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Benefits of
NMCE |
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There is a need to move
agriculture to a market system of economy from a state owned economy. This
requires agriculture to be organized just like the industrial and service
sectors of the Indian economy. In addition, flow of corporate and
institutional investment in the sector at present is negligible. There is,
therefore, the need to facilitate the flow of easy credit to the farmers
as a priority, through the use of warehouse receipts to get pledge
financing from banks. In a nutshell, there is a need to integrate
production, storage, transportation, trading, financing and marketing of
agricultural produce in India.
NMCE would bring about the converge of large-scale processors, traders,
and farmers along with banks. NMCE would provide a common ground for
fixation of future prices of a number of commodities enabling efficient
price discovery/forecast. In addition, hedging using different and diverse
commodities would also be possible with help of NMCE. |
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Benefits to Farmers |
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Efficient Price Discovery/Forecast made by the NMCE will
enable farmers decide cropping pattern and investment on inputs. |
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Price risk management would be possible via NMCE |
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Price Stability resulting from a equilibrium in supply and
demand for a commodity would be possible through NMCE |
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WRS introduced for trading in futures on the Exchange would
lead to proper grading, standardization and scientific storage of
agricultural commodities resulting in value addition and better price
realization to farmers. |
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WR’s could be discounted by Farmers with banks and used by
farmers to raise finance quickly. The NMCE would help provide liquidity
and a viable secondary market for WR’s as a good financial instrument. |
Price Stabilization
Using Futures when good harvest is expected
(For all stake holders)
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Sale
of Futures (If good harvest expected)
(Via NMCE)
 
Fall
in Futures Prices
(Signal for Farmer to plan for alternative Crop)
Reduced incentive to hold excess stock
Sale of spot Stocks
Fall in Spot Price
Demand increases with reduction in spot prices
 
Increased Supply meets Increased Demand (Price Stabilization takes place) |
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Price Stabilization when Poor Harvest is expected
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Purchase of Futures (If poor Harvest
is expected)
Rise in Futures Prices
Increased Incentive to hold excess stock
Purchase of Spot Stocks
Rise in spot Prices
Fall in Demand
Reduced demand meets reduced supply (Price stabilization takes place)
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Farmers Education
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Farmers will be educated for price discovery and produce
planning by following agencies |
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1) |
Government Agricultural Extension department,
including universities such as NIAM etc.
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2) |
Agri-clinics. |
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3) |
APMCs and co-operatives. |
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