The ban on futures and option trade has left soyabean farmers in Madhya Pradesh associated with farmer producer organisations (FPOs) in lurch as they are forced to sell their produce in local mandis, to traders and nearby processing plants at ”whatever price they quote” in the absence of an efficient price discovery process.
With a big push given for setting up of 10,000 FPOs by the central government, about 1,200-odd FPOs have emerged in Madhya Pradesh alone, the home state of Union Agriculture Minister Narendra Singh Tomar.
Madhya Pradesh is the leading soybean producing state with over 40 per cent share in the country’s total production of around 13 million tonnes. Around 60 FPOs from the state are registered on the NCDEX platform and some had begun taking advantage of the price discovery mechanism but then the ban on soyabean and chana derivatives along with five more agri-commodities for a year till December 20, 2022, left them in disarray and discouraged.
Adding to their woes is the delay and huge deposit amount of Rs 3 lakh that each FPO must pay for getting a mandi licence for trading, according to FPOs.
”I sold 20 quintals of soyabean two months back at Rs 4,500 per quintal at a local mandi. Now the rate is Rs 5,200-5,400 per quintal. Had I known the price of future months, I would have waited,” Shravan Kumar Gujjar (45), a soyabean farmer from Nipania Baijnath village in Agar Malwa district, told PTI.
Gujjar has harvested 30 quintals from his six acres of land. He has sold part of the produce independently this time and is holding the stock hoping to get a higher price in the coming months. Narayan Singh (60), another soyabean farmer from the same village, sold soyabean at Rs 5,450 per quintal a few weeks back in a local mandi but much lower than Rs 7,000 per quintal which he got in January 2021.
Gujjar and Singh are both directors at Avantika Self Reliant Farmer Producer Organisation (ASR-FPO) and had to sell part of their produce to meet the immediate personal and sowing expenses of rabi (winter) crops like wheat and chana which is underway.
Although the price at which these farmers have sold is well above the minimum support price (MSP) of Rs 4,300 per quintal fixed by the government, they claimed the current rates are not sufficient to cover the high cost of seeds and other inputs.
Other members of the ASR-FPO have also sold their soyabean produce on their own as the FPO could not market on their behalf in the absence of price risk management and price discovery mechanism.
However during the pre-ban period, ASR-FPO, established in 2016 with 4,583 member farmers from 32 villages of Agar Malwa district, had made decent gains by actively using the leading agri-commodity bourse NCDEX platform for hedging price risk both in futures and option derivatives of soyabean and chana.
According to young CEO Neeraj Jat (29 year-old), ASR-FPO had sold 1,000 quintals of soyabean in futures trade on NCDEX in 2018-19. In 2019-20, it sold 500 quintals of chana in futures trade,while 900 quintals in option trade.
The FPO, however, did not trade on the exchange platform in 2019-20 and 2020-21 due to the pandemic and ban on futures and option trade. ”We had to sell in the local market to traders and processors. But the profits were too low. On NCDEX, we had earned a profit of Rs 200-300 per quintal on soyabean, the profit in the local market was only Rs 20-30 per quintal,” Jat said.
This year, ASR-FPO members have harvested 90,000 quintal soyabean, out of which, members have sold on their own about 50,000 quintals of soyabean as the FPO could not find better price for them, he said and noted, ”Members are still holding 40 per cent of the soyabean stock hoping the ban will be lifted post December.”
Stating that the price risks were better managed with the help of future and option trading, ASR-FPO Chairman Nanda Kishore Yadav (43 years) said: ”If a farmer gets an indication that soyabean prices are going to increase in next two months, he will keep the produce either at home or rented warehouses. Today, we have to sell at whatever price quoted in the market,” he said.
Yadav also mentioned that FPOs had an advantage trading on the NCDEX platform as each FPO used to get reimbursement up to Rs 5 lakh a year on transportation, labour, gunny bag, quality tests and mandi tax. The difficulties being faced by Samrudh Kisan Producers Company Ltd (SKPCL), another soyabean FPO located in Kandariya village of Ujjain district is no different from the one mentioned above.
SKPCL, established in 2017, has 1,570 member farmers from 22 villages of Ujjain district and the FPO had made a turnover of Rs 4.70 crore in 2021-22 fiscal from the sale of soyabean, wheat, chana, garlic, onion, seeds and potato.
Its CEO Veerandra Singh Songar (31) said SKPCL was active on the futures and option trade till the trading was banned. SKPCL in 2018-19 sold 3,000 quintal soyabean in futures trade on NCDEX, about 800-900 quintal in 2019-20,while 1200 quintal in both futures and options trade in 2020-23, he said.
”After the ban, we don’t get to know the price trend to manage the price risks. For instance, if the auction rate in mandi is Rs 5,600 per quintal, farmers do not have a mechanism to check if this is the right price or not,” he said. Members of the FPO have harvested about 20,000 quintals this year.
Of which, 60 per cent has already been sold at an average rate of Rs 5,000 per quintal individually by farmers, he said adding that the profits farmers got through selling in local mandi is lower than that on NCDEX. ”Right now, farmers are holding some of their stock. If the ban is lifted post December, farmers’ future will be secured,” he added.
Many FPOs had recently made a representation to the Union Finance and Agriculture Ministers as well as regulator SEBI requesting them to lift the ban on these commodities.
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