Sunday, 15 July 2018

Farmers earning shall be economically viable.

60% of farmers in India, who cultivate less than 0.80 hectares of land,continue to be under the poverty line if they do not switch to a non-agricultural occupation. Overall, India’s agricultural output has been increasing on average 3.6% annually since 2011.

The blame goes to the government policies governing the food rather than the agriculture sector. The key problems identified are the trade restrictions specifically designed to keep domestic food inflation low, including frequent ban on exports and MSPs set mismatching the international prices. The Essential Commodities Act and the Agricultural Produce Market Committee Act, are as a few  examples of regulations hampering price discovery for farmers.

Controls imposed by the government on movement of food and exports at the slightest hint of inflation going up prevented farmers from realising higher prices from exports.

The hardest and strictest measures to be taken by the government is to control the marketing of Agricultural produces in the APMC Mandies,which are not regulating the farmers market properly to achieve desired results for which the APMC Act was originally formulated. Rather at present the said act is giving counter productive results by harrassing the farmers by not facilitating them in getting the prices as per the farmers input cost + transportation + his profit so that he may earning shall become economically viable.

Saturday, 16 June 2018

Regenerating soil for photosynthesis and good nutritional values in human life.

Soil restoration is the process of improving the structure, microbial life, nutrient density, and overall carbon levels of soil. Many human endeavors – conventional farming chief among them – have depleted the Earth to the extent that nutrient levels in almost every kind of food have fallen by between 10 and 100 percent in the past 70 years. Soil quality can improve dramatically, though, when farmers and gardeners maintain constant ground cover, increase microbe populations, encourage biological diversity, reduce the use of agricultural chemicals, and avoid tillage.

Soil restoration begins with photosynthesis.

Imagine there was a process that could remove carbon dioxide (CO2) from the atmosphere, replace it with life-giving oxygen, support a robust soil microbiome, regenerate topsoil, enhance the nutrient density of food, restore water balance to the landscape, and increase the profitability of agriculture. Fortunately, there is. It’s called photosynthesis.

Without photosynthesis, the Earth’s surface would merely be weathered rocks and minerals.

In the miracle of photosynthesis, which takes place in the chloroplasts of green leaves, CO2 from the air and H2O from the soil are combined to capture light energy and transform it into biochemical energy in the form of simple sugars.

These simple sugars — commonly referred to as photosynthates — are the building blocks of life. Plants transform sugar into a great diversity of other carbon compounds, including starches, proteins, organic acids, cellulose, lignin, waxes, and oils.

Fruits, vegetables, nuts, seeds, and grains are packaged sunlight derived from photosynthesis. The oxygen our cells and the cells of other living things utilize during aerobic respiration is also derived from photosynthesis.

Significantly, many of the carbon compounds derived from the simple sugars formed during photosynthesis are also essential to the creation of well-structured topsoil. Without photosynthesis there would be no soil. Weathered rock minerals, yes… but no fertile topsoil.

The Plant-Microbe Bridge

It comes as a surprise to many that over 95 percent of life on land resides in soil, and that most of the energy for this amazing world beneath our feet is derived from plant carbon. Exudates from living roots are the most energy-rich of these carbon sources. In exchange for ‘liquid carbon,’ microbes in the vicinity of plant roots — and microbes linked to plants via networks of beneficial fungi — increase the availability of the minerals and trace elements required to maintain the health and vitality of their plant hosts (1,2).

Exudates from plants feed microbes that live near plants’ roots. The microbes in turn bring nutrients to the root zone and make them bio-available to the plants.

Microbial activity also drives the process of aggregation, which enhances soil structural stability, aeration, infiltration, and water-holding capacity. All living things — above and below ground — benefit when the plant-microbe bridge is functioning effectively.

Sadly, many of today’s farming methods have severely compromised soil microbial communities, significantly reducing the amount of liquid carbon transferred to and stabilized in soil. This creates negative feedbacks all along the line. Over the last 150 years, many of the world’s prime agricultural soils have lost between 30 and 75 percent of their carbon, adding billions of tons of CO2 to the atmosphere.

The loss of soil carbon significantly reduces the productive potential of the land and the profitability of farming. Soil degradation has intensified in recent decades — around 30 percent of the world’s cropland has been abandoned in the last 40 years due to soil decline (4). With the global population predicted to peak at close to 10 billion by 2050, the need for soil restoration has never been more pressing. Soil dysfunction also impacts human and animal health.

Nutrient Depletion In Our Food

Over the last 70 years, the level of every nutrient in almost every kind of food has fallen between 10 and 100 percent. This is an incredibly sobering fact. An individual today would need to consume twice as much meat, three times as much fruit, and four to five times as many vegetables to obtain the same amount of minerals and trace elements available in those same foods in 1940.

Dr. David Thomas has provided a comprehensive analysis of historical changes in food composition from tables published by the Australian Medical Research Council, the Ministry of Agriculture, the Ministry of Fisheries and Foods, and the Food Standards Agency. By comparing data available in 1940 Thomas demonstrated a substantial loss in mineral and trace element content in every group of food he investigated.

The nutrient depletion summarized in Thomas’ review represents a weighted average of mineral and trace element changes in 27 kinds of vegetables and 10 kinds of meat:

Mineral Depletion in Vegetables ( average of 27 kinds of vegetables):
Copper – declined by 76%
Calcium – declined by 46%
Iron – declined by 27%
Magnesium – declined by 24%
Potassium – declined by 16%

Mineral Depletion in Meat ( average of 10 kinds of meat):
Copper – declined by 24%
Calcium – declined by 41%
Iron – declined by 54%
Magnesium – declined by 10%
Potassium – declined by 16%
Phosphorus – declined by 28%

Significant mineral and trace element depletion was also recorded in the 17 varieties of fruit and two dairy products tested over the same period. The mineral depletion in meat and dairy reflects the fact that animals are consuming plants and/or grains that are themselves minerally depleted.

In addition to the overall decline in nutrient density, Thomas found significant changes in the ratios of minerals to one another. Given that there are critical ratios of minerals and trace elements for optimum physiological function, it is highly likely that these distorted ratios have an impact on human health and well-being (5).

Restoring Nutrient Density to Our Food

It is commonly believed that the significant reduction in the nutrient density of today’s chemically-produced foods is due to the dilution effect. Dilution occurs when yields rise but mineral content falls. Significantly, though, vegetables, crops, and pastures grown in healthy, biologically active soils do not exhibit these compromised nutrient levels.

Most of the ‘deficiencies’ observed in today’s plants, animals, and people are due to soil conditions not being conducive to nutrient uptake.

Only in rare instances are minerals and trace elements completely absent from soil. Most of the ‘deficiencies’ observed in today’s plants, animals, and people are due to soil conditions not being conducive to nutrient uptake. The minerals are present in the soil but are simply not plant-available. Adding inorganic elements to correct these so-called deficiencies is an inefficient practice. Instead we need to address the biological causes of dysfunction.

Around 85 to 90 percent of plant nutrient acquisition is microbially-mediated. The soil’s ability to support nutrient-dense crops, pastures, fruits, and vegetables requires the presence of a diverse array of soil microbes from a range of functional groups.

The majority of microbes involved in nutrient acquisition are plant-dependent. That is, they respond to carbon compounds exuded by the roots of actively growing green plants. Many of these important groups of microbes are negatively impacted by the use of “cides” — herbicides, pesticides, insecticides, and fungicides.

In short, the functioning of the soil ecosystem is determined by the presence, diversity and photosynthetic rate of actively growing green plants — as well as the presence or absence of chemical toxins.

But who manages the plants and the chemicals? You guessed it… we do.

Fortunately, consumers are becoming increasingly aware that food is more than a commodity.It is up to us to restore soil integrity, fertility, structure, and water-holding capacity — not by applying Band-Aids to the symptoms, but by better managing our food production systems.

The Soil Carbon Sink

Soil can function as a carbon source — adding carbon to the atmosphere — or a carbon sink — removing CO2 from the atmosphere. The dynamics of the source/sink equation are largely determined by land management.

Over the millennia a highly effective carbon cycle has evolved, in which the capture, storage, transfer, release, and recapture of biochemical energy in the form of carbon compounds repeats itself over and over. The health of the soil and the vitality of plants, animals, and people depends on the effective functioning of this cycle.

Technological developments since the Industrial Revolution have produced machinery capable of extracting vast quantities of fossil fuels from beneath the Earth’s surface as well as machinery capable of laying bare large tracts of grasslands and forests. This has resulted in the release of increasing quantities of CO2 into the atmosphere while simultaneously destroying the largest natural sink over which we have control.

The decline in natural sink capacity has amplified the effects of anthropogenic emissions. Many agricultural, horticultural, forestry, and garden soils today are a net carbon source. That is, these soils are losing more carbon than they are sequestering.

The potential for reversing the net movement of CO2 to the atmosphere through improved plant and soil management is immense. Managing vegetative cover in ways that enhance the capacity of soil to sequester and store large volumes of atmospheric carbon in a stable form offers a practical and almost immediate solution to some of the most challenging issues currently facing humankind.

The key to successful soil restoration and carbon sequestration is to get the basics right.

Five Principles for Soil RestorationGreen is good — and year-round green is even better

Photosynthesis draws hundreds of billions of tonnes of CO2 from the atmosphere every year. The impact of this reduction was dramatically illustrated in a stunning visualization released by NASA in 2014.The movement of carbon from the atmosphere to soil — via green plants — represents the most powerful tool we have at our disposal for the restoration of soil function and reduction of atmospheric CO2.

While every green plant is a solar-powered carbon pump, it is the photosynthetic capacity and photosynthetic rate of living plants (rather than their biomass) that drive the biosequestration of stable soil carbon. Photosynthetic capacity is the amount of light intercepted by green leaves in a given area (determined by percentage of canopy cover, plant height, leaf area, leaf shape and seasonal growth patterns).

On agricultural land, photosynthetic capacity can be improved through the use of multi-species cover crops, animal integration, multispecies pastures, and strategic grazing. In parks and gardens, plant diversity and mowing height are important factors. Bare soil has no photosynthetic capacity. Bare soil is also a net carbon source and is vulnerable to erosion by wind and water.

Photosynthetic rate is the rate at which plants are able to convert light energy to sugars. It is determined by many factors, including light intensity, moisture, temperature, nutrient-availability and the demand placed on plants by microbial symbionts. The presence of mycorrhizal fungi, for example, can significantly increase photosynthetic rate. Plants photosynthesising at an elevated rate have a high sugar and mineral content, are less prone to pests and diseases, and contribute to improved weight gains in livestock.

Photosynthetic rate can be assessed by measuring Brix with a refractometer. An increase of around 5 percent in global photosynthetic capacity and/or photosynthetic rate would be sufficient to counter the CO2 flux from the burning of fossil fuels, provided the extra carbon was sequestered in soil in a stable form. This is feasible. On average, global cropland is bare for around half of every year. If you can see the soil, it is losing carbon!

Both photosynthetic capacity and photosynthetic rate are strongly impacted by management. Leading-edge light farmers are developing innovative and highly productive ways to keep soil covered and alive, while at the same time producing nutrient-dense food and high-quality fiber.

Grazing Management

Growth of both tops and roots is significantly impaired if more than 50 percent of the green leaf is removed in a single grazing event.

This topic requires far more space than is available here, but it is vitally important that less than 50 percent of the available green leaf be grazed . Retaining adequate leaf area reduces the impact of grazing on photosynthetic capacity and enables the rapid restoration of biomass to pre-grazed levels. Over a 12-month period, significantly more forage will be produced — and more carbon sequestered in soil — if pastures are grazed tall rather than short.

In addition to leaf area, pasture height has a significant effect on soil building, moisture retention, nutrient cycling, and water quality. To maintain photosynthetic capacity (and to ensure rapid recovery) it is highly beneficial to remove livestock from a pasture before you can see their feet.

Regenerative grazing can be extremely effective in restoring soil carbon levels deep underground. The deeper the carbon, the more it is protected from oxidative and microbial decomposition. The sequestration of most significance is that which occurs below 30 cm.

Crop Production

Increasingly sophisticated machinery and a plethora of “cides” have provided the means for the planet’s rapidly expanding population to create bare ground over billions of acres, dramatically reducing global photosynthetic capacity. Reduced levels of photosynthesis have in turn resulted in reduced carbon flow to soil, significantly impacting soil and landscape function and farm productivity.

Organic carbon holds between four and 20 times its own weight in water. This means that when carbon levels are depleted, the water-holding capacity of the soil is significantly compromised. Low water-holding capacity results in poor structural stability when soils are wet and reduced plant growth when soils are dry.

One of the most significant findings in recent years has been the improvements to infiltration, water-holding capacity, and drought-resilience when bare fallows have been replaced with multi-species covers. This improvement has been particularly evident in lower rainfall regions and in dry years.

Microbes matter

A healthy agricultural system is one that supports all forms of life. All too often, many of the life-forms in soil have been considered dispensable. Or, more correctly, they have not been considered at all.

The significance of the plant-microbe bridge in transferring and stabilizing carbon in soil is becoming increasingly recognized. The soil microbiome is now heralded as the next frontier in soil restoration research.

One of the most important groups of plant-dependent soil-building microbes are mycorrhizal fungi. These extraordinary ecosystem engineers access water, protect their hosts from pests and diseases, and transport nutrients such as organic nitrogen, phosphorus, sulfur, potassium, calcium, magnesium, iron, and essential trace elements including copper, cobalt, zinc, molybdenum, manganese and boron — all in exchange for liquid carbon. Many of these elements are essential for resistance to pests and diseases and climatic extremes such as drought, water-logging, and frost.

When mycorrhizal symbiosis is functioning effectively, 20-60 percent of the carbon fixed in green leaves can be channelled directly to soil mycelial networks, where a portion is combined with biologically-fixed nitrogen and converted to stable humic compounds. The deeper in the soil profile this occurs the better. Humic polymers formed by soil biota within the soil matrix improve soil structure, porosity, cation exchange capacity, and plant growth.

Soil function is also strongly influenced by its structure. In order for soil to be well-structured, it must be living. Life in the soil provides the glues and gums that enable soil particles to stick together into pea-sized lumps called aggregates. The spaces between the aggregates allow moisture to infiltrate more easily. Moisture absorbed into soil aggregates is protected from evaporation, enabling soil to remain moist for longer after rain or irrigation. This improves farm productivity and profit.

Well-structured soils are also less prone to erosion and compaction, and they function more effectively as bio-filters.

Sadly, many of the microbes important for soil function have gone missing in action. Can we get them back? Some producers have achieved large improvements in soil health in a relatively short time. What are these farmers doing differently? They diversify.

Diversity is indispensable

Every plant exudes its own unique blend of sugars, enzymes, phenols, amino acids, nucleic acids, auxins, gibberellins, and other biological compounds, many of which act as signals to soil microbes. Root exudates vary continuously over time, depending on the plant’s immediate requirements. The greater the diversity of plants, the greater the diversity of microbes, and the more robust the soil ecosystem.

The belief that monocultures and intensively managed systems are more profitable than diverse biologically based systems does not hold up in practice. Monocultures need to be supported by high and often increasing levels of fertilizers, fungicides, insecticides, and other chemicals that inhibit soil biological activity. The result is even greater expenditure on agrochemicals in an attempt to control pests, weeds, diseases, and the fertility issues that ensue.

The natural grasslands that once covered vast tracts of the Australian, North American, South American, and sub-Saharan African continents — plus the ‘meadows’ of Europe — contained several hundred different kinds of grasses and forbs. These diverse grasslands and meadows were extremely productive prior to simplification through overgrazing and/or cultivation.

A monoculture of triticale (left) is suffering severe water stress while triticale sown with other species (right) is healthy. The “cocktail crop” contains oats, tillage radish, sunflower, field peas, faba beans, chickpeas, proso millet, and foxtail millet in addition to triticale.

Innovative farmers are experimenting with up to 70 different plant species to see which combinations perform best for soil restoration. Some grain and vegetable producers are setting aside up to 50 percent of their cash crop area for multi-species diverse soil primers. They believe the benefits far outweigh the costs. It has been reported that two full seasons of a multispecies cover can perform miracles in terms of soil health. Mixtures of peas with canola, clover or lentils with wheat, soybean and/or vetch with corn, and buckwheat and/or peas with potatoes are becoming increasingly common.

The integration of animals into cropland can also be extremely beneficial. This doesn’t need to be complicated, though. Something as simple as including one or two companions with a cash crop can make a world of difference.

As well as improving soil function, companion plants provide habitat and food for insect predators. Recent research has shown that as the diversity of insects in crops and pastures increases, the incidence of insect pests declines, reducing the need for insecticides.

Hence increase in biodiversity including different varieties of crops in the soil as well as different kind of animal species including words and Earth grazing worms and also various kind of microbes reacting with the soil and less use of chemicals and pesticides is the Guru Mantra for creating a soil rich of nutrients and thereby regenerating the soil sustaining good environment and excellent human nutrition.

Thursday, 7 June 2018

National Agricultural Market(eNAM) and it played the role in e marketing of farmers produce in India

DR.N.K. ARORAM.Sc.,Ph.D.,PGDCS., Gold medalist 52nd All India Warehousing,Former Director,WDRA, Delhi& GM/Dy.MD,MSWC,/ SAM,CWC

National Agricultural Market(eNAM) and it played the role in
e marketing of farmers produce in India

As per the Dalwai Committee Report 2017-18 (Volume IV), there are close to 29,547 marketing points. Of these, 22% or 6,615, are regulated markets under the APMC and 22,932 are regional periodical markets (RPMs). On an average, a farmer gets a regulated market in the radius of about 12 km and a RPM in a radius of about 7 kms. Out of these 6,615 markets, the NAM scheme aimed to bring 585 markets (i.e. 9%) on its e-market platform by the end of financial year 2017-18. Quite commendably, as on March 2018, all targeted mandis, i.e., 585 that are in 16 states and 2 UTs, (Chandigarh and Puducherry), have been integrated with the NAM-platform. But, these 585 mandis brought only 90.5 lakh farmers onto the platform, which is less than 7% of the 14 crore Indian farmers. Close to 17 MMTs of quantity worth Rs 42,265 crore (cumulative since platform’s inception), is reported to have been traded on the platform. But, this value is only about 2% of India’s total value of agricultural output. . By including such transactions made at fixed prices (MSP) by a fixed buyer (procurement agency) onto the e-NAM platform, the true spirit of e-NAM, i.e. of free and competitive market fades.

Good information, Dr. Arora. 7% farms covered by 9% mandies is good enough as all farms do not sell at mandies. You have raised the issue of competitiveness - one of the reasons is lack of transparency on the quality of produce seen through standardised parameters. Small quantities brought in by small farmers compound the problem further. The solution will emerge by giving attention to this aspect right from the sowing stage, and not when the produce is brought to the mandi. This is what we wanted to attempt when we conceptualised the FPOs. The last Budget aims in that direction.

Thursday, 3 May 2018

History of Commodity derivatives market in India 

Commodity derivatives market in India seems like old wine in new bottle. In reality, forward trading in commodities existed in India from ancient times (period of Kautilya’s Arthashastra) and the first modern futures market was established in 1875 for cotton contracts by the Bombay Cotton Trade Association, just a decade after CBOT entered the focus and traded its first future. The separate association Bombay Cotton Exchange Ltd was established over widespread discontent amongst leading cotton mill owners and merchants over the functioning of the Bombay Cotton Trade Association. The movement continued by setting up “Gujarath Vyapar Mandali” in 1900 for futures trading in oil seeds, ground nut, castor seed and cotton seeds etc. The chamber of commerce at Harpur established the futures exchange for wheat trading in 1913, the first futures exchange for bullion futures in Mumbai in 1920 and similar exchanges come up in Rajkot, Jamnagar, Kanpur, Delhi and Calcutta. In Calcutta Hessain Exchange Ltd in 1919 and East Indian Jute Association Ltd in 1927 were established further and these two exchanges merged in 1945 as East India Jute and Hessin Ltd to conduct the organized trading of futures contracts in raw jute and related goods, meanwhile, many other exchanges started in country to trade in diversified commodities.

After independence, Government of India commissioned a committee headed by A D Shroff in 1950 to introduce Forward Contract bill in Parliament, under the regulation of Ministry of Consumer Affairs and Public Distribution. The FMC was powered to regulate, licensing and control of trading of forward and option contracts all over India. The smooth functioning of market continued till 1966, but due to various regulations, the market lost its vivacious and finally the forward trading was completely banned. The Government of India reintroduced forward trading in select commodities like Cotton, Jute, Potato, etc., as per the recommendation of Khusro committee in 1980. Subsequently, the liberalization of Indian economy in 1991 gave a new lease of life for commodity trading. The Government setup a new committee under the chairmanship of Prof. K. N. Kabra in 1993, the committee recommended to start the futures trading in agriculture commodities in basmati rice, cotton seed, oilseeds, etc. Further in 1996, the World Bank in association with United Nations Conference on Trade andDevelopment (UNTCAD) conducted a feasibility study and found that there is tremendous scope in revitalizing futures trading. In 2000, National Agricultural policy envisioned the reforms in agricultural commodities trading, that has brought a new wave in trading of commodity futures and paved the path for hedging and risk management by removal of control and regulation in agricultural market. In the aftermath of the second generation reforms, based on the recommendations of Kabra committee, World Bank Report and Guru Committee (2001) brought a dimension futures trading in Indian commodity market.

Indian commodity derivatives market has been rationalized in 2003 and futures contracts trading has seen upturn in terms of volume and value surge with very swift growth during that decade. It raised itself to compete in the global market with international giants, such as NYMEX, CBOT, LME, etc., and became the top fifth exchange in terms of number of contracts in gold, second in silver, copper and natural gas. It is found that the trading in commodity derivatives is about three times more than in physical market, whereas, it is more than ten times in advanced economies. In spite of reaching global standards, the market is facing the challenges due to lack of infrastructure, warehousing, inadequate risk mitigating instruments, etc. If the regulators take cognizance of these issues, Indian commodity derivatives market will become definitely an icon among the world commodity derivatives market.At present 21 commodity futures exchanges are working in the country, out of which, six are at national level and fifteen at regional level. All these exchanges are under the regulatory system of Forward Market Commission (FMC), Government of India but now merged under SEBI. By and large, the market has staged a spectacular growth of trading in terms of volume and value of commodity trading. It is very clear through the statistics that 53 commodities notified and permitted for futures trading in 2003 by forward market commission that moved to 113 in agricultural, and non-agricultural commodities futures contracts. On the other hand, the market has registered a significant growth in terms of value, which was Rs.12.9364 billion in 2003-04 and augmented to Rs. 1812.6104, 1704.6840 and 1014.4795 billion during the last three years, i.e., 2010-11, 2012-2013 and 2013-14 respectively.

Review of Literature

There is plethora of studies in the field since the existence of trading took place on commodities at India and the world. The important studies are reviewed and presented in a chronological order and examined the performance of trading, growth, role of price discovery, hedging, regulation future prospects to assess the performance of Indian commodity derivatives market specifically. 

Shroff (1950) referred the Government of India draft bill on introduction of forward trading in India and recommended the introduction of forward trading helps in hedging, price stabilization, reducing the speculation. The study further advised to establish the trading rules and regulations, approved and managed byGovernment. Kamara (1982) analyzed the impact of introduction of commodity futures by comparing the spot market volatility before and after introduction of commodity futures and found no significant change. Kabra Committee Report (1993) advised to strengthen the Forward Market Commission (FMC) and Forward Contract Act, 1952 by means of improving infrastructure, telecommunication, functioning of the exchanges, adequate norms, automation of trading in exchanges, regulation to designing and trading of futures contracts, and establishing strong vigilance committee. 

UNCTAD and World Bank Joint Mission Report (1996) highlighted the role of futures markets as market based instruments for managing risks and suggested the strengthening of institutional capacity of the regulator and the exchanges for efficient performance of these markets. Further noted that Government intervention was pervasive in some sensitive major commodities like wheat, rice and sugar and was of the view that future markets in these commodities were unlikely to be viable.The National Agricultural Policy , (2000) recommended to liberalize the agriculture and allied sector, enhance the infrastructure and information technology, the commodity exchanges has to launch futures contract on liquid commodities in the market. Singh (2000) analyzed efficiency of Indian commodity futures, advised optimizing the futures markets to discover the prices and minimise risk. According to him, exchanges should be self-regulated to curb speculation. The Government should minimize the intervention in pricing mechanism and should initiate private participation. Sahadevan (2002) surveyed the recognized exchanges and their organizational, trading and the regulatory set up for futures trading in commodities and revealed that many of the commodity futures exchanges fail to provide an efficient hedge against the risk emerging from volatile prices of many farm products in which they carry out futures trading. Habibullah Committee (2003) advised the Government of India that the development of commodity derivatives market must be upheld by removal of obstruction on convergence between securities and commodity derivatives market on account of policies relating to cash market, which will impact demand and supply forces. The Government follows common policy applicable to all over India. It further advised on removal of restrictions on participation of banking institutions at least for hedging purpose. The new policy framework should permit the introduction of the commodity futures indices contracts, spreads, weather, electricity and freight. It also recommended modifying the SEBI regulation to permit participation of mutual funds, Foreign Institutional Investor.Chen and Firth (2004) analyzed the relationship between return and trading volume of four commodity futures in China, by using correlation and Granger causality test. They found no correlation between return and volume, but signify the causality from trading volume and return, vice versa. They, however, found a correlation between absolute return and trading volume. Bir (2004) investigated hedging performance of agricultural commodity futures market in terms of price discovery and risk management. The factors responsible for inefficient hedging in commodities were found as low volume, low participation, inadequate warehouse facility and deficient information system of commodity exchanges. Wang and Ke (2005) analyzed the efficiency of the futures market for agricultural commodities in China found that long term equilibrium exists between futures and cash prices for Soybean. On the other hand, the comparison of wheat and soya bean futures reveals short term efficiency of Soybean futures market. Zapata (2005) analyzed the unidirectional Granger causality from futures prices for world sugar on the New York Exchange and world spot price of sugar and found the futures market helps in price discovery in spot, and the flow of information is from futures to spot market but not vice versa. Gorton and Rouwenhorst (2004, 2005) analyzed the long term characteristics of investment in collateralized commodity futures contracts by creating a commodity futures weighted index covering period of July 1959 to December 2004. The results showed that there was higher historical index and spot market return during the sample period. Further the study was found that the commodity futures risk premium was higher than debt market return and equal to equity market return. Ahuja (2006) analyzed the commodity derivatives market in India. And found that the commodity futures market in India has recorded spectacular growth to reach a one trillion mark in 2006. However, several challenges have to be overcome for further stability and persistent growth and development of the market. Karande (2007) studied the castor seed futures traded in with Mumbai and Ahmadabad and evaluated three features of commodity futures market in India, viz, basis risk, price discovery and spot price volatility. The result found that the price discovery was achieved and beneficial in spot price volatility market. Liu and Zhang (2006) analyzed the Price discovery of Spot and Futures price in Chinese Copper, Aluminium, Rubber, Soybean and Wheat markets and found that lead lags relationship between spot and futures market is quite limited. Abhijit Sen (2007) revealed that there is no significant proof for price acceleration of agricultural commodity prices in post futures period, the period of study being very short to discriminateenough between the futures trading and the cyclical adjustments. Lokare (2007) revealed significant co integration between futures and spot prices of selected commodities and had shown the slower operational efficiency. On the other hand, there was inefficient exploitation of available information to capture in the prices of futures contract. 

Ram and Ashis (2007) concluded that agricultural commodity derivatives provide an efficient protection against the price volatility risk in terms of commodity prices, commodity exchanges offer a broad based platform for trading of agricultural and non-agricultural commodities over time and space so the commodity exchanges need to be developed at national level. IIM Bangalore (2008) study found post futures period volatility increased, in spite of negative results of futures market, suggested to integrate the geographical separated markets, remove the incompetence is arising among the futures prices and futures spot prices, which was due to immature nature of the market, there are many obstruction in nature of the institutional and policy level constraints. 

Kedarnath and Mukharjee (2008) investigated the impact of futures trading on agricultural commodity market and found there is nosignificant change in spot prices post futures period in essential commodities, but a comparative advantage found through causality analysis proves that bidirectional relation exists between futures and spot market through flow of information. Bose (2008) found that information flow between the market helps in price determination. In spite of lesser degree of association in spot and futures indices, the agriculture commodity indices shows weak performance in price dissemination for predicting the futures prices than non-agriculture commodity futures indices. Nath and Lingareddy (2008) concluded that futures trading in the selected commodities escort to increase volatile in case of urad, in case of gram and wheat prices moderately rise in post futures period not proved statistically significant. Bhawna et al. (2009) found the removal ban on commodities achieved the spectacular growth achieved its objective as price risk management and price discovery and high untapped potential market growth in agriculture commodities. IIT Bombay (2009) conducted a research study on behalf of Forward Market Commission (FMC) of India and found that seventy percent of population depends on agriculture commodities, and there is a need to liberalize the to manage the price risk through commodity futures. Sabnavis and Gurbandani (2010) analyzed global commodity markets. These markets have proved to be efficient price discovery mechanism in India and worldwide. Further, Gurbandani (2010) found that both spot and future prices for selected agricultural commodities are efficient in weak form. Future prices are independent and past prices have no role in the contribution of future price prediction.

Basu and Gavin (2010) concluded that the investors are searching for the alternatives like high risky mortgage debt and financial derivatives market to mitigate the risk. The study also found that there is negative correlation between equity market to commodity futures return and it gives scope of bringing the arbitrage to exit hedging profits. Shanmugam and Dey (2011) showed that the commodity market have performed better for all the stakeholders. There is an urgent need for new instruments in the commodity markets. In addition, the regulator has to develop stringent policies that can allow financial intermediaries like institutional investors, banks and mutual funds to benefit at gross root level. Swati and Shukla (2011) concluded there is a need to convergence of all types of market like equity, commodity, forex and debt, which should be developed and regulated properly to provide wide-ranging risk management solutions to Indian stakeholders. Gupta and Ravi (2012) investigated the relationship in price discovery which proved that futures markets are more responsive in dissemination information and price discovery to correct spot market. Mahanta (2012) analyzed price trends in the international market and concluded that gold price movements in international market is positively correlated with Indian gold price movements, so proper considerations to international markets should be given while designing policies of derivatives market in India. Barua and Mahanta (2012) investigated the high inflationary pressure due to commodity derivatives. Few futures contracts like red gram, black gram, chickpeas, wheat, rice, potato, refined soybean oil and rubber have been canceled, but analysis proved that the ban on these commodity futures contract didn’t bring price stability Popli and Singh (2012) revealed that commodity futures market was volatile in USA, U.K. and India. The comparison between US, U.K and Indian futures markets reveals the policy makers have to follow the clue from U.S and U.K regulation to promote and encourage investments in commodity derivatives market. Kaur and Anjum (2013) carried out the study on agricultural commodity futures in India and found that in spite of development of commodity futures market, farmers could not gain leverage from the market, as there is no integration between spot and futures market. They further found that due to lack of infrastructure and warehousing, regional exchanges could not penetrate to rural India

Research Gap and Contribution of the StudyThe systematic review of literature revealed that the majority of studies covered the feasibility of futures trading, institutional and policy level constraints, strengthening of regulations, liberalizing the exchanges, institutional building, need for new instruments in the market and International market linkages. In the aftermath of reintroduction, most of the studies conducted by many researchers focused on impact of futures on volatility, risk management, price discovery, hedging, and market efficiency, relation between return and trading volume, lead-lag relationship between trading activity and cash price volatility before and after introduction of futures market, but no study was found with regard to assessing the growth, development and future prospects on long term performance of the market. Hence, the present paper is undertaken as a modest attempt to dwell on such untapped aspects. 


References

Abhijit Sen Committee Report (2007). Impact of Future Trading on Agricultural Commodity prices, Ministry of Consumer Affairs, Food & Public Distribution, Government of India.

Ahuja. (2006). Commodity derivatives market in India: development, regulation and future prospective. 

International Research Journal of Finance and Economics, 1, 153-162.

Barua, N., & Mahanta, D. (2012). Indian commodity derivatives market and price inflation. IOSR Journal of Business and Management, 1(6), 45-59.

Basu, P., & Gavin, W. (2011). What explains the growth in commodity derivatives? Federal Reserve Bank of St. Louis Review, 93(1), 37-48.

Bose, S. (2008). Commodity futures market in India: a study of trends in the notional multi- commodity indices. Money & Finance, 3(3), 125-158.

Chen, G., Firth, M., & Xin, Y. (2004). The price-volume relationship in China’s commodity futures markets. The Chinese Economy, 37(3), 87–122.

Economic Survey (2009-10). Commodity Futures markets, Government of India. Retrieved from http://www.fmc.gov.in/writereaddata/Links/Final-AR-2009-10-dt-01-02-201114426625029079276660.pdf. 

Gorton, G., & Rouwenhorst, K. G. (2004). Facts and fantasies about commodity futures. ICF Working Paper No. 04-20, Yale.

IIMB (2008). Study on impact of futures trading in wheat, sugar, pulses (such as urad, tur and chana) and guar seeds on farmers. Retrieved from http://www.sebi.gov.in/cms/sebi_data/commodities/Report9.pdf.

Kamara, A. (1982). Issues in Futures Markets: A Survey. Journal of Futures Markets, 2, 261–94.

Karande, K. D. (2007). A study of caster seed futures market in India. Available on http://dx.doi.org/10.2139/ssrn.983342.

Kaur, H., & Anjum, B. (2013). Agricultural commodity futures in India- A literature review. Galaxy International Interdisciplinary Research Journal, 1(1), 35-43. 

Kedarnath, M. (2008). Impact of future trading on Indian agricultural commodity market. Available on http://ssrn.com/abstract=1763910 (accessed 30 September 2012).

 Lokare, S. M. (2007). Commodity derivatives and price risk management: an empirical anecdote from India. Reserve Bank of India Occasional Papers, 28(2), 27-77. 

Mahanta, D. (2012). Indian commodity derivative market: a study of price trends in the international market. Indian Journal of Applied Research, 2(1), 73-75.

Nath , G. C., & Lingareddy, T. (2008). Commodity derivatives contributing for rise or fall in risk, paper presented at Money and Finance Conference, 18-19 January 2008, Indira Gandhi Institute of Development Research, Mumbai.

Popli, G. S., & Singh, S. (2012). Commodity markets challenges and arbitrage opportunities – an insight into commodity trading business in India. Available at: http://ssrn.com/abstract=2084082. 

Sabnavis, M. (2010). Working of commodity markets in India. Published by S. S. Bhandare for the Forum of Free Enterprise, Peninsula House, 2nd Floor, 235, Dr. D. N. Road, Mumbai 400001, 4/July/2010.

Shroff. (1950). Control on Forward Trading, Draft bill, the Economic Weekly, August 12, 1950, Page No 770-71.

Shunmugam, V., & Dey, D. (2011). Taking stock of commodity derivatives and their impact on the Indian 

economy. International Journal of Economics and Management Science, 1(1), 8-16.Srivastava, S. P., & Saini, B. (2009). Commodity futures markets and its role in Indian economy. Indian Journal of Agricultural Economics, 64(3), 398.

Swati, & Shukla, M. B. (2011). Commodity derivative in India challenging tasks ahead, ICSI Charted Secretary, November, 1581-1587.

Wang, H. H., & Ke, B. (2005). Efficiency tests of agricultural commodity futures in China. Australian Journal of Agricultural and Resources Economics, 49(2), 125-141.

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DR.N.K. ARORAM.Sc.,Ph.D.,PGDCS., Gold medalist 52nd All India Warehousing,Former Director,WDRA, Delhi& GM/Dy.MD,MSWC,/ SAM,CWC

India’s warehousing requirement

Investment # warehousing # manufacturing # GST#
India’s warehousing requirement is expected to grow at an annual average rate of 9% to 1,439 million sq. ft in 2019 from 919 million sq. ft in 2014,The government’s renewed focus on incentivizing the manufacturing sector in view of GST, is key to the growth of warehousing, adding that the logistics market will reap the benefits of this growth in coming years.

The additional demand for warehousing space per year will be around 104 million sq ft and will entail investments of about Rs.15,000-16,000 crore every year, it is estimated. The investments will go towards land acquisition and cost of construction.

Investment in warehouse can provide an opportunity of realizing returns in the range of 12%-20% per annum to investors willing to explore this sector.

Monday, 23 April 2018

Always have a mentor who is GURU in the particular field of busines

When running a business, may be agri or finance or of commodity markets,you can feel like you are doing it all alone, you feel frustrated because there is no one to bounce ideas off. The buck stops with you, and you’re working long hours. You have challenges that are keeping you awake at night; you can stop ‘wondering’ about what to do. Once you make a decision, you spend too much time second guessing if you’ve made the right decision. A mentor will help you reprogram fearful thinking toward powerful thoughts, faith and belief. You’ll be able to focus on achieving your goals without distractions.      

There are many benefits to having an accomplished, experienced mentor and advisor on your team, and ultimately their role is to help you achieve your goal. Once you have an accomplished executive mentor as a resource, you can be sure that they are focused and conscious of the need to deliver tangible and measurable outcomes for your business.

There is absolutely no doubt that if you find the right mentor, someone, you connect with, and your prepared to do the work, you and your business will grow, prosper and thrive.
So always have a mentor who is GURU in the particular field of business and see the difference.
Regards
DR N K ARORA

India's Storage capacity grossly inadequate

For a country with an agricultural sector as large as India’s, its warehousing capacity is woefully inadequate. India produces around 260 million tonnes of foodgrains every year, but has a total storage capacity of just 115 million metric tonnes (MMT). While state-run Food Corporation of India (FCI), the Central Warehousing Corporation (CWC), and State Warehousing Corporations (SWC) together account for around 85 MMT of warehousing capacity, the private sector chips in with about 30 MMT.

However, small and marginal farmers rarely use any of these modern warehousing facilities. They either sell marketable surplus immediately after harvest or use more traditional storage facilities by covering heaps of grain with husks, clay, or other materials. Such storage methods are subject to rodent attack and infestation leading to high wastage and quality deterioration.

Looking at this and several other reasons, 37-year-old Kishor Jha started Ergos, an agri-supply chain firm based in Bengaluru. He says that there were several reasons that turned his attention to the agri space.

While working at an MNC bank, Kishor was handling portfolios of high-net-worth individuals (HNI), which comprises a mix of financial products including some commodity derivatives. One of the products was commodity arbitrage and it basically had three entities: investors, millers/processing company, and traders.

Kishor noticed that millers/processing companies are keen on fixing the price of raw materials for about one to two months, but they don’t have enough supporting cash flow or appetite to take delivery. Traders have risk-taking ability to leverage the underline opportunity, and investors want fix return on securitised assets. Kishor says,

“If you see, grower/farmers are nowhere in the picture. The questions start from here: Why are they not involved in this arrangement? How to bring them into the mainstream? What are the support system required? How to build an ecosystem around that? The basic principle is if the farmers are not participating in the whole arrangement, my personal opinion says, sustainability will be questioned always.”

With this idea in mind, Kishor met 39-year-old Praveen Kumar, who hails from Akhtiyarpur, a village in Samastipur district in Bihar, and has been working in HR recruitment across MNCs. Being an owner of more than 70 acres of land in Bihar, he has significant on-ground understanding and experience in farming.

Kishor explained the gaps that he felt were there in the agri space. In 2012, the duo decided to meet a couple of farmer in Praveen’s village. Looking at the crop and the produce, Kishor with his banking background immediately started capturing data on the total produce coming from each field.

It was then he noticed that everyone was struggling due to poor post-harvest management. And due to lack of storage facilities, most farmers would end up selling their crops at distress sale prices. Kishor says they found their solution in that very village.

Another guy named Sambhu Jha who is also a farmer and had built some 200 tonne capacity warehouse in his village. Due to social issues, no one uses that warehouse including him. We convinced him after many rounds of discussion and hired that warehouse for three years. We then called a farmer meeting at that warehouse and explained them the process and the operations.

The ride wasn’t easy in the first year and there were only four or five farmers who participated.

“The answer to everything was only demonstrating and validating. We took two years to reach the level where the farmer started booking the space for warehousing at least two to three months in advance,” says Kishor.

 Several challenges were faced linked to financing, marketing, and distribution. Some of the major financial challenges include maintenance of cash flow and operational expenses, especially for small-size warehouses.

This is due to the gap in the meticulous calculations required while managing the consumables, safety, and security of the warehouses.

The marketing and distribution challenges were related to customer engagement, awareness, and trust building, and the need for behaviour change amongst smallholder farmers to adopt warehousing practices.

it was very difficult to attract, train, and retain suitable talent, as the concept is new and people with desired skill-sets are rarely available. The enterprise needs to recruit the right talent, and train them professionally, to obtain the required business outputs.

Choosing the right warehouses

“Ergos only engages those set of warehouses which is scientifically constructed and plans are approved by NABARD, WDRA, or state agriculture department,”

Due diligence of the warehouse and a survey report covering titleship of warehouse ownership, location, approach road, flood history, height from the ground, distance from police station, fire station, theft history, number of gates, security arrangement, flooring, ceiling condition, number of pillars, and wall conditioning among others.

Ergos then finalises the terms of long-term lease of no less than five years with the landlords and executes the agreement on an appropriate revenue stamp with all KYC documents, obtains notary declaration from the owners, and registers the agreement in local registrar office.

The farmers/PG account set up with Ergos basis their KYC document–ID, LPC, and address proof (ration card, PAN card, Aadhaar card, driving license, bank passbook, voter card)–with originals seen and verified by Ergos executive. Basis all the basic documentation, Ergos creates UID (Unique Identification Number) for the farmer in SAP.

Work after the choices are made

What Ergos actually does is offer scientific warehousing solutions and collateral management facilities to smallholder farmers in rural Bihar. It operates a chain of efficient and hygienic warehousing facilities situated within a range of three to four kilometres from the farmers’ locations.

It provides 24/7 access to farmers to transact, sell, or hold the commodities. Farmers can thus track market movements and sell when they can realise better prices with the help of portfolio adviser; Village Champ (VC) who is a one-point contact for them to assist on the transaction.

The team runs a network of micro-warehouse-based ‘farmer offices’ that works in tandem with the retail partners of Ergos to build capacities of smallholder farmers, and to expand the existing user base. At present, there are nearly 28 farmer offices, and the enterprise plans to increase this number to 500 in the next couple of years.

The micro-warehouse runs as a low-cost format that operates at the village level and helps the enterprise to directly bond with the farmers. The enterprise signs agreements with several smallholder farmers who store their agricultural produce in the warehouse.

Once farmers deposit stock in the warehouses, Ergos checks the quality and quantity of the items and issues a warehouse receipt to the farmers certifying the weight, grade, and quality.

Bringing in awareness

After six to eight months, the enterprise is able to negotiate better prices on behalf of the farmers, based on this data. The micro-warehouse network helps Ergos accomplish business development as well as transaction execution. This arrangement also ensures optimum capacity utilisation of the warehouse, and low wastage and higher price realisation for the farmers.

“Ergos is able to achieve higher turnover with limited capital. It has also achieved greater price efficiency in certain crops such as maize, wheat, and paddy, as these are the major crops cultivated in the region,” says Kishor.

The team has also introduced a unique concept of ‘farmers’ portfolio management’, wherein a software application captures basic information about all associated farmers. The agri-tech company also creates general awareness among smallholder farmers regarding the importance of storage solutions.

It showcases the significance of storage solutions through videos, roadshows, and midnight cafes. Ergos also works with local farmer leaders to mobilise interest, and has tied up with Dr Rajendra Prasad Central Agriculture University in Pusa, Bihar, to conduct awareness programmes in its different markets.

Initially, the team set up the warehouse facility with the help of National Collateral Management Service Limited (NCML), which helped the enterprise to understand warehousing and credit access, and also provided access to finance to Ergos-associated smallholder farmers.

Collaborations

Ergos collaborated with National Commodity and Derivatives Exchange e-Markets Limited (NeML) for forward linkage to access the national platform. It also partnered with LTC Commercial to adopt better warehousing practices.

The agri-tech startup received an investment from Aavishkaar, an early-stage investor, in March 2015. It works with the government banks such as Industrial Development Bank of India (IDBI), IndusInd Bank, and State Bank of India (SBI), and World Bank (WB) programmes to facilitate Warehouse Receipt Financing.

The team charges Rs 6–Rs 10 per quintal per month as against Rs 15–Rs 20 per quintal per month (with lock-in of four to six months) charged by others. The enterprise also offers various packages that customers can choose according to their requirements. These packages include warehousing, bank linkage for eWHR financing, forward linkages, processors, etc.

Future plans

Ergos’ micro-warehouse network helps to achieve procurement and transaction execution and ensures maximum capacity utilisation of the warehouse. The major revenue streams of the enterprise include warehousing services, value-added warehousing services, bank linkage, and forward linkage with processing companies.

By next year, Ergos intends to rent over 30–35 additional warehouses, and expand its operations to other low-income states by replicating the Bihar model. The team also plans to scale its warehousing capacity to 2-3 lakh metric tonnes to connect with over two to three lakh farmers by 2019. And over half a million farmers after that.

By 2020, Ergos aims to reach 5,00,000 farmers and 5,000,00 tonne rural warehousing capacity. It plans to establish a unique procurement process in India that can be replicated globally for processing companies which redefine the existing supply chain process.

The idea, Kishor adds, is to secure storage at farm gate and improve the resilience of an entire farm enterprise by allowing farmers to be price makers than price takers.

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DR.N.K. ARORAM.Sc.,Ph.D.,PGDCS., Gold medalist 52nd All India Warehousing,Former Director,WDRA, Delhi& GM/Dy.MD,MSWC,/ SAM,CWC