Abstracts

Understanding Fluctuation: Demand and Supply Side Perspectives - Dr. Nilanjan Banik The growth of Indian agriculture has lagged behind overall GDP growth for the country. The volatility in agricultural output is also higher when compared with manufacturing and services sector output. This present research proposal aims at understanding the sources of volatility in agricultural output, manufacturing output and services sector output in India. If the source of this volatility is predominantly supply driven then government cannot control it using demand management policies. Whenever we talk about demand management policies, i.e. fiscal, monetary or combination of both, we are basically talking about how to minimize this cyclical fluctuation of output. There are two components of output the trend component and the cyclical component. Trend component is something which is generally supply driven and which do not change in the short-run. This study hopes to explore issues such as inflation, minimizing volatility of agricultural output and uneven income distribution. This study is expected to have policy relevance both in the context of what NCDEX is presently doing and also from the perspective of the Indian government. Close | Top   Measuring the Need, Relevance and Efficiency of Commodity Trading Advisers (CTA) in India - Dr. Sheeba Kapil & Dr. K. N. Kapil, Commodity Trading Advisors (CTAs) usually use certain trading programs to advice what and when to buy and sell commodities and financial futures. CTAs in India are an increasingly becoming popular and a potentially profitable investment alternative for institutional investors and high networth individuals. Development of alternative performance measure of CTAs will help in combating poor trading efficiency like data envelopment analysis (DEA). DEA permits us to evaluate, appraise and rank the trading efficiency of CTAs without using traditional market indices. In this study the data set would comprise of at least 70-100 live CTAs that report monthly performance figures net of all management and performance fees to SEBI. With the help of DEA the efficiency performance of CTAs will be measured. An input-oriented variable returns-to-scale model will be used to examine this trading efficiency of CTAs. The Banker et al. (BCC) the cross efficiency model and super efficiency model will be employed. The result of each DEA model will then be further compared with the Sharpe ratio to see whether the rank order of DEA models can be used as a complementary performance measure. Close | Top   Role of CSO-CBO Partnership in the Aggregation of Agricultural Commodities: Issues and Prospects for Commodity Futures Markets - Mr. Yeswanth D. & Mr. Sai Krishna N. Agricultural marketing India is characterized by problems such as long supply chains, poor grading and standardization, low price realization by farmers. To address the above issues, models such as marketing cooperatives, private retail markets and contract farming have evolved over the years. No one model is a panacea to the all the existing problems. A new model where partnership between civil society organisations (CSO) with community based organizations (CBO) like Self Help Groups, small and marginal farmers associations is emerging in many parts of the country. It appears that this new aggregation model helps in increasing the efficiency of the agricultural supply chain. In addition to increasing the farmer's pie in the final price of a produce, this model appears to offer solutions to the existing bottlenecks in agricultural commodity trading. The principal question raised by the authors of this research proposal is whether the new CSO-CBO partnership model holds any merit when compared to the traditional or other existing models in terms of its profitability and economic principle. The study will adopt multiple case design method. Comparison would be made across cases with two prominent supply chains for each model. To understand the nuances of the process involved in aggregation, semi-structured interviews and personal interaction at field level and organization level will be conducted Close | Top   Impact of Markets on Production of Selected Agricultural Commodities: A Study of Cardamom, Potato and Jaggery - Dr. P. K. Mandanna The aim of the paper is to study the pattern of production of selected crops in Karnataka, to analyse the growth of arrivals of these commodities in the principal markets in the state, to study the spatial linkage of the markets, and, to asses the impact of markets on the growth and production of selected commodities in the state. In order to study the market impact on production, cardamom, potato and jaggery will be selected. District-wise data on price and arrivals, production and productivity will be collected. Time series analysis like ARIMA models, spatial price efficiency, Markov chain will be adopted. The study will assess the impact of markets on production, determine the pricing efficiency of markets, and will help in developing a suitable marketing policy for agricultural commodities. Close | Top   Market Reforms and the Dynamics of Cotton Trading in India: A Comparative Assessment of Small Cotton Producers in Gujarat and Maharashtra - Dr. P. K. Viswanathan This study seeks to understand the dynamics of cotton trading in the context of market integration and the impact of such trading strategies on the marketing behaviour of cotton farmers. In India, cotton is one of the commercial crops, which has been in the organized trade regime for more than a century now. From the time it was first traded in the late 1800s under the auspices of the East India Trade Association to the present day system of trading through the National Commodity and Derivate Exchange, the trading system has undergone several reform measures. This study proposes to understand the following- (1) dynamics of the primary, secondary and the terminal cotton market and their interlinkages, (2) role of government measures such as support prices, (3) influence of international cotton prices on the domestic market and prices, (4) trends in the spot and future prices of cotton and their influence on the marketing practices of the farmers, (5) reform measures introduced by the government to organize cotton trading, (6) diffusion of knowledge and training to the farmers to improve their returns. The study will use both secondary and primary sources of data to explain the objective criteria. It is proposed to collect all the secondary information and data from the established commodity exchanges in Ahmedabad and Mumbai. International futures and spot prices of cotton will also be gathered. The study also involves a survey of 200 cotton farmers in Gujarat and Maharashtra to understand their marketing decisions and the socio-economic status over 20-30 years of cotton farming. Close | Top   Was Banning Wheat Futures Economically Justifiable? - Alka Parikh This paper examines different variables- trading volumes, basis, price volatility and causality to look into the justifiability of banning the wheat futures. All the variables seem to support the view that the banning was not justified. This includes chana, sugar, pepper and urad for the first three variables; and sugar, turmeric, cotton, soy oil and raw jute for the last one. We suspect that there might be a case for closely regulating urad and tur trade, but the issue needs to be explored further with more tests. The paper also looks into whether futures trade benefits farmers. The main concerns of farmers and consumers are reviewed. The implications for the futures are outlined accordingly. Close | Top   Food Security in India: Does the Futures Market for Wheat Meet the Bill? - Prof. K.V. Bhanu Murthy The thrust of agricultural policy during the sixties and seventies was towards restriction on trade. While this might have been justified in the years of shortages, the present trend towards surplus production of foodgrains necessitates a review of such restrictive policies. Also agricultural policy needs to tap the potential of the market by creating the necessary price incentive and information processing mechanism of the market so as to ensure long-term food security. An efficient commodity futures market along with removal of restrictions may be the right long term strategy for India's food security. In this context this study seeks to analyze the long term trends in area, production, yield and prices of wheat to study the importance of futures trading in wheat. Cointegration techniques with structural breaks for comparing spot and future prices of wheat will be employed. Unlike in the case of other commodities or financial futures, the linkage with the real sector is important as in the case of wheat. It is important to know whether the futures market stabilizes the real sector. It should “mirror” the desirable long term trends. We expect that if restrictions are removed and government intervention in the wheat market is minimized it would help in the long term stabilization of agriculture. Futures trading should not introduce distortions of its own. Close | Top   Convenience Yields Modeling as Call Options: Indian Wheat Market - Mr. Ashutosh Roy In the early 1930s, Convenience Yield (CY) evolved as one of the pioneer theories for the explanation of market behaviour of contango and backwardation. The economic notion of CY became very useful for the explanation of no arbitrage based pricing of futures and forward contracts. . Early authors [Kaldor (1939); Working (1948, 1949)] have defined it as a negative component of carrying charges in an effort to explain the often observed phenomenon of spot prices being higher than futures prices. This study empirically examines the behavior and determinants of CY over time for wheat. Contrary to previous approaches, CY is modeled as call options with identifiable exercise price, time to maturity and underlying asset. The empirical results derived from the analysis of Indian wheat price and stock data covering the period 2004-2006 are in line with previous evidence that CYs are negatively related to inventory levels. The Milonas Thomadakis (1997) approach is replicated in the context of the Indian wheat market. The work throws light on the feasibility of option pricing for an agricultural commodity even in the absence of an option instrument. In the purview of efficient market and no arbitrage scenario, this study provides a new dimension to the research literature on Indian commodity trading. Close | Top   Factors Affecting Forward Pricing Decisions: Evidence from the Indian Poultry Sector - Mr. Dwaipayan Bardhan With the increasing importance of the poultry sector of India, there is an interest in promoting the use of institutional markets such as futures and forward contract markets to manage the price risks affecting poultry producers. Although, forward contracting in poultry marketing has been prevalent in some areas of the country, scant attention has been paid till now to assess the scope and feasibility of futures market in this sector. Forward pricing in poultry sector will be effective only if its institutional mechanism assures price stability and if the poultry producers are willing to participate in it. The proposed research study addresses the second issue as acceptance of forward pricing by producers is critical and constitutes an important area of research inquiry as regards its potential policy implications. The study would be confined to U.S. Nagar and Nainital districts of Uttarakhand. The region is recognized as a hot bed of poultry production accounting for more than 60 per cent of the state's poultry population. Farmers' contingent behaviour will be analyzed on the basis of data collected from a survey. Contingent scenario places respondents in a hypothetical market situation. The study would use an ordered Probit model to examine producer marketing behaviour as producers' choice of a preferred marketing alternative (dependent variable) which is based on a set of producer characteristics (independent variables). Close | Top   Structure of the Rice and Soybean Futures Markets: Implications for Farm Production and Income - Dr. Vishwa Ballabh & Dr. Prantik Ray Indian agriculture is not performing according to expectations. The agriculture commodity market continues to suffer from several imperfections and excessive government regulation. Among the first few steps, the government has introduced futures trading in some of the important agricultural commodities. This study aims at assessing the efficiency and performance of the commodity futures market for rice and soybean. The entire supply chain for these commodities will be studied to identify marketing cost and areas of intervention to improve value chain efficiency. The impact of government policies and interventions on the supply chain and the extent to which commodity futures in these commodities enhance production, productivity and farmer income will be estimated. The authors propose to visit major trading and delivery centers for these two commodities, rice and soybean and interact with key players. Also secondary data from commodity exchange will be collected. The government policies and their impact will be estimated by employing the sampling method to various areas and types of farmers. Interaction with the policymakers and academicians will also be a part of the study. Close | Top   Analysis of Oil Seeds & Grain Price Volatility in India : A VEC- MVGARCH Approach - Dr. Alok Pandey Indian oil seeds and wheat prices have witnessed unprecedented volatilities and price fluctuations in the recent past. Extreme volatility in commodity prices, particularly of food commodities, affects consumers across different economic strata as well as farmers, especially the small and marginal ones. High food prices through their impact on wages and inflation can have a destabilizing influence on the macro economy. At the micro level risk-averse farmers decrease their investments thereby reducing output. For exporters especially, price volatility increases cash-flow variability and reduces collateral value of inventories resulting in increasing borrowing costs and ultimately affecting firm values adversely. This study proposes a multivariate vector error correction generalized autoregressive conditional heteroscedasticity model to investigate the effect of oilseeds and wheat grain prices in neighbouring countries of Asia on its Indian equivalents. We propose to test whether in the long run the law of one price holds and whether in the short run the model captures the salient features of Indian commodity prices (oilseeds and wheat grain). The model will be used to compute rolling forecasts of the conditional means, variances and covariance of the prices of oilseeds and wheat grain one year ahead. We expect that this model will produce superior forecasts compared to those based on a commonly used methodology of an autoregressive conditional mean model where the second moments are estimated using a fixed weight moving average. Close | Top   Price Discovery and Convergence in the Indian Commodities Market: A Two Regime Threshold VAR approach - Mr. Vishwanathan Iyer & Mr. Hardik Mehta How relevant is the futures market in the Indian commodities space? Where does price discovery happen? At what rate the information spills over to the other markets? Is any of the markets- spot or futures redundant, i.e. playing a pure “satellite” to the other market? We develop a two regime threshold vector autoregression (TVAR) and a two regime threshold autoregression (TAR) to answer these questions for six commodities in the Indian market. The regimes (or states) are defined around the expiration week of futures contract. As expected, this paper does throw some surprising results and raises more questions than it answers. The cash market is found to be a pure “satellite” of the futures market for two commodities (chana and copper) in the first regime, and for four commodities (chana, copper, gold and rubber) in the second regime. Nickel was the only exception where cash market played a dominant role in the first regime and knocked out the futures market in the second regime. Gold and silver, as expected, showed the highest convergence between the spot and futures while nickel, rubber and chana showed very poor convergence between the markets. Close | Top   Forecasting Gold Futures Prices: Application of ARIMA and GARCH Models - Dr. Nupur Hetamsaria & Mr. Mithun Maity This study establishes models for price movements of gold. Of the total turnover in the commodity futures markets globally, gold accounts for roughly 45 per cent. Gold is a keenly tracked commodity. The major reason for this being that gold is found to have an inverse relationship with the US economy and in turn the USD. Investors shift away from the dollar denominated markets to gold whenever they expect the US economy to weaken. Moreover investing in gold has always been found to be a safe haven against geopolitical tensions as well as inflationary pressures. Our data set consists of the daily closing prices of these commodities obtained from the New York Mercantile Exchange (NYMEX) and its subsidiary, the Commodity Exchange (COMEX). We use a time horizon of 14 years for our analysis. This gives us around 3,500 data points for each of the commodities. The Auto Regressive Integrated Moving Average (ARIMA) and Generalized Auto Regressive Conditional Heteroscedasticity (GARCH) models for understanding past price movements and to forecast future prices. Close | Top   Lead Lag Relationship between Gold Futures and Spot Prices - Dr. Daniel Lazar, Dr. K. C. S. Rao & Dr. Joseph Jeyapaul In India, gold is valued as a savings and investment vehicle and is the second preferred investment after bank deposits. In the cities gold is facing competition from the stock market and a wide range of consumer goods. But in rural areas, gold is the preferred and secured investment. Gold is a traded commodity in derivatives market. Numerous papers have examined the relationship between spot and futures prices for various types of commodities as well as for financial assets. Empirical evidence to date is mixed, although most of the studies indicate that future markets have a price discovery role. This research paper is going to use multivariate framework like the Johansen test (Johansen, 1988, 1991). Already the Johansen framework is followed by Kellard, Newbold, Rayner and Ennew (1999) and Haigh (2000). The general belief is that due to future trading spot prices of gold are always at the top. Therefore, it was thought fit to study the price behaviour by considering the recent three years daily prices of both futures and spot markets. Close | Top   High Frequency Data Prediction for Indian Metals Futures: A Multiple Regression Approach - Mr. Somnath Dey There is a strong need for a regression model and a dependence predictor, the Indian futures metal market is getting efficient day by day and a constant correlation is seen among Indian and worldwide prices. A multiple regression model with independent variable like crude oil, Dow Jones, silver, euro, USD are used for predicting gold and the most leading base metals like copper. A general R-squared elimination was followed and multicolinearity was reduced by removing correlated independent variables. Upon regression the equation was stress tested for errors and residual errors. Close | Top   Emergence of Commodities as an Investment Class: Its Relevance to Retail Investors and Risk Management for Industry - Prof. Deepak Ukidave The objective of this study is to gain an insight into the world of futures trading and the benefits thereof to producers, processors and traders. By attracting participation from stakeholders across the market spectrum, the futures market provides a neutral, transparent, liquid and vibrant online platform for efficient price discovery. This enables the farmer to get the best prevailing market price for his produce and other participants to hedge themselves against price risk and volatility, thereby protecting their margins. In particular, the study aims at investigating: (i) macro economic analysis of demand, supply, price movements of certain select commodities traded on the exchange; (ii) study of hedging strategy in commodity futures used for effective risk management in select commodities like gold, ferrous and nonferrous metals; (iii) comparison of price volatility of various commodities traded on commodity exchange platforms for a period of three years; (iv) study of recent trends in the commodity markets including real challenges faced by the investors; and (v) identification of critical dynamic issues which need to be addressed to ensure efficiency of commodity markets. Close | Top   Agri-Commodities Future Price Discovery Parable: Imperfections Galore - Prof. Jacob George The central thesis of agricultural marketing reforms in India is based on three primary factors. First is the agriculture landscape, second is the existing institutional setup under the constitutional safeguards, and the third is the emerging globalisation compulsions. The 2000-02 version of foodgrains marketing reform model is 'neither fish nor fowl' and hence ignores all the three basic elements. On the other hand, the parable of price discovery using the spot and futures market dynamics has not helped the Indian farmers as it is flawed. Above all private monopoly cannot be explained away as price discovery. The reengineering of the Indian agricultural marketing institutions, undoubtedly, is the need of the hour. The regulatory mechanism for agri-commodities marketing has a public institutional bias. Then would this mean another variant of the exclusionary set of measures? What is going to be the terms of engagement and how meaningful is the operating protocol? How broad based is the stakeholder matrix? Are we consciously downplaying the role of existing players in the name of reforms? These are some pertinent and key questions. Close | Top   Price Convergence in Agricultural Commodity Markets - Dr. Surabhi Mittal The proposed research intends to look into the issue of convergence of spot and futures prices in agricultural commodity markets in the post-2003 period. Policy implications and recommendations would also be proposed based on the derived results. Ideally, as a futures contract nears expiration, the futures price and the spot price converge. The credibility threat of delivery ensures convergence. This difference in the convergence can be easily explained by arbitrage and the law of supply and demand. The gap between the spot and futures prices may contain information about the expected future price of the commodity. To understand the linkage between spot and futures price factors like demand and supply position, net availability, storage, seasonality, transportation costs etc. are important components to be considered. The issue of price convergence in commodity markets both at national and international levels has been studied in the literature rather extensively either under the law of one price or market integration. In this study, methodologies like correlation analysis, stationary and co-integration analysis will be applied to study price convergence. Impacts of various factors leading to non-convergence will be decomposed using decomposition models. Price data from major agricultural commodity exchanges will be analysed to check for sensitivity. Close | Top   An Examination of the Maturity Effect in the Indian Commodities Futures Market - Dr. Ashutosh Verma & Dr. C.V.R.S. Vijay Kumar This study seeks to estimate the maturity effect for Indian agriculture commodities futures markets. Samuelson (1965) proposed the maturity effect which states that conditional variance of future price changes per unit of time increases as the time to maturity decreases. This relationship has implications for setting the margins and devising strategies for hedging. Bessembinder, Coughenour, Seguin and Smoller (BCSS, 1996) provided a new theoretical framework for maturity effect. The proposed research study attempts to test the Samuelson and BCSS hypotheses in the Indian agriculture commodities futures market. The data consists of the logarithm of the daily settlement prices of all the agricultural commodities futures contracts at NCDEX from the date of the first listing of the contract to March 2007. In most of the studies on future prices, the data has been aggregated in order to create a time series. This methodology often biases the results due to aggregation and extreme regression coefficients. Therefore, in the proposed study each contract will be examined individually and the Daal, Farhat and Wei (2003) methodology will be adopted. The prices for the near month contract will be taken as spot prices. Regression analysis will be carried out to study the maturity effect and the relationship between the maturity effect and covariance between the spot price and net carry cost. Close | Top   Impact of Futures Trading on Commodity Prices: A Study of Pulses Contracts - Dr. Golaka C. Nath & Dr. T. Lingareddy The government decision to allow setting up of modern national commodity exchanges helped in the revival of futures trading after nearly four decades. The national exchanges equipped with modern technology have helped taking futures market to many targeted participants. This led to a phenomenal growth in volumes, though deliveries against futures contracts remained negligible. The functioning of futures markets came under scrutiny during 2006-07 and the government ordered the delisting of futures contracts in agricultural commodities like urad, tur, wheat and rice in early 2007 suspecting that futures trading in these commodities was contributing to the rise in their domestic spot prices. The study tries to explore the effect of introduction of futures trading on the spot prices of urad. Apart from this, an attempt is also made to check the association between the commodity futures markets and other important financial markets. Results indicated that there is mild effect from the futures trading on spot prices of urad. The study shows that volatility of urad prices was high during the period of futures trading while prior to introduction of futures as well as after the ban of urad contracts, the volatility has come down. However, no significant association could be found between the commodity index and any other financial market indices indicating the possibility of diversification of risk for investors. Close | Top   Hedging Effectiveness with Physical Delivery and Cash Settlement in the Indian Commodity Derivatives Market : An Empirical Comparison - Dr. Prasanna Kumar Barik & Dr. M V Supriya This study attempts to test the hedging effectiveness in both the physical and cash markets in the Indian commodity futures market. Through this test, the basis risk, price convergence, efficiency and economic growth can be judged. Thereby the trading option issue i.e. the dependence on either physical delivery or cash settlement, can be ascertained fairly and accurately. Understanding the original work of Bollerslev (1986), Bollerslev (1987), Bollerslev et. al. (1992) and IGARCH (1, 1) two stage model of Barik and Supriya (2005, 2007a and 2007b), this study will follow the Multivariate GARCH (1, 1) model of Park and Switzer (1995). This study will consider both the physical delivery and cash settlement for futures trading at NCDEX. The hedging model will be constructed using a two period investment decision based on the utility maximization. Using the spot price (S), future price (F), timing (T: at the delivery) and quality (Q: grade of the underlying commodity) variables, the hedging portfolio will be constructed. The authors will employ NCDEX futures trading data for agricultural commodities. Close | Top   Price Discovery in Futures and Spot Commodity Markets in India - Dr. Pratap Chandra Biswal & Mr. Raghavendra Badaskar Despite the phenomenal growth rate of Indian commodity futures markets, there are apprehensions about commodity futures market in India. Politicians have constantly frowned upon the concept of futures and forward trading. The exchanges and analysts attempt at allaying all apprehensions about forward and futures trading. There has been widespread interest in the relationship between commodity futures market and its underlying spot trading. This study examines the role of commodity futures market in providing a price discovery mechanism. The extent to which futures market perform this function can be measured from the temporal relation between futures and spot price. If information is reflected first in futures price and subsequently in spot price, futures price should lead spot prices, indicating that the futures market performs the price discovery function. The price linkage between futures market and spot market would be investigated using cointegration (Johansen, 1991) analysis which offers several advantages. To examine the cointegration and error correction dynamics, this study would use futures and spot indices of NCDEX and MCX. Close | Top   Interrelation of Futures and Spot Market: A Study of Wheat and Urad Market - Dr. Praveen K. Jain & Dr. B. S. Hansra Conceptually, futures markets serve the risk shifting function to lock in prices instead of relying on uncertain prices. Forward and futures market have a long history in India. However, the coverage of futures trading was enlarged after the implementation of the National Agriculture Policy. There are conflicting views about the role and impact of futures market on the economy. One section of society feels that futures market is responsible for rising prices. The other section argues that futures market is efficient in discovering right market prices. Some are ready to accept futures trading provided that genuine users of commodity participate and speculation is eliminated. The government banned the futures trading in some agricultural commodities. Thus it is necessary to find out the actual impact of futures trading on the market prices. The proposed research study is intended to study two important areas viz variability and integration of futures and spot market, and movement of prices of agricultural commodity in the market during and after the banning of futures trading. Purposively, two crops- one cereal i.e. wheat and one pulse i.e. urad have been selected for investigation. Trading of these two commodities was banned. The study will be based on secondary data. Cointegration and variability analysis techniques will be used for drawing inferences. Close | Top   Future Trading Activity and Commodity Cash Price Volatility: Evidence from India - Prof. Sanjay Sehgal & Dr. Namita Rajput The commodities future market in India has experienced an unprecedented boom in terms of the number of exchanges, number of commodities allowed for derivatives trading as well as the levels of futures trading in commodities which has crossed the USD 1 trillion mark in 2006. The objective of the present study is to examine a lead-lag relationship between futures trading activity (volume and open interest) and cash price volatility, and between cash price volatility and open interest for major agricultural commodities in India. The study also examines the stabilizing and destabilizing effects of future trading volume in India in relation to selected agricultural commodities. The data for the analysis consists of daily cash closing prices, daily futures settlement prices, total futures trading volumes (TV), total futures open interest (OI), for selected agricultural commodities such as (wheat, rice, oilseed etc.) for the period mid-2002 to September 2007. Time series of spot market volatility as well as future market volatility and option market liquidity measures will be tested for stationarity. The spot market volatility will be estimated using the GARCH model. The association between spot market liquidity and future market volatility will be tested using a suitable causality test. Based on casualty result, we shall try to develop a predictive model. Close | Top   Performance of Agricultural Futures Markets in India - Dr. Jatinder Bir Singh Exponential growth of commodity futures trading in the last three and half years has generated a lot of debate about its usefulness, linkage to the real economy, and its risk management efficacy. Of special interest to academic researchers, policymakers and the business community is the role played by agricultural futures markets in providing the vast multitude of farmers dependent on agriculture a hedging platform, and its role if any in compounding inflation. NICR endeavours to carry out a performance survey of agricultural futures market since its inception in India in 2003. This study would investigate the price forecasting performance, hedging efficiency, spot and futures price relation, arbitrage opportunities with respect to mispricing of futures prices, convenience yield and backwardation behavior, and temporal price relationships of futures contracts. Price forecasting would be based on the rational expectation hypothesis of futures prices assuming complete information and predicting spot market prices at maturity with precision. The correlation of spot and futures prices, variance comparison of spot prices and basis, as well as more rigorous econometric methodology like GARCH will be used to estimate hedging efficiency. The pricing effects of agricultural futures markets will be appraised for the short run, seasonal and yearly time horizons. We expect our analysis relating to volatility behavior, spot and futures price spreads, successive futures contract price spreads and maturity month price convergence to throw up conclusions with significant policy implications. Close | Top   Efficiency Analysis of Futures Markets in India for Agricultural Commodities: Cointegration and Causality Test Analysis - Dr. Jabir Ali & Dr. Kriti Bardhan Gupta In line with the ongoing global and domestic reforms in agriculture and allied sectors, the government is reducing its direct market intervention and encouraging participation by the private sector. This has led to increased exposure of agricultural produce to price and market risks. This implies a need for a price discovery and price risk management mechanism. This paper analyses the efficiency of agricultural commodity markets by assessing the relationships between future and spot prices of 22 major agricultural commodities in India. Johansen's Cointegration Analysis and thw Granger Causality Test are used. Unit root test procedures such as Augmented Dickey-Fuller (ADF) and non-parametric Phillips-Perron (PP) are initially applied to examine whether future and spot prices are stationary or not. The direction of relationship between futures and spot prices are further analyzed by employing the causality test. Based on cointegration and causality tests, this study categorizes selected commodities based on the level of futures and spot market efficiency. The results of this study provides directions to various stakeholders, such as producers, traders, commission agents, commodity exchange's participants, regulators and policy makers for better decision making. Close | Top   Impact of Risk Management Options for Agricultural Feedstocks of Biofuel Production on Commodity Trade - Mr. Anandajit Goswami The demand for crops for biofuel production has increased agricultural price volatility. The proposed study aims to find out how various risk management instruments like options, futures and forwards could be used for these mitigating price risks. The study would analyze the pros and cons of each instrument along with the barriers in the application of these instruments in the case of specific agricultural commodities used for biofuel production. The study would comprise both secondary literature review and primary survey of stakeholders in India comprising farmer associations, producers, manufacturers, end users of the commodities and biofuel, commodity exchange stakeholders among others. A literature review of price risk management instruments for select agricultural commodities employed in the US and the countries of Europe will be undertaken. The two commodities which would be studied are sugarcane and wheat. Specific trade and policy implications of price risk management instruments for the above mentioned agricultural commodities will be explored. Close | Top   Effect of Reforms on the Indian Commodity Markets and Their Integration into the World Economy - Mr. Anshuman Jaswal The proposed study seeks to understand the degree to which Indian commodity markets have been integrated with international commodity markets. studies have come up with very different conclusions. While Mundlak and Larson (1992) found support for the transmission of global prices into domestic prices, Quiroz and Soto (1993) conclude otherwise. In the Indian case, Sekhar (2004) found that for most of the commodities, there had been a reduction in the volatility of commodity prices after liberalization and globalization. In the Baffes and Gardner (2003) study of the impact of reforms for eight countries, evidence for transmission was found only in three of the cases. Overall, the hypothesis of structural break in prices following the reform year was rejected. The results obtained highlight the importance of the fact that reforms cannot be superficial, but have to actually allow for integration of domestic commodity markets with the global market. Using the methodology adopted by Baffes and Gardner, in the first part of the study it is proposed to test whether there has been any significant integration in the case of Indian commodity markets and if yes, then what has been the nature of it. The second part of the study would look at the effect of volatility and the post-reform behavior of commodity prices. Close | Top   Reforms in Indian Commodity Exchanges: Regulatory Interface between the State and the Market - Mr. CKG Nair Can exchanges, with their apparent conflicting interests of profit maximisation and value creation on the one hand, and regulatory role on the other, rise above ordinary enterprises and minimise the agency problem? Will they reduce information asymmetry and transaction cost in the property right dimension? As governance agencies can they rise above opportunism, avoid moral hazard, achieve credibility and legitimacy and become governance institutions? If so, can we shift to a principle based self-regulation model of market regulation with exchanges becoming true Self-Regulatory Organizations? This Paper analyses these issues and questions from an institutional perspective and following a structure-conduct performance approach. The study will use a combination of descriptive, analytical and exploratory approaches. The regulatory questions will be analysed in terms of the enabling policies and regulations, contract specifications and the tools and practices being followed by the exchanges. The 'legitimacy' question of exchanges as organisations aspiring to become institutions will be analysed broadly following the Williamson-institutional environment, formal rules of the game as well as governance. Exchange governance issues will be analysed by the style of demutualization and corporate practices. Regulatory responses to specific market behaviour will be used as case studies to judge the effectiveness of regulation. Since liberalised commodity futures market are a recent phenomenon, contextual comparison with the securities market will be made. Lessons from major commodity futures markets in the US and UK, following different regulatory models, would also be used for relevant comparison. Close | Top   A Study of Factors Contributing to Higher Volumes in Certain Commodities: The Case of Guar Seed, Chana and Pepper - Mr. Amit Sahita Certain commodities traded on NCDEX enjoy greater liquidity and broader participation. In the Indian context, we have seen significantly higher volumes for agro-commodities such as guar seed, pepper, soya and mentha oil. The objective of the study is to better understand the factors that have led to higher volumes and greater liquidity. Broadly, the factors under study have been divided into (i) investor interest prior to futures being introduced; (ii) seasonality factor and its impact on prices and volumes; (iii) awareness levels regarding futures amongst traders; (iv) presence of NCDEX members in trading areas; (v) corporate participation within these commodities; (vi) greater price volatility; and (vii) regulatory actions. The author proposes to understand the volumes on NCDEX on the basis of seasonality (month-wise, expiry-wise concentration of volumes), geographic concentration (spread of traders in percentage terms across different towns), member-wise concentration (amongst top ten contributing members), client-wise concentration (amongst top twenty clients) , and volumes on NCDEX as compared to overall consumption (demand and supply). This study will help in understanding factors that contribute to higher volumes, impact of regulatory changes on liquidity, awareness levels of participants and correlation with liquidity, and correlation of spread of NCDEX members and volumes. Close | Top   An Enquiry into Efficiency of Futures Trading in Agricultural Commodities in India - Mr. Ashwini Kumar The government's decision of lifting the ban on futures trading of a number of agricultural commodities in February 2003 along with the setting up of nationwide demutualized multi-commodity exchanges has led to the unprecedented growth of futures trading in India. The average daily volume of trade at major commodity exchanges viz. MCX and NCDEX far exceeds that of securities trading at the Bombay Stock Exchange. However, there have been apprehensions about undue speculation in commodity futures trading failing the objective of price discovery and thereby accentuating inflationary pressures. This paper looks into this aspect for selected commodities. Cointegration tests will be carried out to test the efficiency of commodity futures markets and to see whether there is any relation between spot and futures prices. Close | Top   Testing the Efficiency of Agriculture Commodities Market in India - Prof. Sanjay Sehgal & Mr. Abhishek Singh This study looks into the questions of efficiency and price discovery for the agricultural commodities market. It would estimate market efficiency for agricultural markets and also to see if the futures prices are based on cost of carry model, and if any arbitrage conditions are possible between spot and future market. The study intends to look into the working of commodity market in India. The commodity market was established to overcome the inefficiencies of government interventions and wherein free interaction of demand and supply sets the prices. If the market is still working inefficiently what should be done to improve it and what needs to be done. It also looks into the pricing of commodity futures. Future prices are introduced to reduce the overall price volatility of the spot market as future prices play an important role in price discovery. Close | Top   Volatility and Forecasts of Commodity Markets in India - Dr. Sanjeev Gupta & Dr. R. S. Bawa Commodities have emerged as an investment class. Before checking the volatility clustering, data will be checked for stationarity by applying Autocorrelation, Ljung-Box Q statistics, Augmented Dicky Fuller and Phillips-Perron Unit Root tests. In order to test the presence of volatility we will apply the GARCH model. The forecasts will be based on Adaptive Exponential Smoothing, ARIMA and Neural Network Models. Non-disguised structured questionnaire to 400 investors will be administered in order to understand their investment preferences relating to commodity markets. Policy measures will be recommended for enhancing the involvement of investors in commodity markets. Close | Top   Globalization & Commodity Markets: A Study of the Indian Scenario - Ms. Sumalatha B.S There is a paucity of literature on commodity markets for India. The broad objectives of this study are to study the structure of commodity markets in the globalization regime in India, to examine the role of the commodity futures markets in agricultural commodities by taking some selected products, and to examine the existing price mechanisms in the economy. The role of the futures markets in risk mitigation will be analyzed. The major data sources are the reports of National Commodity and Derivative Exchange, Multi Commodity Exchange, National Multi Commodity Exchange India and Reserve Bank of India. Close | Top   Agricultural Marketing Reforms: A case study of Karnataka - Dr. Veerashekharappa & Dr. Ramesh G. Tagat Governments at the Centre and States have presently organized marketing of agriculture commodities through a network of regulated markets. Only about 15 per cent of markets have been brought under the ambit of these regulations. There is need for setting up efficient marketing systems at every level in the domestic supply chain. The Government of Karnataka introduced the reforms in agriculture marketing though the reform of the state APMC bill drafted along the lines of the model APMC Act of the Centre. The bill aims to give the farmers more marketing options. With the implementation of the Act, farmers in the state will be free from the compulsion of selling their produce in APMC controlled markets. But there was opposition from wholesale and retail traders. In this context, the study incorporates the present functioning of the markets and highlights how the new Act of Karnataka will help every participant in the agricultural marketing process particularly farmers. The research methodology to be adopted towards this aims at colleting the opinions of the farmers and other stakeholders associated with agricultural marketing process in Karnataka. This would provide an insight into the misplaced apprehensions of the stakeholders. Close | Top   Futures Commodity Market and Price Gains in Agriculture: A Case Study of Wheat - Mr. Pankaj Kumar Producers of agricultural commodities face price and production risk, thus the need for risk management. One means of reducing these risks is through commodity futures exchanges. The importance of futures trading rests in a transparent pricing and effective hedging mechanism which will help in better price realization. This present study investigates the spot market for wheat in the mandi of Shahjahanpur, Uttar Pradesh. It also studies the various sources of price dissemination among the user groups. An attempt has also been made to study the various marketing channels and also the influence of spot in the price discovery of futures price. The paper is organized into five sections, the first section deals with the scenario of the financially engineered products in both Global and Indian market. The following section deals with the various marketing channels of wheat in Uttar Pradesh. The third section analysis the impact of spot in price determination of futures market. The fourth section studies the various channels of dissemination of price in the market. The final section deals with suggestions. Close | Top   Dynamics of Rural Tribal Markets: Exploring Tribal People's Needs and Experiences - Dr. Suneetha Kandi This study aims to understand the dynamics of unregulated tribal markets (shandies) by exploring the needs and experiences of the tribal people and assessment of the market situation. Although the life style of the tribal people is generally considered to be below average, they possess access to some precious resources, traditions and medical knowledge which the non-tribal people want to acquire. 12 tribal village markets of Andhra Pradesh will be the sampled. In depth study and investigation of the markets will be conducted along with collecting information and opinions of tribal people. The dynamics of these unregulated markets will be studied by way of participatory observations, conducting interviews and focus group discussions. Data pertaining to types of commodities being sold, prices, demand-supply aspects, facilities in markets, future needs, and such other issues will be collected. The findings of the project will also help in framing several policies and initiating action for further expansion of the tribal markets. Close | Top   Evaluation of Alternate Aggregation Models: Rice Cultivators of West Bengal - Dr. Debabrata Lahiri Commodity exchanges like NCDEX or MCX provide trading platforms for trading in different commodities like agro-products, metals and crude oils. As far as agricultural products are concerned, NCDEX used to have trading in rice. Parboiled or raw rice have been the main commodity for farmers of the Eastern region like West Bengal, Assam, and Tripura. Any crop from the farm gate to the ultimate consumer flows through different market channels. Generally, through all these market channels and functionaries the crops are aggregated and further aggregation occur when the crops move from the primary to terminal markets. As the crop aggregates and moves from one functionary to other and from one market to other its prices also increases as to it the commission of the market functionaries, transportation, storage and handling charges are added to it (if there is no speculation at all). Thus at every stage, the producer's share gets decreased as it moves from one stage to the other. Whatever aggregation models the particular crop follows it must provide maximum producer's share in terms of consumer's rupee. The main objective of the study is to make an economic assessment of the various aggregation models of rice for farmers of Eastern India particularly West Bengal and investigate whether through these aggregation models the farmers are being able to maximize their income. Close | Top   Commodity Market: A Necessity for the Indian Economy - Mr. Girish Chandwani This study intends to demonstrate that a developed commodity market is of utmost importance for an agrarian economy like India. They provide the necessary platform for this population to benefit to the fullest. Here the author intends to document the usefulness of agricultural futures trading in jeera and channa (Unjha and Delhi) to farmers. The study will employ both questionnaire based as well as secondary research. The questionnaire will contain questions on socio-economic characteristics, trading and marketing aspects, margins, price discovery modes etc. Close | Top   A Study on the Natural Rubber Market - Dr P.M. Mathew The futures market for natural rubber is of recent origin in the country. While the new system has several advantages, several arguments have, of late, come to further look into its efficacy. This study proposes to examine the relationship between the spot and futures market, especially in relation to its impact on spot price behaviour, and,also in relation to the international spot and futures markets. The study proposes to have a detailed investigation of the natural rubber market, with special focus on the context in which hedging was introduced and rationalised. It will also look into the intricacies of grading as it relates to the demand from the tyre sector, which consumes around 65 per cent of the natural rubber in the country Close | Top