A farmer is usually prone to weather risk, productivity risk and most importantly pricing risks. While minimum support price (MSP) was developed to safeguard a farmer from price risk, other instruments like hedging among others can also be explored to support farmers. However, such instruments are only feasible for larger farmer producer organisation (FPO), stated the experts at a panel discussion ‘The Role of Commodity Markets’.
The experts were Kapil Dev, Head, Products and Business Development, NCDEX and Omveer Singh, MD, NDDB Dairy Services. The webinar was jointly organised by FPJ and SIES and supported by NSE, East-West Seed and NCDEX (National Commodity & Derivatives Exchange). It was moderated by RN Bhaskar, Consulting Editor, Free Press Journal.
Kapil Dev said, “The consolidation of FPOs needs to be done. There is a need to create a lot of awareness among these FPOs as well (to participate in future or spot trading).” Around 300 FPOs have registered with NCDEX and around 100 are trading on its platform. “There are a lot of issues on the ground as ultimately FPOs are farmers,” Dev added. Just being a (small) FPO does not help, it is only after the consolidation and aggregation of a large number of small farmers that an FPO can make profits through such platforms. The understanding of smaller farmers and small FPO groups about the futures markets is almost nil, he stated.
He added the corporates are doing a good job in creating awareness about the platforms like the futures market.
Omveer Singh said, “Adding another institution (to manage FPOs) is adding extra cost and there is also the issue of governance. It is, therefore, better to have experts or consultants who can facilitate them in creating proper controls and organising them.” He added once the governance issue in FPOs is fixed a lot of issues will be sorted out. “FPOs or farmer-owned business enterprises should move to the concept of collective market and once that is achieved, you will get the benefit of the virtual market,” Singh reiterated.
Singh, who comes from an institution that is a pro-farmer institution, said the objective of such (the exchanges) institutions should be to ensure the participation of the farmer and maximise the farmers’ return. “In these commodity markets, barring few FPOs, I am unsure who is participating in these markets and who is benefiting with these markets.”