Due to lack of uniform supply chain in commodities, farmers are getting exposed to price fluctuations, said G.K. Vasanta Kumar, Additional Secretary Karnataka Agriculture Department.

Addressing the ‘Agribusiness and Commodities price risk management’ meet, organised by Business Line in association with Forward Markets Commission and National Commodity and Derivatives Exchange (NCDEX), he said “lack of supply chain is also making the sector too risky for farmers to invest in otherwise profitable activity.”

Volatility in commodity prices has always been a major concern for producers, processors, traders and consumers. “The major reason for this is that the trade is supply driven,” he said.

Green revolution has benefited only a section of farmers and the others were left out. “A concerted effort is needed to bring them to the mainstream,” he said.

In his inaugural address, K. Shiva Shanmugam, President of FKCCI, said “In the wake of globalisation and consequent surge in the global uncertainties, financial organisations are engaged in devising instruments to contain the price risk resulting due to uncertainties.”

Planned and sustained growth of any sector depends on prudent demand and supply management. “This in turn calls for a system, which not only yields adequate return to its producers but also ensures timely supply at desired prices to the consumers,” he said.

Allaying fears that futures trading was driving inflation, M. Mathisekaran, Director, Forward Markets Commission, said demand and supply issues in commodities were causing inflation.

Futures trading was plagued by fragmented physical market, lack of proper storage practises by warehouses, and geographically scattered spot markets, he added.

The value of trade in futures trading has grown from Rs 66,000 crore in 2002-03 to Rs 181 lakh crore in 2011-12. “As expansion is happening, depth and liquidity is being addressed,” he said.

Ratan N.V.L., Deputy General Manager (Agri), State Bank of Mysore, advised farmers to initiate better farming techniques for better productivity.

Currently the growing areas were facing storage deficiency. Farmers need to analyse these issues before commencing cultivation. “There are people to guide farmers to take up scientific farming,” he said.

Speaking on ‘Commodities as critical driver of India’s economic growth’, G. Chandrashekhar, Business Line, said the Government through reforms has created a free trade environment and our market is gradually integrating with the global market.

“As we integrate our market risk perception is also getting heightened. Hence, it is imperative to focus on risk mitigation.

“It is here, hedging price risk is one of the tools to mitigate it. Futures exchange offers the safest way to protect margins and price risk management is extremely important in commodities market,” he added. anil.u@thehindu.co.in

(This article was published on August 19, 2012)
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