Indian agricultural commodity futures markets: An overview

Futures market provides a convenient mechanism through which a farmer, who is uncertain about the price of his produce, can cover his risk by selling a futures contract before the harvest day. To improve the performance of futures market in India awareness at various levels i.e. Government, media, influential thinkers, corporate, farmers, traders etc. is to be created on war footing. Clearly, people need to understand that futures trading are not responsible for higher prices. The absence of link between spot and futures market is creating inefficiencies. There is a strong need to develop the spot market and related at with the futures market. There is need to build infrastructure and improve delivery system. More deliveries have to take place to make the market more efficient, get in more value chain participants and make the market more credible. To reach at grassroots level, there is an urgent need to spread members in important production centers. Education and training programmes for the various participants is must, particularly the farmers. In order to maximize the benefits to the farmers, awareness about negotiability of warehouse receipt (WR) should be created among the farming community. Warehouse Accreditation Agency should be promoted on a priority basis so that the confidence of bankers could be earned and farmers reap the benefits of good prices.