Agricultural Commodity Futures: Searching for Potential Winners
Chatterjee, Ashok Gulati|Tirtha; Hussain, Siraj | December 20017
Abstract
Agricultural futures markets can provide useful information to farmers for taking more informed planting decisions for their crops, which are forward looking, and thus reduce their market risk. But in India, agri-futures have gone through a roller-coaster ride since their mega opening in 2003, which does not bode well for farmers. As per our review and analysis, one of the principal reasons behind its lack-lustre performance has been unpredictable and perhaps excessive regulatory interventions in some commodities that appear to be sensitive in common man’s consumption basket. These interventions often generate negative market sentiments and have detrimental impact on trade. We use Principal Component Analysis to identify criteria for assessing potential success of a commodity in agri-futures in India. We find that commodities that are relatively less sensitive from the perspective of food security of common man have higher prospect of success in agri-futures than say staple food commodities.
Thus, the lessons learnt are that futures market can be deepened in India by (1) focusing first on ‘non-sensitive’ commodities which are less susceptible to Government intervention. The portfolio can later be diversified, once agri-futures attain a sufficiently large scale. (2) Given the fluctuations in domestic production, consumption and global trade, these prospects need to be reviewed at regular intervals, (3) Developing delivery based contracts will increase the comfort of the regulator and policy maker, thus helping to deepen agri-futures in India, (4) Government of India can encourage its State Trading Enterprises to trade on agri-futures platform so that they have better information and comfort about the dynamics of these markets. (5) make it more attractive by allowing global players and Indian importers currently hedging in exchanges in foreign countries, especially for edible oils such as palm and soya oils and (6) developing agri-futures is as much the responsibility of the regulator as that of Commodity Exchanges, and both need to work in harmony for the benefit of various stakeholders.
Citation
Chatterjee, Ashok Gulati|Tirtha; Hussain, Siraj. 20017. Agricultural Commodity Futures: Searching for Potential Winners. © Indian Council for Research on International Economic Relations. http://hdl.handle.net/11540/7837.Keywords
Agroindustry
Agricultural trade
Commercial farming
Agroindustry
Sustainable development
Export volume
Export Development
Access to markets
Agricultural market
Agricultural economy
Distribution
Agricultural trade
Agricultural investment
Agricultural economy
Agricultural products
Import volume
Export volume
Tariff negotiations
Regional integration
Trade regulations
Agricultural market
Agricultural economy
Commercial agriculture
Agriculture
Sustainable agriculture
Trade Volume
Agricultural Trade
Food Security And Trade
Regional Trade Agreements
Food Security
Agriculture
Agricultural Trade
Trade
Trade Barriers
Trade Facilitation
Sustainable agriculture
Commercial agriculture
Trade Negotiations
Trade Development
Trade And Development
Regional Trade Agreements
Agricultural Trade
Agriculture Trade Liberalization
Agricultural diversification
Agricultural resource
Farm produce
Land capability for agriculture
Food Supply
Rural land use
Technological innovations
Agricultural innovations
Farm supply industry
Natural resource
Adaptive natural resource management
Produce trade
Poor
Price Indexes
Integrated rural development
Cost and standard of living
Population
Crop improvement
Rice farming
Crop
Food industry
Perishable goods
Food
Agricultural resource
Farm produce
Natural products in agriculture
Plant products industry
New agricultural enterprises
Agricultural industry
Foreign trade and employment
Perishable goods
Consumer goods
Agricultural products
Agricultural industry
Food industry
Food Safety
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