Introduction

This chapter introduces the topic and covers the literature on the development of institutions and technology for futures markets, farmer market access, and key enablers of their market access. Futures trading in agricultural commodities has been introduced but not yet attracted significant participation, especially of producers. While the futures markets should help in price discovery and risk management, there is considerable debate in India on their usefulness and impact. The participation, direct or indirect, of a good number of small holders in the derivative markets is important for inclusive benefits and impact. However, small farmers are often reluctant to engage in risky or entrepreneurial activities in the absence of effective risk mitigation measures. The International Task Force on Commodity Risk Management of the World Bank recommended the formation of farmer organizations to improve participation of small farmers in derivative markets, and this has made limited progress. The literature indicates that the institutional push for aggregation during 2007–2008 had encouraged farmer participation by Gujarat farmers in cotton futures market. Also, the futures price information helped many farmers to develop better spot price expectations for cotton, castor, and guar seed in pockets of Gujarat. However, most initiatives did not continue and were largely pilot in nature. Two development organizations, Aga Khan Rural Support Programme (India) (AKRSP) and Self-Employed Women’s Association (SEWA), facilitated farmer price information access or participation in hedging the price risk. In 2002–2003, a new form called the Farmer Producer Organization (FPO) or Farmer Producer Companies had been introduced which had elements of a corporate and a cooperative. The number of these entities is relatively more in the states of Madhya Pradesh (about 90), Gujarat (20), and Rajasthan (36). They have exploited the scope of newly promoted exchange-traded forward contract in certain commodities.