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Proposal for Studying the Structure of Commodity Futures Market in Rice and Soybean and Also the Impact on the Income and Production of the Farmers Vishwa Ballabh & Prantik Ray XLRI. Presentation Plan. Problems of Agriculture Sector in India Objective and Scope of the Proposed Study
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Proposal for Studying the Structure of Commodity Futures Market in Rice and Soybean and Also the Impact on the Income and Production of the FarmersVishwa Ballabh & Prantik RayXLRI
Presentation Plan • Problems of Agriculture Sector in India • Objective and Scope of the Proposed Study • Rice and Soybean Futures Markets in India
Macroeconomic Trends in India Economy Source: Economic Survey, 2000-01,2005-6
Capital Formation in Agriculture (at 1993-94 prices) (Rs. Crore) Source: Ballabh (2007)
Lack of Infrastructure and High Transaction cost • Scale of production is small • Production is risky • Information and credit cost is also very high • Lack of proper transportation and warehouse further increases the transaction cost
Objective of the Study • To assess the efficiency and performance of the commodity futures market with reference to rice and soybean • It will include studying the structure in the spot and future markets and mapping out the functioning of the markets in these commodities. • To study the entire supply chain of these commodities which will help in identifying value addition, marketing cost and areas of intervention to improve the value chain efficiency • To study the impact of government policies and interventions on the supply chains in these commodities • To study effect of commodity futures in these commodities on the production, productivity and the income of the farmers.
Importance of Rice in India • Rice is the most important and extensively grown food crop in the world. • Around 90% of all rice grown commercially is used directly for human consumption. • Rice is the staple food of more than 60 percent of the world population and will remain as lifeline for the people in Asia and Pacific regions where 90% of it is produced and consumed. • International trade in rice is relatively very small – only about 5%. It is estimated that 50% of the world crop is consumed on the farms where it is grown. • India has the largest area under rice in the world and ranks second in the production after China. India has also emerged as a major rice consumer and exporter.
Structure of Rice Futures in NCDEX • Fourtypes of Rice Futures are traded: Grade A Raw rice, Grade A Parboiled Rice, Common Raw rice, Common Parboiled Rice • Contract Size: 10 MT • Primary Delivery Centre: Delhi • Spot Price Determination by Polling (CMIE) • Risk Mitigation by NCDEX by Margin Collection
How We Will Go About the Study • Collection of Primary Data through interaction with all concerned parties like the farmers, middlemen, brokers, exchange authorities and government officials • Studying the historical secondary price data from the exchange and market • Correlating the production and farmers’ income with the participation in the futures market • Suggesting policy changes required