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Commodity futures market helped farmers: Study

Has heloed farmers in dismantling powerful trading cartels in commodities like potato, mentha oil

BS Reporter  |  New Delhi 

The growth of in India has helped in dismantling powerful trading cartels in commodities like potato and mentha oil apart from helping them in taking more broad-based decision on production, and marketing of farm produce, a conducted by Tata Institute of Social Sciences in association with showed.

The which analyzed the contribution of commodity exchange ecosystem on economic development showed that exchanges have facilitated a number of brokers, traders and producers, who are first generation economic beneficiaries of commodity and they have expanded their business with growing opportunities.

The report was based on in-depth analysis of pilots conducted on two main crops on cotton and bullion and was spread across Rajkot, Gondal, Jalgaon, Agra, Moradabad, Chandausi, Chennai, Kolkata, Bangalore, Kerala, Mumbai and Ahmedabad.

Though the cumulative value of trade in India’s all major commodity exchanges fell 5.95 per cent to Rs 170,00,000.47 crore ($3.11 trillion) in the fiscal year ended March 31, for the first time since 2003, on the whole the volumes have risen at a steady clip ever since the modern exchanges started around 2002-03. Experts feel that the volumes dropped in 2012-13 because of curbs on futures trade and also a shift towards equities.

The also showed that there has been a definite impact of commodity market as a platform for high price risk volatility management in bullion, base metals and energy products.

“With risk management on futures market platform, a number of producers have survived the high price volatility arising out of post-2008 global financial crisis. If we want to calculate the direct benefits arising out of hedging on electronic exchanges, the calculations will be astronomical,” the said.

It also said that growth of has fuelled a steady development of agriculture infrastructure which include storages, vaults, transport and logistics associated with the expansion of commodity

“Infrastructure expansion has also contributed to the growth of sustained employment and income generation in ancillary industries,” the said. It said the exchanges have also expanded the presence of women in fields like trading, research etc.

“Worldwide, commodity account for five times the volumes of equity Since, this is not yet the situation in India, there is great potential in the sector,” the said.

First Published: Sun, April 28 2013. 14:00 IST