Agricultural commodity trading
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This would enable farmers to legally enter into long-term production and marketing arrangements with processors, retail chains and other big buyers.
But these are restricted to only marketing. Moreover, they provide for an overbearing and intrusive role of APMC functionaries. Not surprisingly, they have excited neither farmers nor organised market players. The proposed model law, it is hoped, will be reflective of ground realities, providing a framework that protects the rights of both sides and also keeps transaction costs at reasonable levels.
How expeditiously it can be drafted, shared with stakeholders, and rolled out at least in a few states will indicate the seriousness of the announcement. The second signal from the Budget is more ambitious, relating to integration of the spot and derivatives futures and options markets for farm produce using the electronic National Agriculture Market e-NAM agri commodity trading india. It is tempting to believe that the government has tacitly accepted that e-NAM is not actually firing — enthusing neither farmers nor traders — and, hence, this reinvention of the portal as a bridge between spot and derivatives markets.
But skepticism notwithstanding, the proposed creation of an operational and legal framework for integration of the spot and derivatives markets for agri-commodities can be a potential game-changer. One of us Raghav Raghunathan has been directly associated with the roll-out of an experiment involving a farmer producer company in Madhya Pradesh.
InRam Rahim Pragati Producer Company Limited sought the support of Samaj Pragati Sahayog — a grassroots NGO based in Bagli, Dewas district — to deal with price volatility in crops such as soybean and chana chickpea grown by its 3,plus tribal and women farmer-members.
That year turned out to be one of bumper production year, agri commodity trading india to prices crashing in the local mandis agri commodity trading india around Rs 3, per quintal. But the locked-in price meant that the losses from selling in the spot market were offset by the gains on the futures position taken at the exchange platform.
Learning from that successful hedging experience, Ram Rahim PC has evolved a regular mechanism of locking-in prices through NCDEX before every soyabean planting season. Also, by using the futures agri commodity trading india as a form of quasi-collateral, it has been able to raise working capital from financial institutions for funding procurement from farmer-members.
With over 1, functional PCs in India at agri commodity trading india, organisations like NCDEX have stepped up efforts agri commodity trading india bring as many such bodies on to its trading platform. However, agri commodity trading india can be enabled to do so through PCs taking positions on their behalf.
But more serious is the likely opposition from the APMC-controlled agri commodity trading india, which will view any tie-up between e-NAM and commodity exchanges as another threat to their virtual monopoly over agri-produce trading.
It is they that have primarily squeezed the e-NAM into an irrelevant corner. There are only four cropping seasons left between now and the next general election. The proposed model contract farming law and integration of spot with derivatives markets through e-Nam will have to deliver at least preliminary benefits to farmers by the fourth season — before April — for the Modi government to reap any political gains.
Will that incentive be enough to push through these two potential game-changers? Home Business Budget Budget and agri-commodity trading: February 16,