Multi Commodity Exchange of India Ltd (MCX) has recorded a strong physical delivery of 8,280 tonnes in September of Agra potato contract, which expired on the 14 th of the month, thanks to a robust delivery mechanism and knowledge of physical market intricacies.
The settlement rate (DDR) of the potato Agra contract was Rs 620.40 per quintal.
?This record delivery reaffirms the fact of the exchange?s deep domain knowledge about the futures and physical commodity markets,? said Sanjit Prasad, vice-president of MCX.
Agra potato accounts for 40% of the total Indian potato crop estimated at around 26-27 million tonne annually.
?Farmers are among the biggest beneficiaries of futures trading in potato,? he said.
Prior to MCX, the farmers had no clue on prices beyond a day and, therefore, no incentive to hold potatoes post-harvest. Now, with a range of prices available to the farmer, thanks to futures trading of the commodity, he can decide to sell his produce immediately or much later, based on prevailing futures prices one, two or three months post-harvest, he added.
Farmers can sell potatoes on the exchange if quality and quantity parameters match futures contract specifications or they can sell in the spot market, wherein prices have over 90% correlation with futures prices.
Irrespective of whether a farmer sells spot or futures potato, he gets a price very close to the latter. Therefore, a farmer benefits from MCX directly by selling on the exchage or indirectly by selling in the spot market, he said.
The other benefit of storing produce in an exchange certified warehouse or cold storage is availability of bank credit against warehouse receipts at rates of interest much cheaper than those charged by other sources. Farmers can avail of such loans at 2-3% below banks? prime lending rates and thus avoid being victims of a distress sale, he said.