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³Aggregation ± A Solution of Farmer¶s Participation in Commodity Exchanges´

Report Submitted To: Dr. V.Shunmugam Chief Economist

Multi Commodity Exchange of India Limited, Exchange Square, Suren Road, Chakala, Andheri (East), Mumbai - 400093

SUBMITTED By: Amresh Kumar Sumeet Kumar Pandey

KIIT SCHOOL OF RURAL MANAGEMENT (KSRM) KALINGA INSTITUTE OF INDUSTRIAL TECHNOLOGY (KIIT) UNIVERSITY, BHUBANESWAR January 2011

Executive Summary
Title of the Project: Aggregation ± A Solution of Farmer¶s Participation in Commodity Exchanges. Host Organization: Multi Commodity Exchange of India Ltd, Mumbai. Project Location: Indore, Sagar, Vidisha (Madhya Pradesh) and Bikaner, Ganaganagar, Jaipur (Rajasthan). Project Duration: 2nd December, 2010 to 28th January, 2011. Objective of the Project: To find out the constraints/issues in participation of farmers in Commodity Exchanges. Methodology: To achieve the objective of the project, primary data was collected by survey and opinion taking. Altogether 25 samples were taken from each three districts of Madhya Pradesh and Rajasthan through purposive sampling. The sample break up was as follow: 76% farmers, 12% traders, 8% processors, and 4% warehouses. Apart from this opinion taking was also done with banks, Co-operatives, and NGOs. Findings and Analysis: There is very low awareness of futures market among the farmers as only 45% had heard the name of the futures market but awareness about its utility is negligible. If empowered with price signals all surveyed farmers in Rajasthan and Madhya Pradesh showed willingness to hold their produce. The holding period varies from 1 month to 5 months and the average holding period is 2 months. The minimum lot size of chana for trading in futures market is 10 MT. This is too large as the overall average production by the farmers surveyed is approximately 5.3 tonnes. Hence the small, medium and even large farmers find it difficult to meet the lot size. The lack of infrastructure in the rural areas is a major constraint in farmers¶ participation in the commodity markets as there are no warehouses in the rural areas at the same time there in no reliable quality certification agency too. Generally farmers have fragile liquidity condition so they take loan from the organized or unorganized sectors for the chana cultivation and thus they are under pressure to sell their produce immediately after harvesting in order to repay their loan. The lack of infrastructure like warehouses, electricity, roads, and computers with internet connectivity in the rural areas has made farmers participation in the futures market even tough. Recommendations: Creation of infrastructure in the rural areas is the most urgent need of the hour. There is need of creation of warehouses and quality certification agency at the farm level on which the farmers have trust should be established. At the same time better connectivity of the rural to urban areas should be emphasized (through roads, electricity and internet).
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Continues awareness campaigns should be organized in association with District Co-operative Boards and Regional Rural Banks as they are working closely and regularly with the farmers. So this can prove an effective means to spread awareness. The awareness programs should be in local languages and in lucid manner as it would be difficult to understand the complex terms and processes involved in the trading. Bankers, Co-operatives, NGOs and other potential aggregators should also be made aware of futures market and its utility so that they can make best benefit out it and provide better services to the farmers. The issues of aggregation which need detail study are profit and loss sharing model, say in the decision taking at commodity market. As the most of the potential aggregators want this power should remain with them, on the contrary the farmer say that as it¶s their produce so this power should remain with them only. The service fee charged to farmers should be mutually beneficial to keep both parties interested in the process, method of working (the whole process from aggregation to trading) with farmers to win the trust and faith of the farmers as an aggregator.

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ACKNOWLEDGEMENT
The present study has been carried out with active support from Multi Commodity Exchange, Corporate Office, Mumbai. We are grateful to Dr. V.Shunmugam, Chief Economist for providing us opportunity for summer trainee project in your esteemed organization which provided a stage for our exposure to real time production and business practices in agriculture in rural area and for expanding my horizon. We are thankful to Mr. Nazir Moulvi, Mr. Debojyoti Dey, Mr. Sujan Bhattacharyya and Mr. Niteen Jain for their kind support throughout the period of completion of the study. Our special thanks to Prof. L.K. Vaswani, Director, School of Rural Management, KIIT University, Bhubaneswar for his invaluable guidance, constant inspiration, keen interest, kind help & untiring efforts during the course of preparation of this report. We are extremely thankful to the officials of all the firms and organizations who provided necessary information, data and operational details for the completion of this study. We are indebted to many other organizations, persons from industry, trade and farmers who contributed immensely to this study by sharing their knowledge and experience. However the responsibility of data collected, sources indicated, quotes mentioned and findings lies solely with us and not any of the person indicated above.

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..........1.........................................................................................................4 Lack of Infrastructure .................................................. 21 4.............. 11 2........................................................ Limitation of Study:............................................................................ Data Collection: .................................................. 21 4...2........................................................................................................... 10 1....................... Project Rationale: . 23 6........... 12 2....................................................................... 6 1................................Table of Contents 1........1................................... Conclusions: ..... 23 5...............................................................1 Regulatory constraints ................ 21 4................................................................................................................................... 13 4..................................................................................................................................................................... 12 2................................................ Scope of Study: ......5 Some common opinion regarding participation in futures market:............................................ 12 3.................................................................... 20 4..................................................................2 Lot size .........................1......... 11 2................................................................6...2........ Phases of the study: .................................... Methodology For The Study: ................................................................ 12 2.................................. 15 4................................................................... Introduction to Commodity Future Market .... Recommendations: ...................2 Some key constraints regarding participation in futures market:..........................................................1 Major Issues/Constraints in farmers¶ participation in futures market: ..3 Aggregation opinion .......... Data Analysis: ..4...........................1 Awareness:............................2 Policy Constraints ............. 19 4.......... Sample Design and Sampling Method: ........................................................................................... 10 1........................................................5.......................... 26 Annexure......................................................................................................................... Objective of Study: ............................2................ 10 2......................................................................3......................... 9 1....... 25 Annexure-1 . 15 4.. 6 1.............................................................................2.................................................................................... 22 4....... 22 4......1................ Review of literature: ................................................................................................................... Designated Project Area: ............................................................................................................................... 15 4..........................1 Background Study: ...............................2.......................2 .......... Survey Design: .......3 Poor liquidity condition: ..................... Findings and Analysis: ................................................................... 9 1......................4.................... 28 [4] ..3...............1..............

.. 15 15 16 17 18 18 26 26 27 27 27 List of Figures Figure No......... 1 Figure No.. Ace Derivatives and Commodity Exchange Ltd........ 10 Table No...... 3 Table No. 11 Description Source/s of Price & Market Information (Rajasthan) Source/s of Price & Market Information (Madhya Pradesh) Source/s of Price & Market Information (Madhya Pradesh & Rajasthan) Duration of produce holding by farmers Average spot & futures prices of chana in Madhya Pradesh (2010) Average spot & futures prices of chana in Rajasthan (2010) Volume and value of trade commodity derivatives Some important figures at a glance (Rajasthan) Some important figures at a glance (Madhya Pradesh) Some important figures at a glance (Rajasthan & Madhya Pradesh) Cost of delivery at warehouse for futures trading by traders Page No. 43 List of Tables Table No......... 6 Table No. 4 Description Phases of the study Source/s of Price & Market Information (Rajasthan) Source/s of Price & Market Information (Madhya Pradesh) Source/s of Price & Market Information (Madhya Pradesh & Rajasthan) Page No... Indian Commodity Exchange Ltd... 2 Table No........ 7 Table No...... Multi Commodity Exchange of India Ltd.......... Agriculture Produce Marketing Committee Know Your Customer Glossary Chana Mandis Vaayda Bazzar Gram Agriculture Produce Markets Futures Market [5] ................ 2 Figure No..References: . Table No.... 5 Table No. 11 15 16 16 List of Abbreviations FMC CBOT ECA UNCTAD NMCE NCDEX MCX ICEX ACE APMC KYC Forward Markets Commission Chicago Board of Trade Essential Commodity Act United Nations Conference on Trade and Development National Multi Commodity Exchange of India......... National Commodity Derivatives Exchange Ltd......... 4 Table No..... 1 Table No. 9 Table No.... Figure No..... 8 Table No................... 3 Figure No.......

In 1881. 1. but it doesn¶t involve any immediate transfer of ownership of the Commodity involved. In 1865. but sometimes ³forward´ agreements were also made ± deals to deliver and pay for something in the future at a price agreed upon in the present. a regional market was founded in Minneapolis. The first modern organized futures exchange began in 1710 at the Dojima Rice Exchange in Osaka. The first contract (on corn) was written on March 13. These agreements (customarily called as futures contracts) provide for delivery of a specified amount of a particular commodity during a specified future month. today the Minneapolis Grain [6] . Trading was originally in forward contracts.1 Background Study: 1.3 History of commodity markets: Commodity markets have existed for centuries around the world because producers and buyers of foodstuffs and other items have always needed a common place to trade.1.1Commodity: A commodity is a good for which there is demand. There are records.1. but which is supplied without qualitative differentiation across a market. The United States followed in the early 19th century.S.2 Commodity Future Market/Exchange: A commodity futures market (or exchange) is similar to a public marketplace where commodities are contracted for purchase or sale at an agreed price for delivery at a specified future date. One of the earliest written records of futures trading is in Aristotle's book ³Politics´. Chicago is located at the base of the Great Lakes. Trading continuously since then.1. The elementary difference between a futures market and a market in which actual commodities are bought and sold. In 1848. for example. Cash transactions were most common. standardized futures contracts were introduced.1. 1851. are made under the terms and conditions of a standardized futures contract. These are especially an agricultural or mining product that can be processed and resold. Minnesota and in 1883 introduced futures for the first time. the Chicago Board of Trade (CBOT±) was formed. of ³forward´ agreements related to the rice markets in seventeenth century from Japan. 1. These purchases and sales. We can also say that it is something useful that can be turned for commercial or other advantage such as an article of trade and commerce. Japan. either for immediate or later delivery is that in the futures market deals in standardized contractual agreements only. close to the farmlands and cattle country of the U. which must be made through a broker/agent who should be a member of an organized exchange. Introduction to Commodity Future Market 1.

dry chilli. The Expert Committee on Strengthening and Developing Agriculture Marketing (Guru Committee: 2001) highlighted the need for and role of futures trading in the price risk management and in the management and marketing of the agricultural produce. Lyallpur. Regional mandis and unorganized markets are the major places for Spot trading in India which are fragmented and isolated. The report also highlighted the government¶s intervention as pervasive in some very sensitive commodities like wheat. The Kabra Committee (1994). and Calcutta. Karachi. UNCTAD and World Banks Join Mission Report ³India: Managing Price Risk India¶s Liberalized Agriculture: Can Futures market Help? (1996) emphasized on the role of future markets as a market based instruments for managing risks and strengthening of institutional capacity of the Regulator and exchanges for the more efficient performance of the future markets. The major pre independence commodity markets/centers were the cotton market of Bombay. Karachi. 2000. Over the period of time other commodities were also permitted to be traded in the future markets/exchanges. and the earlier reports in early post 1991. The groundnuts market of Madras and Bombay. Hapur. maize. With the addition of the New York Mercantile Exchange (NYMEX) the trading and hedging of financial products using futures dwarfs are playing a major role in the global financial system.6. The first commodity exchange set up for organizing commodity trading in India was Bombay Cotton Trade Association Ltd in 1875. the futures markets have far outgrown their agricultural origins. a number of steps were taken to liberalize the commodity forward markets. This can be felt by the expression in several reports and studies of committees and groups which recommended positive reforms in the commodity future markets. 1. Okara. Today. and sugar was of the point of view that future markets in these commodities were very unlikely of be useful because of this.Exchange (MGEX) is the only exchange for hard red spring wheat futures and options. the wheat markets were at Bombay. With coming up of 20th century India saw a number of commodity exchanges mushrooming. The committee and groups unanimously recommended that the future markets should not resume for wheat. recommended opening of 17 selected commodities for future trading but there were no consensuses regarding on some of the commodities. The other major policy which supported future markets was the National Agriculture Policy. vanspati and sugar. Amritsar. coffee. pluses. Emergence of Commodity Futures Markets/Exchanges in India: Future trading in India started way back in 19th century. rice. 1. tea. The committee¶s Group on the Forward Markets also recommended that it should be the work of interested exchanges to decide the usefulness and appropriateness of commencing of future trading in the [7] . Ahmedabad and Indore. For most of these commodities it was recommended that it require case by case review of suitability of each commodity be carried out in light of developments in the future.1. Impact of Different Policies and Committees on Futures Market: With the liberalization of the Indian Economy in the year 1991.4.1. non-basmati rice.

Metals.products (not only the commodities) based on the studies of feasibility on a case to case basis. IV.1. The commodity must have a suitable demand and supply conditions with respect to their volume and their marketable surplus should be large. Some of the main regulatory measures imposed in the FMC include daily market to market system of margins. The price of the commodity should be volatile which makes hedging necessary in this case person with a spot market commitment may face a price risk. creation of trade guarantee fund. Gur). The commodity must be free from the governments or any other bodies¶ substantial controls and regulations. Present Status of Commodity Futures Markets/Exchanges in India: At Present. Fibers. If it not fulfill this criteria the arbitrage would not be possible and there would be no relationship between the spot markets and the futures market. A commodity suitable for future trading must have these following basic charters: I. III. Other (Castor seed. since year 2001 to Oct. Food grains. II. online trading for the new exchanges. which may lead to restrictions on their supply. [8] . demutualization for the new exchanges and one third representation of independent Directions the Board of existing Exchanges etc. back office computerization for the existing single commodity exchanges . Forward Markets Commission (FMC) and the government encouraged setting up commodity exchanges using the most modern system and practices in the world. Edible oilseed. as per the list presented on Forward Market Commission (FMC). It should be a homogenous commodity or it should be easy to standardize or grade and easy to measure their deviation from the standard set or grade. distribution and prices. This should be a must condition for the futures exchange to deal in standardized contracts.7. The futures market has grown by 177 %. Energy. policies. 1. As a result it has a demand for the hedging facility. The commodity should be easy to store or storable. there are about 21 exchanges (list of commodity exchanges in India) are in operation carrying out futures trading activities in a wide variety of commodity items under 7 major categories there are about 100 commodities are available for trading which are. However it recognized that: All the commodities are not suitable for futures trading. To make up the loss of growth and development during the four decades of restrictive Govt. V. Spices. 2010.

Project Rationale: India is predominantly an agrarian economy with very high population dependence on agriculture and allied activities.´ 1.A solution of farmer¶s participation in commodity Exchanges´. The commodity Market is poised to play an important role of price discovery and risk management for the development of agricultural sector.There are five National Level Commodity Exchanges in India which are MCE (National Multi Commodity Exchange of India). which causes unforeseen losses irrespective of the level of yield. The present study was conducted with the following objectives: y To find out the constraints/issues in participation of farmers in Commodity Exchanges. About 65% of total population derives their livelihood from agriculture directly or indirectly. regulators and other share holders will need to proactive and quick in their response to new developments. WTO regime makes it all the more urgent to develop these markets to enable our economy. Commodity future markets could help the farmers to address the price risk and price discovery if farmers are linked with the proper mode of channels. New issue and problems Govt. Objective of Study: The study is focused on ³Aggregation. They also face price or market risks mainly due to adverse movements price of commodities in market produced by them.2.3. which affect the yield of crops directly. NCDEX (National Commodity Derivatives Exchange Ltd). ACE (Ace Derivatives and Commodity Exchange Ltd. (Indian Commodity Exchange Ltd). Commodity derivatives play a pivotal role in the price risk management process especially in any agricultural based country. ICEX.) The commodity Market is poised to play an important role of price discovery and risk management for the development of agricultural and other sectors in the supply chain. with risks not belong absorbed any more the idea is to transfer it as the focus is shifting to ³Manage price change rather than change prices the commodity markets will play a key role for the same. Fluctuations in prices of agricultural commodities adversely impact the incomes and livelihoods of farmers. Risk and uncertainty are inescapable factors in agriculture. MCX (Multi Commodity Exchange of India Ltd). especially agriculture to meet the challenge of new regime and benefits from the opportunities unfolding before U. Still the Indian farmers are not participating in the commodity future market. particularly the small and marginal farmers. [9] . Farmers face production risk from the weather.S. Our study is an investigation to find out the issues/ constraints in participation of farmers in commodity market/ Exchanges. diseases and natural calamities. pests. This study has been carried out to identify the issues/constraints in participation of farmers with commodity future markets in India. 1.

4.5. processors. The time period was not sufficient for studying the different dimension and details which would have been more beneficial. Scope of Study: The information. [10] . The case method was adopted for collecting relevant data. So our study areas were the major gram producing districts of Madhya Pradesh (Indore. traders and processors. The present study also used secondary data collected from various published sources. 1. warehouses.1. NGO¶s. The primary data collected regarding farmers. The academic that arises from the project would provide a model for similar work elsewhere. suggestion and opinions made can help in strategic planning for aggregation. The leading gram producing states of India are Madhya Pradesh and Rajasthan which accounts for 53. which obviously had its recall bias especially from farmers. Further these districts are closer to the MCX India¶s delivery centers at Ganj Basoda in Madhya Pradesh and Bikaner in Rajasthan. farmer¶s organizations. Sagar and Vidisha) and Rajasthan (Bikaner.37% of the total gram production in India (in year 2008-09). Hence. Analysis was carried out both in static and dynamic settings. co-operatives and banks would result in creation of resource for future studies. care should be taken while using the results of the present study for making policy decisions. The implication of the case study has to be used with caution before generalization as the study was confined to only one district at a particular point of time. Ganganagar and Jaipur). Limitation of Study: y y y y y The study was confined to only six districts of Madhya Pradesh and Rajasthan.6. traders. Designated Project Area: As our selected commodity was gram (chana). 1.

Phase 1 (Background Study): The Background study (phase 1) of our project or study consisted of the background study on the commodity and commodity markets/exchanges. The report was written on the basis of the phase1 (Background Study) and phase 2 (Field work). Various statistical tools were applied to analyze the data. Methodology For The Study: 2. 2. impact of policies.3.1.2. Phase3 (Report Writing): The report writing (phase 3) of the project consisted of the report writing. farmer organizations.1. and how it has benefited farmers. Phase 2 (Primary Research): The Primary research (phase 2) of the project consisted of field work for data collection from the respondents which included farmers. 2.1 2.1.1. [11] . It also included detailed discussion with the staffs of MCX India. area for field study. and banks. warehouse owners. NGOs.1. present status. processors. The sample design and questionnaire were based on the discussion and background study. Phases of the study: Phases (Phase-1) Background Study (Phase-2) Primary Research (Phases-3) Report Writing Lietraure Review Discussion With MCX India Staffs Sample Desgining Questionnaire Development Data Collection Data Analysis Fig. It included selection of commodity. their origin. co-operatives.2. sample designing and development of questionnaire. traders. regulation.

8% processer interview. with one respondent as one unit of the study. fourth questionnaire was designed warehouse owners.2. second questionnaire was designed for traders. co-operatives. processers. The respondents were randomly selected based on their availability and willingness to participate in the survey. The purpose of the survey was conveyed to the respondents before starting the survey. processors and warehouse owners was done in purposive sampling which was done by dividing into non-overlapping groups of all mentioned above. The study of distribution of farmers. The potential respondents from each district were considered as the universe for the study. traders. Data Collection: Since the research required both quantitative and qualitative data. opinion taking was also done with the NGO¶s. The survey was done by taking sample size of 25 samples from each district of our study. Sagar. 12% trader interview. warehouse owners) were from the three districts of Madhya Pradesh (Indore.3. processers.4. Data Analysis: The data collected was analyzed using various statistical tools after tabular and graphical summarization of the raw data. and banks). 2. First questionnaire was designed for the farmers. Sample Design and Sampling Method: For this project random sampling was done. Apart from the survey. Survey Design: Questionnaires were designed for the primary survey. 2. so both the data were collected. and Vidisha) and three districts of Rajasthan (Bikaner. Ganaganager and Jaipur). The check list for opinion taking was designed in order to get the information from the potential aggregators (NGO¶s. farmer¶s organization. and bankers. co-operatives. [12] .2. Quantitative and qualitative data were collected from farmers. The respondents (farmers. After the data analysis the final conclusions were drawn and these conclusions along with personal observations at field formed the basis for recommendations. and warehouse owners. and 4 % of the warehouse owner interview. traders. traders. 2. third questionnaire was designed processers. From the opinion taking mostly qualitative data were collected. 76% of our sample size was covered with farmer interview.2.

(iii) Facilitates lengthy and complex. Review of literature: Futures contracts perform two important functions of price discovery and price risk management with reference to the given commodity. it enables him to hedge his risk by operating in futures market.html) Nath and Lingareddy (2008) study found that both average price change and spot price volatility of urad. The futures trading is very useful to the exporters as it provides an advance indication of the price likely to prevail and thereby help the exporter in quoting a realistic price and thereby secure export contract in a competitive market. Basab Dasgupta (2004).gov. the paper finds that future price elasticity of production always [13] . production and manufacturing activities. He can do proper costing and also cover his purchases by making forward contracts. paper suggested that the allegation against futures market in India 'that it distorts the spot market price and creates artificial scarcity by allowing unnecessary hoarding'. (v) Encourages competition and acts as a price barometer to farmers and other trade functionaries.in/htmldocs/Evolution.3. With the assumption that future market is monopolistically competitive. They also reported tests of causality that show that the volume of futures trading had positive and significant causal impact on both the average level of spot prices and their volatility in case of wheat and urad. (iv) Helps balance in supply and demand position throughout the year. is a misconception. production decision and the inventory decision. This paper finds out that there is a co-movement among futures price. gram and wheat were higher by statistically significant margins during October 2004 to January 2007 as compared to either the pre-futures period January 2001 to September 2004 or during February 2007 to October 2007 when futures trading in some of these commodities was suspended. (Source: http://fmc. It is useful to all segments of economy. Having entered into an export contract. (ii) Leads to integrated price structure throughout the country.this mechanism dampens the peaks and lifts up the valleys i. It is useful to producer because he can get an idea of the price likely to prevail at a future point of time and therefore can decide between various competing commodities.e. the amplitude of price variation is reduced. It enables the consumer get an idea of the price at which the commodity would be available at a future point of time. the best that suits him. Other benefits of futures trading are: (i) Price stabilization-in times of violent price fluctuations .

an unnecessary hoarding will increase the carrying cost leading to a lower responsiveness of inventory to futures prices. [14] . This paper also finds out the effect of expected production shocks on futures price elasticity of supply The Guru Committee (2001) emphasized the role of futures trading for price risk management and marketing of agricultural produce. Therefore. ii) To take benefit of prices discovered on the platform of commodity exchanges by taking rational and well informed cropping /marketing decisions. The suspicion about the increasing hoarding resulting from futures market can also be proved unjustified from results.being greater than or equal to one. an increase in profit by increasing price is not possible. Farmers can derive benefit from futures markets as follows: i) By participating directly/indirectly in the market to hedge their price risks. Our results show that futures price elasticity of inventory is inversely related with the carrying cost. the doubt about its distorting effect on spot price can be ruled out. Therefore.

electronic Media (television/radio). contract specification.67% 50. (fig.56% 55. Sagar nad Vidisha of Madhya Pradesh (fig.22% Jaipur 84.63% 36. c) The major source of price and market information for farmers in Bikaner. electronic media and others. Table No. Farmers mainly seek price and market information from mandi traders and commission agents.84% Sagar 66. No.47% Ganganagar 55.56% 72. futures market brokers and mobile services [15] .78% T.00% 27.86% 89.4. 2 Source of Information in Madhya Pradesh Sources Traders Newspaper Vidisha 89. hence hedging through aggregation seems to be a very difficult task at this stage. hedging. and others 1 . Jaipur and Ganaganager of Rajasthan. On the other hand in Indore. newspapers.32% Indore 89.21% Source: Field Survey T.32% Table. Findings and Analysis: 4.47% 26. b) The farmers who had heard the name of futures market/vaayda bazzars had mindset that it is not for the farmers but only for traders. newspapers.-2) (sample size was 56) the major sources of price and market information are local traders.1. Even the big farmers having large farm land holdings lacked awareness of the futures market. These farmers are unaware of any further information regarding contract size.47% 52.1 Awareness: At farmers¶ level: a) The awareness about the futures market among the farmers was very low.V/Radio 84. but the majority is unaware about the futures market utility. speculation etc.V/Radio 26.1) (where our sample size was 56) are local traders.32% 26. About 45% farmers have heard only the name of futures market or vaayda bazzars.1 Major Issues/Constraints in farmers¶ participation in futures market: 4.21% 26.1 Source of Information in Rajasthan Sources Traders Newspaper Bikaner 73.32% Source: Field Survey 1 Others includes APMC mandis.

The APMC mandi and the local traders remains the major source/s of information for farmer in Madhya Pradesh but farmers of Rajasthan are using sources of information other than local traders which are print and electronic media. Table No.4) Madhya Pradesh and Rajasthan. Tele-density in Rajasthan i. 125662/-.43% at Rs.07 32. The per capita income of Rajasthan is higher by 17.e. newspaper.e. The farmers of Rajasthan due to higher income compared with their counterparts in Madhya Pradesh rely more on modern communication tools like mobile phone other electronic media.71 2 Source: Director of Economics & Statistics of respective Sate Governments.14 41. 3 Source of Information in Madhya Pradesh and Rajasthan Sources Madhya Pradesh Rajasthan Traders Newspaper T. 2011) [16] . Wednesday. is about 15%.c) When we look it at overall picture (fig.28 60. The government agricultural extension services centers and NGOs have failed in price and market information dissemination.14 71.14.42 64.compared with their counterpart in Madhya Pradesh at Rs. (source: Mint. 2005-06. there are also few farmers who are also using mobile service and futures market brokers for their price and market information. pg.V/Radio Source: Field Survey 82. about 32% as compared with Madhya Pradesh i. and Central Statistical Organization. On the contrary in Madhya Pradesh the farmers due to lower penetration of information communication and technology (ICT) have to rely more on traders.15219/. January 26. (56 samples from each state) we see some major difference in the source/s of price and market information.

34% of the average spot price. In Rajasthan only 14.and the average exchange spot price for the same period was Rs.and the average exchange spot price for the same period was Rs. On the other hand in Rajasthan the awareness about the MSP is 60.75 9. If the farmers of Rajasthan would had taken hedging decision and had hedge their produce they could have realized 19. of Farmers 37 43 21 11 % of Total Farmers 33.71% which is quite low as compared with Madhya Pradesh. then how could one expect that the farmers attending the awareness camp would understand. So we can say that farmers of Rajasthan got up to 97. So the farmers of Madhya Pradesh got up to 91.39 18.65% more than what they got in the spot market. Table No. We also find that 9. 2169/-. Farmers feel less benefited by MSP because at the time of bumper production MSP fails to benefit/support the farmers as the government gives all kinds of quality related excuse and surrenders farmers at the mercy of parasitic traders but at the time of lower production farmers get better prices in market.5 3 to 3.5 % of the average spot price whereas in Madhya Pradesh the average price realized (Table No: 6) to the farmers was Rs 1936/. If the same decision was taken by the farmers of Madhya [17] . There are 33. the farmers were expecting that they would come and help them by showing how the whole process takes place in the futures market.5 months. 2119/-.5 4 to 5 source: Field survey No. 4 Maximum duration produce holding by Farmers Capacity to Stock (in Months) 1 to 1. g) One of the national level Exchanges had organized a camp in year 2010 at Ganaganagar district in which the state ministers also came and they tried to make farmers aware about the futures market and its utility.5 2 to 2.5 months where as the majority of farmers which constitutes 38.82% of farmers can hold their produce for 4 to 5 months. But it did not serve the purpose for which it was organized because the members of Exchange delivered their information about future market in such a manner that most of the trader who were in the camp could not understand what the Exchange members wanted to explain. h) The average price realization (Table No: 5) to the farmers as per our survey of Rajasthan in year 2010 was Rs.04 38.04% of farmers who can hold their produce for 1 to 1.14% but only 15.d) If empowered with price signals all farmers surveyed in Rajasthan and Madhya Pradesh showed willingness to hold on their produce for at least one month (Table No. They also promised that they would give every possible help to the farmers but they never came back again.22% farmers feel that they have been benefited by MSP.71% farmers feel that they have been benefited by MSP.82 e) The awareness about the Minimum Support Price (MSP) is high in Madhya Pradesh which is about 82.4). f) In Indore district an awareness camp was organized in year 2010 by an Exchange.39% can hold their produce for 2 to 2. 2114/.

15** 26.07* 20.07** 27.46 2218. c) The price signals have benefited the traders as they can take the decision on selling.49 2500.34 2614.04% more than what they got in the spot market.04 Note* If hedge in the month of October 2009 ** if hedged in the month of March 2010 Source: Field Survey and secondary data form Futures Exchange Month Table No. buying.16 97.49 Average 2114.07 28.62 July 2145.33 94.37 2424.93 2728.51 2777. This can be seen as opportunity lost for not hedging at the exchanges. holding and releasing the commodities or contracts.04 August 1963. [18] .65 Note:* if hedged in the month of October 2009 ** if hedged in the month of December2009 *** if hedged in the month of February 2010 Source: Field Survey and secondary data form Futures Exchange Month At traders level a) There is a high awareness among the traders about the futures market as 70% (where our total sample size was 18) of the traders knew about the futures market and about 50% participate in the futures market occasionally or regularly.46 2728.80 97.76 19.52 95.07*** 11.Pradesh then they could have realized 28. Table No.61 91.07* 30. 6 Average spot & futures prices of chana (gram) in Madhya Pradesh (2010) Average price Average % price realized by Average futures % potential realized by Exchange farmers as compared price at the time incremental price farmers (as per spot price with exchange spot of sowing (six realization if hedged survey) prices months Earlier) at exchange March 1908.78 2133. 5 Average spot & futures prices of chana (gram) in Rajasthan (2010) Average price Average % price realized by Average futures % potential realized by Exchange farmers as compared price at the time of incremental price farmers (as per spot price with exchange spot sowing (six realization if survey) prices months Earlier) hedged at exchange April 2159.47 2642.89 88.03 Average 1935.51 96.48 2020.20 2204. b) The number of traders participating in the futures market as hedgers is very low. Most of the traders are view based traders or speculators.85 May 2037.23 2169.97 2119.71 2226.

[19] . c) They are aware about lending against the warehouse receipts of certified warehouses. which is generally not possible from small. b) Awareness about the futures market is known to national level Co-operative. and they were very reluctant to participate in futures market as they had mindset that futures market is full of speculation and it is a gamble. IFFCO. About 83% of processors knew about futures market.2 Lot size a) The minimum lot size for Chana (Gram) for trading in futures market is too large (10 MT). b) They generally never take any decision regarding loan or financial transaction based on futures prices or price signals of the exchanges. They participate in the futures market regularly. At Co-operative level a) There is very low awareness about futures market among Co-operatives. Out of the six warehouses surveyed only two were participating as a hedger. 4. out of this about 40% of processors knew hedging and rest were speculators (our total sample size was 12).1. one co-operative perceived commodity futures as a tool just for speculation. At NGOs level a) There is no awareness among the NGOs surveyed. marginal farmers and even the produce of few large farmers is not enough to meet the minimum lot size of chana for trading in futures market. At bankers level a) There is low level of awareness among the bankers regarding futures market as only two bankers out of the six interviewed knew about the futures maket. They lend up to 75% of the total values of commodity stored in the warehouse. Out of the two. b) The price signals really help processors as it takes them 4-5 days for processing of chana so they participate in the futures market to ensure their regular supply and minimize their price risk. At warehouse level a) There is 100 % awareness among warehouse about futures market.At processor level a) There is high level of awareness about futures market among processors. As only two Cooperatives out of the six surveyed knew about futures market.

A farmer having an average land under chana cultivation is 8. So the farmers of Rajasthan are more prone to price risk than Madhya Pradesh.22 quintals/ acre and average land under chana cultivation is 7. b) The average cost of chana cultivation in Rajasthan is Rs. Farmers have to fulfill others responsibilities and social [20] . 70791/.44 acres.24 acres with the average productivity of 5.28 quintals which is much below the minimum lot size required to trade on exchanges.for chana cultivation. So it would be difficult for farmers to meet quantity specification of the exchanges.per acre.84 acres.22 quintals/acre.81quintals/ acre and average land under chana cultivation is 10.24 acres so a farmer in Madhya Pradesh will require Rs. In Madhya Pradesh the cost of chana is Rs 6307/.e. 4. As we can get the quantity even by pooling but the difference in the quality is also a constraint the quality should be as per the futures market.65% higher as compared to that of Madhya Pradesh which is Rs.per acre whereas in Rajasthan the cost of cultivation is Rs 10348/.44 acres with the average productivity of 6.1662 per quintal which is 34. 76989/.81 quintals/acre and in Rajasthan the average land holding under chana cultivation is 7.24 acres where as in Rajasthan the average productivity of chana is 6. A farmer with average land holding of 8.and average land holding under chana cultivation is 10. money lender or the traders) so they are forced to sell their produce immediately after harvesting in order to repay the loan taken from the different sources and hence farmers can¶t even wait for a short period of time. 10348/.2169/per quintal on the contrary the average spot price realization on Madhya Pradesh is Rs. c) The farmers mostly do not have that much of liquidity at the time of sowing. The average spot price realization of the farmers of Rajasthan is Rs.84 acres and if the average productivity is 5.per quintal.86 quintals of chana which is much below the minimum lot size of 10 MT.for chana cultivation.for chana cultivation.38 quintals and the average produce from a farmer in Rajasthan is 46.64584/.22 quintals/acre) is just slightly more than that of Madhya Pradesh (5.44 acres so in Rajasthan a farmer will require Rs. c) The quality is also a constraint. In Madhya Pradesh the average land holding under chana cultivation is 10. In Rajasthan the average cost of cultivation is Rs. This has been detailed in the model proposed for aggregation in our report. For this we can have the inbuilt quality at the farm level so that we can have the quantity and the quality at the same time.98 quintals/per acre then his average produce would be 52. In Madhya Pradesh the average cost of chana cultivation per acre is Rs. Also the productivity of Rajasthan (6.98qunitals/acre). 6307/.b) The average productivity of chana in the surveyed area is 5. so the average produce from a farmer in Madhya Pradesh is 59.2119/.3 Poor liquidity condition: a) The average cost of cultivation of chana per acre in the surveyed area is Rs.98 quintals/acre and average land under chana cultivation is 8.1086 per quintal.1.per acre and average land holding under chana cultivation is 7. 8008/. They generally do their farming activities by taking loans either from organized (banks) or unorganized sector (i. The average productivity of chana in Madhya Pradesh is 5.84 acres needs Rs.per acre.

d) The futures trading has become online so there are certain infrastructures like computers with internet connectivity are required to participate in the same or to have a glance on the price signals. d) In year.2 Some key constraints regarding participation in futures market: 4. is also a constraint restricting them from participation in future market for them. Farmers have agriculture only as their source of income or livelihood. But there were very few farmers (about 7%) who had third lot to sell.1 Regulatory constraints At Bankers level There is regulatory restriction of the financial Institutions (Banks) regarding participation in futures market. In the second lot about 16% of their produce was sold within one month. [21] . computers. The rest about 1% was sold after two and half months after second lot. roads. electricity. internet connectivity etc. The large farmers who have a bulk produce prefers to travel this distance but small and marginal farmer finds it difficult so they sell their produce to the large farmer or to the local trader. which are not under their control which force them to sell their produce immediately after harvesting.1.4 Lack of Infrastructure a) The lack of infrastructure in the rural area such as warehouses. deaths. They also have to plan their annual expenditures as per their produce.customs. such as marriages. 2010. The farmers also cannot open DEMAT accounts as they don¶t have PAN Cards with them. Restriction on participation of financial institutions also weakens the liquidity on commodity exchanges and gives rise to risk of price manipulations in trading. b) In our survey we found that there were no storing facilities available in the villages due to which some farmers had to sell their produce immediately after harvesting. 4. c) The lack of nearby agricultural produce market and poor connectivity of the rural areas to the urban areas is also a major constraint at an average the farmer has to travel 60 KMs to sell their produce. illness etc. farmers sold about 83% of their total produce in first lot just after harvesting. At NGOs level NGOs or Voluntary Organizations are registered with not-for-profit motive and therefore they can¶t open DEMAT account for profit generating activity like futures trading.2. 4. As a result these organizations are not the perfect match required for an aggregator on behalf of farmers.

Hedging the prices for the upcoming harvest through futures market requires the farmer to pay in the initial and Mark-to-Market (MTM) margins upfront. farmer organizations can as technical support providers for farmer to participate on commodity market because of complex procedural requirements and the technical complexities involved in commodity derivatives. There is also a sense of competition among the farmers which has resulted in lack of consensus among farmers regarding group farming. agribusiness companies.2 Policy Constraints Policy interventions by the Government have an impact on the direction and magnitude of price movements in commodities. a national level co-operative.2. 4.3 Aggregation opinion At present aggregation seems a difficult task because awareness among farmers is very less. These 25% farmers had heard the name of futures market/vaayada market and they showed interest after we explained them about the futures market and its utility. As the farmers have more trust on such Co-operative because they provides fertilizers and agricultural equipments on subsidized rates and is working with farmers for a long period of time.1 Lack of common consensus among farmers ± There is lack of consensus among the farmers regarding group farming. Only about 25% of farmers of the total surveyed farmers were interested to participate in the aggregation process. cooperatives. Institutional Constraints Institutional entities like NGOs. Frequent policy changes by the Government generally results in unbalancing of the market equilibrium and leads to the shift of the balance of favor from one to their counterparts.4. The farmers interviewed for our study had never participated in group farming because it can lead to conflict among them. One of the farmers quoted ³that it is hard to keep my four sons together then how [22] . They also feel that if a successful live example can be quoted then the farmer·s participation in commodity market through aggregation may increase. Rest 75% farmers were not interested to participate in the futures market for hedging through aggregation because of the following reasons: IFFCO. 4. due to which farmers have more trust on them as compared with other co-operatives and other organizations. But due their limited capacity for managing price risk management it may not reach to the beneficiary mainly the disadvantage farmers.3. These kind requirements are proving as a difficult hurdle for the farmers to cross as they have a poor liquidity but willing to hedge their price risks. has a view that the aggregation under such co-operatives like IFFICO can be possible.

Farmers¶ Group consensus and group conflict problem could arise in aggregation due to illiteracy among farmers.3. g. warehouse owners. There is a feeling among farmers that if a successful model/live example even on a small scale of aggregation is shown to them then the farmers¶ participation may increase. e. 4. 4. b. f. d. The farmer expects mutual trust. The socio-economical disparity among the farmers is also a major constrains in aggregation. c. Model for Aggregation: The model which we are proposing for the aggregation is as following: [23] .3. 5. processors. every farmer has difference of opinion regarding farming activities. and advance money for farming. Farmers¶ Group consensus and group conflict problem could arise in aggregation due to illiteracy among farmers. There is common fear that if the farmers cannot be benefited first time by the futures then they would not come back. 4.3 Fear of fraud ± There is a chance of fraud from different stakeholders involved in the process of aggregation like trades.4 Participation of famers: About 78% of the surveyed farmers had view that if they participate and incur loss in the first time in the futures market then they would not participate in the futures market.4. that also for an economic reason´.5 Some common opinion regarding participation in futures market: a. The rigid social strata also hinder this process as the upper caste farmers are not willing to mingle with their lower counterparts. 4. Such events have happened in the study area as one uncertified warehouse has flown away with the farmers produce in Vidisha district of Madhya Pradesh in 2010.Different farmers have different socio economic condition such as big farmers don¶t want to work with small ones. is also a major factor which restricts the participation of farmers in the group farming.tough it would be to keep different farmer together for group farming. Occurrence of such activity has resulted in decline in trust among farmers regarding warehouses in the area. The farmers trust lies with banks.2 Socio-economic disparity . better price. co-operative societies and individual from their own villages or community. or any individual from the village society/ farming community etc.

3. The group would carry their farm activity separately on their farm lands. But they would use the same agricultural inputs and perform similar on and off farm activity on the same time.e. Then on being asked why it can¶t happen here he replied ³The air and water (i. For doing so he will charge a service fee to the FIG. The Cooperatives have been the source of fertilizers and other agricultural inputs at the subsidized rates. culture) of Gujarat has something different that it brings the farmers together which lacks in Rajasthan´. The faith in the individuals from their own community or village gives them [24] . The lot size is too big for small and marginal farmers even the big farmers find it hard to meet the lot size and quality specifications. The lack of infrastructure like warehouses. In our opinion taking one of the Cooperatives in Bikaner (Rajasthan) quoted ³if you want to know about group farming then you should go to Gujarat as it is only possible there´. The issues regarding aggregation are: 1. 2.e.We will be forming farmers¶ interests group (FIG). Now the produced commodity would be aggregated by the farmers of the FIG and would be handed over to the aggregator who would trade the commodity at the exchange. Madhya Pradesh and Rajasthan. Conclusions: At present the farmers¶ direct participation in the futures market seems to be very difficult due following reasons: 1. The farmers are financial very fragile and they can¶t pay the margin money and MTM margin as these are very high. At the same time they also give agriculture related information and live demos to them which have won the trust for them. 3. This would help them to have uniform quality and the quantity which would enable them to participate in the futures market. 4. As per the opinion of the Co-operatives there has been no history of group farming in the study area i. The reason behind this trust is that banks have been the major source of loan and other government benefits are distributed through them. The socio-economical disparities among the farmers are also a major constrains in aggregation. They also help to get them a good price in the APMC markets which further consolidate the trust of farmer in the Cooperatives. The farmers trust lies with banks. There is no common thought process/consensus among the farmers regarding the farming practices. 6. co-operative societies and individual from their own villages or community. The awareness among the farmers about the futures market is very low or negligible. quality certification agency at the farm level and rural urban connectivity is the major constraint in the farmer¶s participation. 4. 2. The FIG formed should be of the farmers of likeminded and coming from similar socio-economic class.

roads. [25] . say in the decision taking at commodity market. as without awareness the aggregation seems to be a difficult task. NGOs and other potential aggregators about the futures market and its direct and indirect benefits must be explained and how the these price signal can be utilized in their decision making. 5. 4. Agricultural lending process should be more simplified and farmer¶s friendly by the organized sectors. The awareness programs should be in local languages and in lucid manner for the farmers. Co-operatives. There is need of in-depth study to understand the socio-economic and cultural mix of different geographical areas and the aggregation model should be developed on the basis of the studied area. The continuous awareness campaign regarding futures market among farmers should be started with association of District Co-operative Boards. There is also a need of awareness among Bankers. Recommendations: 1.the confidence that the individual is one of them only so won¶t be cheating his own fellows or the village. service fee charged to farmers and method of working with farmers which can win the trust and faith of the farmers as an aggregator. Aggregation can be solutions to the farmers¶ participation but initially awareness about the commodity markets need more attention. There is a fear of fraud among the farmers as such events have taken place in our study area. 8. This has shaken the trust of the farmers towards the warehouses in the region. As mentioned in our finding that an un-certified warehouse in Vidisha district of Madhya Pradesh had flown away with the farmers produce in 2010. electricity. 2. 6. 5. and information system (like computers with internet connectivity) at village level. 7. 3. There is a need for establishing and strengthening the required infrastructure such as warehouse. and Regional Rural Banks. There are issues which need focus and in-depth study are like Profit and Loss sharing. 7. Cold Storages.

55.956 76.71 .44 10348.495 66.29.61. 8 Some important figures at a glance (Rajasthan) Average Land Holding (In Acre) Average Land Under Chana Cultivation(In Acre) Average Cost of Cultivation Per Acre (In INR) Average Productivity Per Acre (In Quintals) Awareness About M.29 711.93 557.74 34.88 612.34 686. 7: Volume & value of trade commodity derivatives Volume Value (In Mn.989 52.Annexure-1 Table No.122 36.22 60.34 1014.71.759 21.76.57 7.77 31.S.530 1.926 40. Crores) 21.48.64.754 61. Tonnes) (in Rs.65.363 5.16 6.21 678.46 49.30 194.71 14.P (In %) Farmers Who Feel Benefited with MSP (In %) [26] 14.659 Year 2001-01 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 (Oct-2010) Table No.

S.06 Table No.81 82.22 20.00 Awareness About Loan Against their Produce Stored in Warehouses (In %) 66.307 5.22 73.01 Table No.04 Table No. 11 Cost of delivery at warehouse for futures trading by traders Purchase price of chana /Quintal 2200.Awareness About Loan Against their Produce Stored in Warehouses (In %) Volume of Chana Sold in at First Lot/Time (In %) Volume of Chana Sold in at Second Lot/Time (In %) Volume of Chana Sold in at Third Lot/Time (In %) Maximum Period of Time for which the Farmers Stock Their Produce (In Months) 53.06 Average Productivity Per Acre (In Quintals) 5.S.00 [27] .80 Volume of Chana Sold in at Second Lot/Time (In %) 16.57 76.18 Average Land Under Chana Cultivation(In Acre) 8.70 2.P (In %) Farmers Who Feel Benefited with MSP (In %) Awareness About Loan Against their Produce Stored in Warehouses (In %) Volume of Chana Sold in at First Lot/Time (In %) Volume of Chana Sold in at Second Lot/Time (In %) Maximum Period for which the Farmers Stock Their Produce (In Months) 22 10.84 Average Cost of Cultivation Per Acre (In INR) 70789.67 Volume of Chana Sold in at Third Lot/Time (In %) 1. 9 Some important figures at a glance (Madhya Pradesh) Average Land Holding (In Acres) Average Land Under Chana Cultivation (In Acres) Average Cost of Cultivation Per Acre (In INR) Average Productivity Per Acre (In Quintals) Awareness About M.69 13.66 2. 10 Some important figures at a glance (Rajasthan & Madhya Pradesh) Average Land Holding (In Acre) 18.21 88.14 15.98 Awareness About M.24 6.43 Farmers Who Feel Benefited with MSP (In %) 15.11 2.P (In %) 71.27 Maximum Period of Time for which the Farmers Stock Their Produce (In Months) 2.96 Volume of Chana Sold in at First Lot/Time (In %) 82.

.....2% commission/quintal to Commission agents 0... GRAM PRODUCTION DETAILS: 2008-09 Area Under Cultivation Cost of Cultivation/Acre (In INR) Quantity Produced (In Quintals) Quantity For Self Consumption 2009-10 3... 4... [28] .acre Crops Grown: Kharif: ««««««....50 35.2 Survey Number: «««««« Location: ««««««.. What is your liquidity condition at the time of the following: (in Rs) 1) Sowing«««««««««««.5/quintal/month (for Three Months) Grand Total 44. SOURCE/S OF PRICE & MARKET INFORMATION: (Please tick all the information sources availed by you for getting price information on ³Gram´) Source of Information/s Local Traders 2008-09 2009-10 2) Harvesting««««««««««...««««««««« ««.....« Landholding: ..District: «««««« Contact Number: Landline ««««««««««««Mobile ««««««««««««««..Taluka: «««««««««««.20 11. Farmer Survey Questionnaire 1.Rabi««««««.. 2.50% for Cash Discount/Quintal (If Any) Sub-Total (Total Amount Valid for VAT) Vat 1 % per Quintal Total Amount Paid as TAX Labour Cost and Transportation Cost/Quintal Warehouse cost Rs.4..25% weighing charge/quintal 1.66 15......60% Market Committee Fee /Quintal 0...00 13.96 2318.50 2347....00 5....00 2295..70 22......16 Annexure... BASIC INFORMATION: Name: ««««««««««««««««Address: ««««««««««««««««««« Village: ««.

........ 5............G.......... ...........................................Mandi Name / Own Village / Home) Stage Quantity Month Price Location 1st Time 2nd Time 3rd Time 4th Time Motivation for Sale (Please tick one or more relevant reasons for sale of your produce) 2008-09 Stage Urgent Desired Lack of Commitment Urgent Cash Price Storage to Produce Cash Needs Attained Capacity Needs 1st Time 2nd Time 3rd [29] 2009-10 Desired Lack of Price Storage Attained Capacity Commitment to Produce .... *Location ....... SALES & PHYSICAL OPERATIONS: Sales in Physical Market (Qty in Quintals......... Please Specify) What were the main sources of price and market information five years back from now: ««««««««««««««««««««««««««««««««««««««««««...................... Price per Quintal.......... Agriculture Extension Office Local N.........News Papers Television/Radio Govt.................................... Price Expectations at various Crop Stages [In terms of Price per 100 kg (Quintal)] Year 2008-09 STAGE Month Sowing Harvesting 2009-10 Price Month Price Have you seen ticker boards in your mandi which shows the exchange rate prices at the future markets? (Yes/No) How it is beneficial to you ? «««««««««««««««««««««««««««««««««««««««......................Os Co-operative Society Others (APMC.... Mandi etc.

. 7. Which is the nearest mandi to you and how far it is? «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««.Time 4th Time If Any Other Reasons Specified: (i)«««««««««««««««««««««««««««««««««««««««««. 8. were you able to realize the price greater than the declared MSP? Is there any facility in your village for collective storage of your produce? If yes. Whether the mandi is transparent in its working? (Yes/No) Reason/s «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««. (ii) ««««««««««««««««««««««««««««««««««««««««« 6. If you are given some price signals would you wait for some time and sell your produces latter? (Yes/No) (Specify)«««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««. 9. have you used it to store Gram (chana) during any of the last three years? Awareness of Upcoming Risk Management Tools Yes No Farmer Comments [30] . PRICE RISK MANAGEMENT: Awareness of Physical Market Measures Yes No Farmer Comments Are you aware of MSP for different gram varieties declared by the government? If yes...

Are you aware of mechanisms to lock your target price for Gram? Are there any institutions/ organizations which help you to know the market outlook for Gram? Awareness of Futures Trading on Commodity Exchanges Farmers Response What is the lot size of gram futures contract on Commodity Exchange? The futures contract used in Commodity Exchange is based on which variety of Gram? What is the initial margin money requirement for gram futures contract? Why the price of gram increased since last two years What prices are you expecting for Gram in the coming season? How will you ensure that you are able to get your target price? Are you aware of the possibility of getting loan against your produce stored in warehouse? 6) Did the M. 4) «««««««««««««««««««««««««««««««««««««««. 3) «««««««««««««««««««««««««««««««««««««««.Are you aware of the Commodity market /Commodity Exchanges in India? If yes. [31] ..S.. Experiences of the group activity good or bad): «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 9) Are you interested to form or be a part farmer interest group to sow and harvest chana (Gram) (have to use similar kind of agricultural practices for the production): Yes/No Reason/s: 1) ««««««««««««««««««««««««««««««««««««««« 2) «««««««««««««««««««««««««««««««««««««««.. please name any two of them.P have helped you for better price realization? (If yes then to what extent) ««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««. 8) Have you been ever involved in group farming activity before? (Yes or No.

8) If someone aggregates your produce to get you a better price through the future contracts what would be your expectations form him: «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««.... Demerits: Can¶t get more than locked price (Y/N) «««««««««««««.. ««««.... 9) Who would you trust most as an aggregator: (Please rank as their preference) 1) 2) 3) 4) 5) 6) 7) 8) Individual (form your village/community) ( ) NGO ( ) Cooperatives ( ) Farmer Interest Group ( ) Banks ( ) Warehouse ( ) Processer ( ) Others (Please Specify) ( ) 10) If you won¶t get the price as per the contract (a little less than the contract prices say 2% to 4%) then how would you react? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 11) Is farmer interested to participate in future market (Yes/ No) (a) If Yes/ No.««««««««««« «««««««««««««««.. 12) What problems (if any) would you likely to face in case of participation in future market? [32] . state reasons «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 12) According to you main merits & demerits of futures trading in chana are: Merits: Price Locking/Hedging (Y/N) Insulation from price fluctuation (Y/N) «««««««««««««««... «««««««««««««««...

. of villages from which farmers participate in your trading activities Daily (Approx) Monthly (Approx) [33] . Farmers participation & Village Information: Description 1..Taluka: «««««««««««.««««««««« ««... No. /Date: ««. Most Popular channel for procurement of Chana««««««««««««««««« 4.«««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« Date: ««««««««««. What are the problems faced by you during procurement of chana regarding quality and quantity standardization«««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 5..District: «««««« Contact Number: Landline ««««««««««««Mobile ««««««««««««««. Trader Survey Questionnaire 1. What are the commodities you trade in? «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««. BASIC INFORMATION Name: ««««««««««««««««Address: ««««««««««««««««««« Village: ««. of farmers who participate in your trading activities 2.. Location: ««««««.. No.. 3. Survey Number: ««.« 2.

What is the frequency of your participation? a) Daily b) Once in a week c) Once in a month d) Quarterly e) Rarely 16.. Do you know the details of contract specifications and how trading takes place? (Yes/No) 11. «««««««. «««««« (In tonnes) 8.... What is your average stock turnover time: «««««««««. Percentage of traders participating in chana futures in your district«««« 13. Did the futures trading benefited you«««««««««««««««««« (Yes/ No) How/why: ««««««««««««««««««««««««««««««. 17. Average quantity of chana stored ««««««««««. Do you participate in future trading«««««««««««««««««« (Yes/ No) 14. How much is your monthly and annual commodity transaction of Chana? (In Quintals) Monthly turnover/transaction: ««««««««« Annual turnover/transaction: «««««««««. Do know about Commodity Futures Market? (Yes/No) 10. What are the problems which keep a farmer away from the future markets/commodity exchanges? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««« 21. Have you ever participated on a commodity exchange? (Yes/No) 15. Total number of traders participating in chana contracts in your district: (a) Spot contract««« (b) Future contract«««« (Total traders««) 12.. 18. (In months) 9.6. What are the benefits that you and farmers will derive by participating in futures market? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 19. 7. Do the price trend reflect the risks in the business? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 20. Exchange/s preferred for participation«««««««««««««««««««««««««.. Can you become an aggregator for farmers to enable their participation in the futures markets? (Yes/No) [34] .

. According to you what would be the farmers reaction in case of 2-4 % of loss in future market? What would you do to maintain the harmony among aggregated farmers in group? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 28... [35] Demerits: «««««««««««««. «««««««««««««. If you become an aggregator. How would you win and maintain the loyalties of the farmer as an aggregator? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 26. In case of 2-4 % of loss in future market.Why do you feel so? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 22. What procedure you will follow to maintain trust and transparency while being an aggregator? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 25. ««««««««««««««. What are the major merits & demerits of futures trading in chana? Merits: ««««««««««««««.. If you become an aggregator then you would be putting up some service fee to the farmers. 27. then what would be your expectations from the farmers? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 23. How much percent it would be and justification for that? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 24. how would you react? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««.. .

29. Monthly requirement of chana for your processing plant«««««««««. How many times you procure chana in a year (Specify) «««««««««««««««««.«««««««««.. Have you ever participated on a commodity exchange? (Yes/No) 9.. BASIC INFORMATION Name: ««««««««««««««««Address: ««««««««««««««««««« Village: ««. Are you aware about Commodity Futures Markets or Commodity Exchanges? (Yes/No) 7.« 2... What is the frequency of your participation? [36] . Do you know the details of contract specifications and how trading takes place? (Yes/No) 8. 1. Taluka: «««««««««««.District: «««««« Contact Number: Landline ««««««««««««Mobile ««««««««««««««... 3. (In tonnes) 4.«««««««««««««« «««««««««««««. Any specific opinions/comments regarding the participation of farmers and processor in future markets? Survey Number: ««« /Date: ««« Processer Survey Questionnaire Location: ««««««. ««. Your preferred channel for procurement of Chana ««««««««««««««««««««« 6. What are the problems faced by you during procurement of chana regarding quality and quantity standardization «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 5.

According to you what are the problems that discourages a farmer from participating on futures exchanges? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««. Exchange/s preferred for participation«««««««««««««««««««««««««. 11. What is the most popular source of awareness about future trading? «««««««««««««««««««««««««««««««««««««««««« 13. 16. 12. How would you win and maintain the loyalties of the farmer as an aggregator? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 19. What are the problems/constraints preventing you from participating on futures market of chana (please specify)«««««««««««««««««««««««««««««««««««. What procedure you will follow to maintain trust and transparency while being an aggregator? [37] . then what would be your expectations from the farmers? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 18. If you become an aggregator. «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««« 14.. What are the benefits that you and farmers will derive by participating in futures market? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 15..a) Daily b) Once in a week c) Once in a month d) Quarterly e) Rarely 10. Did the futures trading benefited you«««««««««««««««««« (Yes/ No) How/why: ««««««««««««««««««««««««««««««. Can you become an aggregator for farmers to enable their participation in the futures markets? (Yes/No) Why do you feel so? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 17...

. ««««««««««««.Taluka: «««««««««««.... How much is your monthly and annual commodity warehousing of Chana? (In Quintals) Monthly transaction: «««««««««« Annual transaction: ««««««««««...District: «««««« Contact Number: Landline ««««««««««««Mobile ««««««««««««««.. Demerits: «««««««««««««... 3... No.... Details of the persons who use your storage space 2.............. Farmers participation & Village Information: Description 1. Capacity of the warehouse: «««««««. Any specific opinions/comments regarding the participation of farmers and processor in future markets? Survey Number: ««««...... Location: ««««««. BASIC INFORMATION Name: ««««««««««««««««Address: ««««««««««««««««««« Village: ««... «««««««««««««.... Warehouse Survey Questionnaire 1..««««««««« ««. ««««««««««««««.. of villages from which people come to Farmer: Trader: Others: Daily (Approx) Monthly (Approx) Farmer: Trader: Others: [38] ........ 21.....« 2..«««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 20..... What are the major merits & demerits of futures trading in chana? Merits: ««««««««««««««« ««««««««««««««.

Farmers b. What are the benefits that you and farmers will derive by participating in futures market? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 9. Do you know about Commodity Futures Markets? (Yes/No) 7. What are the problems which keep a farmer away from the future markets/commodity exchanges? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««. Are you also a trader of the commodities? Yes/No e.store the goods 4. If yes. What is the average quantity of commodities stored by« (In quintals) a. 6. Do you know the details of contract specifications and how trading takes place? (Yes/No) 8. Processors d. Can you become an aggregator for farmers to enable their participation in the futures markets? (Yes/No) Why do you feel so? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 11. then what would be your expectations from the farmers? [39] . Others 5. If yes do you trade in spot or futures market f. Reasons«««««««««««««««««««««««««««««««. 10. Traders c.

How would you win and maintain the loyalties of the farmer as an aggregator? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 13.«««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 12.... What would be farmer¶s reaction in case of 2-4 % of loss in futures market? What would you do to maintain the harmony among aggregated farmers in group? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 15. [40] .. «««««««««««««.. Any specific opinions/comments regarding the participation of farmers and processor in future markets? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««.. «««««««««««««. 14. What procedure you will follow to maintain trust and transparency while being an aggregator? «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««. 16. ««««««««««««««.. «««««««««««««« Demerits: «««««««««««««. What are the major merits & demerits of futures trading in chana? Merits: ««««««««««««««..

Do you feel that farmers can repay their loans if they participate in the commodity markets? Why So? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««« 4.O. since«««««««««««««««««««««««««««««««««««««. Number of farmers associated with your organization«««««««««««««««««««« 3. 2..« Name of the Person Interacted With«««««««««««««««««««««««««««« Designation«««««««««««««««««««««««««««««««««««««. Is your organization working with farmers (Yes/ No) If yes. Number: ««««« Location: ««««««.T. As per you what are the problems which keep a farmer away from the future markets/commodity exchanges?««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« [41] . Do know about Future Contracts and its trading in the commodity exchanges? (Yes/No) 6. 1. Do know about Future Markets or Commodity Exchanges? (Yes/No) 5. Checklist for Opinion Taking Name of the organization«««««««««««««««««««««««««««««««.

What are the practical problems in the farmer¶s participation in the futures market as per you? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 12. How would you win and maintain the loyalties of the farmer as an aggregator? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 11. Can you convince and peruse farmers to work in group following similar kind of farming techniques so that they can have a uniform quality of production? (Yes or No) Reason/s for your answer «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 13. Can you be an aggregator of farmers in the commodity markets? (Yes/No) Why do you feel so? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««. then what would be your expectations from the farmers? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 9. how would you react? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««.«««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 7. 10. What procedure you will follow to maintain trust and transparency while being an aggregator? «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««. 8. [42] . In case of 2-4 % of loss in future market. If yes.

Srinivasan & Malabika Deo . India)... 16.. International Journal of Emerging Markets Vol.Pondicherry Central University. 2007. ««««««««««««««. 5 No.. 2010. India). According to you main merits & demerits of futures trading in chana are: Merits: ««««««««««««««. 2. Sukhrali. «««««««««««««.      Websites: [43] . Any specific opinions/comments regarding the participation of farmers and traders in future markets? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« ««««««««««««««««««««««««««««««««««««««««««. Report on ³Commodity policies for Development: A new framework for the fight against poverty´.. India (8 December. 2009).. References:  Report of UNCTAD study Group on Emerging Commodity Exchanges: Development Impacts of Commodity Futures Exchanges in Emerging markets by UNCTAD... New Delhi. Agricultural commodity markets in India: Policy issues for growth By Susan Thomas (May 21. March 2009) Report on Commodity trading advisors(CTAs) for the Indian commodity market By Sheeba Kapil (Indian Institute of Foreign Trade. 3rd September. «««««««««««««« Demerits: «««««««««««««. 8th December. The Temporal Lead Lag and Causality between Spot and Futures Markets: Evidence from Multi Commodity Exchange of India By K. «««««««««««««. and Kanwal Nayan Kapil (Management Development Institute. What would be farmers reaction as per you in case of 2-4 % of loss in future market? What would you do to maintain the farmers group for aggregation? «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« «««««««««««««««««««««««««««««««««««««««««« 15. 2005 Report on ³The Role of Futures Market in Aggravating Commodity Price Inflation and the Future of Commodity Futures in India´ by Sushismita Bose (Money & Finance. 2003).14.

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