NCDEX wants to bring farmers in futures play

CHENNAI: The National Commodities and Derivatives Exchange (NCDEX) is spearheading several projects to encourage farmers to use the exchange platform to participate in futures trading in commodities and hedging their price risks.

“Commodities have emerged as investment and we believe that futures trading has both direct and indirect economic benefits. Farmers would be in a position to choose their cropping pattern based on the future prices disseminated by the exchange rather than the practice of sowing a particular crop based on current prices,” NCDEX managing director and CEO PH Ravikumar said here on Tuesday.

Observing that even though there is speculation in futures trading, he said speculators bring in the advantage of price-discovery. “The prices on commodity futures exchanges reflected the fundamentals of demand and supply. Price discovery on an exchange platforms like NCDEX not only helped farmers to take a decision on when to sell their produce, but also the crop to grow in the next season,” he added.

Mr Ravikumar said several projects were being initiated in Gujarat, Andhra Pradesh and Madhya Pradesh to encourage farmers participate in the exchange. Noting that stagnant productivity in agriculture and global shortfall in supplies of food grains and pulses had led to the spike in inflation, he said commodity futures exchanges threw up useful indicators on the demand-supply situation and the government could take appropriate remedial measures to ease the pressure on prices of essential commodities.

He said the exchange has been particpating in all discussions relating to the regulatory structure and the improvements needed to make the system more robust. It is also in the process of establishing a national level collateral management company to take care of issues of warehousing standards and grades as well as facilitate commodity finance by banks.

NCDEX currently offers a bouquet of 45 commodities for trading. The commodity segments covered are agri-commodities, bullion, energy and metals. It posts an average daily turnover (one-way volume) of around Rs 4,500-5,000 crore. Around 80-85% comes from agricultural commodities and the balance from bullion, metals and energy products.