are stored in IME’s certified warehouses.
The government plans on concentrating commodity trading on the IME and keeping it off the streets.
“Based on a Cabinet ratification on April 26, corn and barley will be bought at a guaranteed price by the government throughout the country and will be traded on IME,” said Mohammad Eskandari, the exchange’s deputy for market expansion.
Protection for Farmers
The pilot of the plan was carried out last year for barley from Kermanshah Province and corn from the southern province of Khuzestan. State Livestock Affairs Logistics Company, a government agency under the Ministry of Agricultural Jihad, which manages much of Iran’s animal feed imports, will buy the crops on behalf of the government.
The government is curbing barley imports to support Iranian farmers. Barley imports at the discount exchange rate were recently stopped, meaning their import will cost 13% more.
Iran has a multiple foreign exchange regime. The Central Bank of Iran currently offers the dollar at 30,590 rials while the greenback’s market rate is 34,660 rials.
The official rate is applied for government transactions and imports of essential goods.
Expansion Plan
IME is expanding its markets fast.
According to Eskandari, the certificates could ramp up commodity trading. IME is expanding the usage of CCDs along with other instruments.
Earlier in January, the exchange offered CCDs for gold mined out of Zarshouran, Iran’s largest gold mine.
Other than gold futures and commodity trading, IME Chief Executive Hamed Soltannejad, has announced plans to offer foreign exchange futures in the US dollar and euro.
Regulator Securities and Exchange Organization has already signed off on this, though the actual offering date, details of settlement dates and the size of the offered contracts remain to be hashed out. Delays may come from the CBI, the final authority in regulating foreign exchange, which posits that the futures should be offered after the bank abandons its multiple exchange rate regime in favor of a crawling peg.
IME Cement Exports Back on Track
After a four-year hiatus, cement offerings for export have resumed at Iran Mercantile Exchange on Saturday.
Isfahan Cement Company initiated the offering with 2,000 tons of the construction material on Saturday, 1,000 tons of which were traded on cash payment.
“We intend to expand our export markets for cement and unify prices by exporting the commodity through IME,” IME chief, Hamed Soltaninejad, was quoted as saying by IRNA.
Cement offering at the mercantile exchange began in 2010. About 1 million tons were traded and 63,000 tons were exported in the next two years. However, government-enforced pricings and the subsequent lack of competition caused cement manufacturers to become disillusioned with the exchange and pull out of IME in 2012.
Soltaninejad referred to the glut in the domestic cement market and emphasized IME’s capability to carry out foreign transactions in the US dollar and euro.
“IME’s use of new financial instruments such as salaf and standard parallel salam contracts (Islamic versions of future contracts) can bolster Iranian producers’ presence in regional markets while providing them with much-needed liquidity,” he said.
