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    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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    Citable URI
    http://hdl.handle.net/11540/7837
    Metadata
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    Thumbnail
    Working_Paper_349.pdf (1.521Mb)
    Author
    Chatterjee, Ashok Gulati|Tirtha
    Hussain, Siraj
    Theme
    Agriculture
    Trade
     
    Copyright 2016-2020 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2020 Asian Development Bank Institute, except as explicitly marked otherwise