MCX, Spices Board organise seminar on price risk management for cardamom farmers in Gangtok

Kolkata: The Multi Commodity Exchange of India and the Spices Board of India on May 3 jointly organised a seminar in Gangtok on cardamom price risk management for farmers in Sikkim, a leading producer of large cardamom, the main cash crop in the state.

The speakers explained the need to manage risks and volatility associated with cardamom prices while highlighting the benefits of cardamom futures contract offered by MCX, which has been well accepted by its stakeholders— farmers, exporters, marketers and processors.

Cardamom is among the crops which earn significant foreign exchange for India. Production of the commodity has increased since the introduction of the futures trading in it, which has helped in setting up the right marketing channel and formal market platform.

MCX officials explained in detail how cardamom farmers have benefited from access to the national level electronic futures exchange. They explained that the prices discovered on the only cardamom futures exchange have emerged as a benchmark price for all grades of cardamom. Without this benchmark, they said, cardamom farmers and other stakeholders would not have a national-level real-time reference price.

They said the variety of cardamom whose price is discovered on the MCX platform is a well-accepted grade for export purposes and in the domestic retail market. The quality consciousness induced in the value-chain on account of the preference for MCX-grade cardamom has led to farmers increasingly opting for grading of their produce to ensure better realisation, they said.

Studies by the United Nations Conference on Trade and Development (UNCTAD), IIM Kozhikode, etc. have recorded the significant benefits that accrue to cardamom stakeholders, particularly farmers, from the efficient price discovery and dissemination platform that MCX provides for cardamom.

Vibhor Tandon, assistant vice president-business development at MCX said, “In addition to serving their most important role as a price risk management tool, cardamom futures contracts also help farmers by empowering them to make better cropping, selling / buying decisions, improving flow of information across the entire cardamom ecosystem, increasing farmer’s share of the price paid by end consumer, developing better storage, grading infrastructure and improving access to finance.”

Chandra Sekhar Ghatani, assistant director, Spices Board of India (Gangtok division) said, “Despite the rapid growth of the Indian economy for the past two decades, the agriculture sector has not kept pace with other sectors. Farmers often lack access to crucial information, which limits their ability to obtain fair prices for their crops.”

Ghatani said that many farmers have to deal with corrupt middlemen who take advantage of their lack of market information. In this regard, the efforts of commodity exchanges such as MCX are commendable in bridging this knowledge gap by empowering farmers with access to a nationwide electronic platform for market players to buy or sell commodity futures contracts, in this case cardamom derivatives contracts, facilitating efficient price discovery mechanism, he said.