The Indian agri - futures remained at low levels forming only 2% of 1.6 billion global agri - futures contracts.
Agri - future marketing system remains unsupportive of farmers.
What are agri-futures?
Derivatives are financial instruments with a price that is dependent upon or derived from one or more underlying assets.
Futures and options represent two of the most common form of "Derivatives".
In futures contract buyer has the obligation to purchase a specific asset, and the seller has to sell and deliver that asset at a specific future date.
Agri-futures markets are one way to ensure that farmers’ planting and selling decisions are forward - looking, and not based on past prices.
What are the issues with Indian agri - future markets?
Governance - They are often disrupted by sudden bans or suspensions by the government as many policymakers have deep mistrust in the functioning of these markets.
The basic distinction between feed and food commodities is missing.
There is less variety of goods to choose from the market.
Participation - Very few farmers or farmer-producer organisations (FPOs) trade on such markets, due to the mistrust with the policymakers.
Implementation - The creation of an all-India spot market/(e - NAM) for farmers is operating at a slow place.
What India can learn from china?
State participation in the futures markets through the State Trading Enterprises.
No abrupt suspensions of commodities.
Focus on choice of commodities, which are not very sensitive from food security point of view.
The Chinese volume of contracts is much higher in soya, mustard, and corn complexes, which are basically for feed.
India being the largest importer of edible oils, especially palm and soya oils, these are promising candidates for agri - futures provided global players are allowed to trade in these.
