Debunking Myths: Impact of Commodity Derivative Suspension on Agri Ecosystem

Studies from BIMTECH, Noida, and SJMSOM, IIT Bombay analyze the impact of suspending commodity derivatives on Exchange Traded Commodities (ETCDs). Findings reveal that derivative contracts are vital for price discovery and managing risks. Suspension leads to inconsistent pricing and undermines market trust, emphasizing the importance of derivatives in agriculture.

In a groundbreaking analysis, researchers from BIMTECH, Noida, and SJMSOM, IIT Bombay address the fallout of suspending commodity derivatives on Exchange Traded Commodities (ETCDs). These studies conclusively show that derivatives contracts are integral to price discovery and risk management for farmers and market participants.

The BIMTECH study, led by Dr. Prabina Rajib, unveils the negative impact on commodity markets following the suspension, highlighting its role in causing price volatility. The absence of derivative contracts has led to disjointed pricing at local markets and inflated retail prices for edible oils.

Conversely, SJMSOM's research negates the assumption that derivative trading inflates market prices, proving that both suspended and non-suspended commodities faced similar price trends post-suspension. Experts argue that reinforcing commodity derivatives trading is crucial to supporting farmers and ensuring a robust agricultural economy.

(With inputs from agencies.)