~ Represented by 10,000+ farmers, NCDEX IPFT hosts the landmark meeting ~
~ FPOs discuss and share the critical impact of suspensions of Commodity Derivatives and way forward
~ Highlight the research by IIT Bombay (SJMSOM), on the ‘Impact of suspensions of Commodity derivatives on the agri Ecosystem’
Farmer Producer Organizations (FPOs) from Maharashtra and Madhya Pradesh, representing over 10,000 farmers, gathered at IIT Mumbai for a unique forum organized by NCDEX IPFT. The event facilitated a crucial dialogue on the significant impact of the suspension of commodity derivatives on farmers and their livelihoods.
During the forum, a study titled “Impact of Suspension of Commodity Derivatives on the Agri Ecosystem,” conducted by Shailesh J. Mehta School of Management (SJMSOM) at IIT Bombay, was presented. The research highlighted the essential role of commodity derivatives in price discovery and risk management for farmers and other stakeholders in the agricultural value chain.
Shri Pasha Patel Chairman of the State Agriculture Price Committee, Maharashtra addressed the meet and opined, “The commodity derivatives markets are an extension of the spot markets. As price discovery is an important function of Commodity Exchanges – FPOs must have access to it. Government initiatives in collaboration with the Exchange can yield results that can empower the farmers/FPOs to mitigate their price risk establishing a robust and sustainable agri ecosystem”
India is the 4th largest producer of oil and oilseeds in the world accounting for 10 percent of global production. Government has launched a mission worth US$ 1.3 billion (Rs. 11,000 crore) FY’25 aimed at reducing the dependency on imported edible oils and achieving self-sufficiency in oilseed production. Commodity derivatives market played a vital role in empowering farmers by providing a transparent price discovery mechanism, mitigating price volatility and promoting sound decision-making by all agri market participants. However, the suspension of Exchange-Traded Commodity Derivatives (ETCDs) has disrupted these benefits, leaving farmers vulnerable to inconsistent mandi prices and volatile market conditions.
The SJMSOM IIT Bombay report Impact of Suspension of Commodity Derivatives on the Agri Ecosystem highlighted that
- Commodity derivatives market and Futures trading provides a transparent price discovery process for Farmers’ Producers (FPOs) to make informed decisions regarding their agricultural produce (right from sowing to selling).
- Commodity derivatives serve as market-driven tools for price risk management by the entire commodity value chain in managing the price volatility and inherent risks in the agro economic space.
- Commodity price fluctuations are inevitable and depends primarily upon market dynamics of Demand & Supply.
Dr. Sarthak Gaurav, IIT Bombay, the author of the aforementioned report, commented that, “Commodity derivative contracts play an important role in price discovery and risk hedging, which is apparent from the analysis. The suspension of futures commodities trading has negatively impacted better price realization because of the absence of reference pricing mechanism and thus also disrupted price risk management practices of participants in the commodity value chain. Consequently, the agri-ecosystem in whole has been affected due to hurdles in market access, participation and securing fair prices.”
The study conducted by the Shailesh J. Mehta School of Management (SJMSOM), IIT Bombay, combined both primary and secondary research, including surveys and in-depth interviews with participants in the physical markets—such as farmers and FPOs—from Maharashtra, Rajasthan, and Madhya Pradesh. The research focused on key commodities like Mustard Seed, Soya Oil, Soybean, Chana, and Wheat. It examined the relationship between futures and spot prices, as well as the volume and volatility of commodity markets, with a particular emphasis on the price variations triggered by the suspension of commodity derivatives. The findings offered valuable insights into the role of futures trading for physical market participants, particularly the farming community, whose experiences with futures trading have often been overlooked. The full report is available at IIT Bombay’s official website.
The study highlights the vital role of commodity derivatives in supporting price stability and risk management for farmers and agricultural stakeholders. The suspension of these instruments has had significant implications for the agricultural value chain, affecting market dynamics and the livelihoods of farmers. By shedding light on these critical issues, the report aims to foster informed discussions and policy decisions that can better support the agricultural ecosystem and enhance the economic security of farmers across India.
