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As hedging desk comes up for cotton and maize, soyabean farmers in Maharashtra ask: ‘Why keep us away from futures market?'
Last week, as Vilas Ufade and other members of Vikas Agro, a farmer producer company (FPC), watched Maharashtra Chief Minister Devendra Fadnavis unveil the first hedging desk for cotton and maize in Pune, one question lingered in their minds: 'Why has soyabean been banned from the futures markets for four long years?'
Located in the heart of Maharashtra's soyabean belt in Latur, Vikas Agro was one of the more than 700 FPCs which dealt with the commodity in the futures market of the National Commodity and Derivatives Exchange (NCDEX). However, the Securities and Exchange Board of India (SEBI) in December 2021 banned the trading of soyabean, along with six other agro commodities, on the futures platform.
The hedging desk for cotton and maize was established to provide training and guidance to farmers and FPOs on participating in the commodity futures market. Nevertheless, 'it is going to be a bloodbath' for soyabean farmers, according to Ufade.
'Even before sowing, prices are far below the government-declared minimum support price (MSP). With no guidance on prices, it will be difficult to form any logical decision about offloading,' said Ufade.
SEBI imposed a ban on soyabean to prevent speculation in commodities, which the regulator believed was causing unusual price fluctuations in the physical markets. Market participants, however, have strongly denied this claim.
The ban remains in force, with soyabean prices trading well below their MSP for most of 2023 and 2024. This year, as Ufade said, the prices are almost Rs 1,000/quintal less than the MSP of Rs 4,986/quintal even before the sowing has finished.
For FPCs like Vikas Agro, the futures platform served as an alternative to traditional markets for offloading their produce. 'Before the ban, we traded over 500 tonnes of soyabean on the platform. If anything, the price guidance available in the futures platform would have helped us to decide on whether to sell in the wholesale markets of Latur or hold on to the produce for more time,' Ufade said.
The futures platform showed price movement three months in advance. 'For our members, this was the biggest advantage of the platform. If the prices in September are below our expectations, instead of soybeans, they would go for some other crop. At least there was some price point to take the call. Now it is all up in the air,' explained Ufade.
According to agri commodity analyst Dipak Chavan, the SEBI's decision to ban futures trading was not in line with established norms or reasons. 'Across the world, agri commodity exchanges have helped farmers and the agricultural community at large to develop price insights. This ban makes no sense,' he said.
Partha Sarathi Biwas is an Assistant Editor with The Indian Express with 10+ years of experience in reporting on Agriculture, Commodities and Developmental issues. He has been with The Indian Express since 2011 and earlier worked with DNA. Partha's report about Farmers Producer Companies (FPC) as well long pieces on various agricultural issues have been cited by various academic publications including those published by the Government of India. He is often invited as a visiting faculty to various schools of journalism to talk about development journalism and rural reporting. In his spare time Partha trains for marathons and has participated in multiple marathons and half marathons. ... Read More
