Farmers in Uttar Pradesh don’t know that there exists a market mechanism under which they can withhold their produce for some months and make much better profit a little later.
As of now, they, almost always, engage in quick post-harvest selling or distress selling of their produce to middlemen or the mandis (grain markets), who in turn make massive profits by forward trading the produce into the market when prices go up.
To teach the farmers, mainly the medium and large ones, the NABCONS (Nabard consultancy services) would conduct district level workshops in 30 districts in the state in the current financial year so that they know the forward trading option and earn bigger profits. “In simple words, the commodity market is like the financial market, where instruments like shares, debentures, etc are the products. While in the commodity market, the products may be bullion (like gold, silver etc) or agri-products. People can engage in future trading of these products,” said Amitabh Mohan, assistant general manager, NABCONS, Lucknow.
Future trading for a farmer would mean stocking his produce in a warehouse and then selling it at a more opportune time. He may also engage in a promissory deal with a broker under which he promises to sell his produce to a broker at an anticipated high rate on a future date. The broker would give him a promissory note against the deal.
A way to engage in future trading is commodity exchanges like the national commodity exchange (NCDEX), Mumbai, multi commodity exchange (MCX), Mumbai, or national multi commodity exchange (NMCEX), Ahmedabad.
Although UP does not have a network of such exchanges at present, still a farmer here can engage in future trading through broking firms that are regulated by Forward Market Commission (FMC), which is to the commodity market what SEBI is to the share market.
Normally, whenever a farmer harvests a crop, the selling prices of it are naturally the lowest because of a glut in the market of that particular harvest in the market. But as the time passes, the prices of the same produce escalate in the market.
Some of the 30 first phase districts for future trading workshops are Meerut, Kanpur, Mahoba, Hamirpur, Pilibhit, Lakhimpur Kheri, Deoria, Ballia, Gorakhpur, Agra. Farmers clubs and NGOs, those working in the farm sector, would be addressed in these workshops.
But what if a farmer needs money quickly? “The promissory receipt that he would get from a broker/trader against his produce can be used to get loans from a nationalized banks. Or a farmer can do spot trading of part of his produce for immediate cash needs and engage in future trading of rest of the produce,” said Amitabh Mohan.
NABARD (National Bank for Rural Development) is engaged in similar exercise in Bihar for maize farmers. “Farmers who engage in future trading make good money. Now, there is a whole maize based industry booming with products like corn, popcorn and some other snacks,” Mohan said.