Agriculture

MCX offers cost effective mode for Risk Management

Cotton Price Risk Management Seminar organized at Bellary by MCX highlights the challenges of global commodity markets being faced by India
MCX offers cost effective mode for Risk Management

In view of high volatility in commodity prices and to protect profitability margins of the cotton value chain participants, Multi Commodity Exchange of India Limited (MCX) offers an efficient hedging platform and an cost effective mode for risk management, a senior Cotton Industry representative said.

Addressing a seminar on Cotton Price Risk Management, jointly organised today by MCX and Bellary Cotton Association in Bellary (Karnataka) V Ravi Kumar, President, Bellary Cotton Association said, “ India is a major producer and exporter of cotton, and in the recent years Indian cotton industry has been enormously exposed the to the global price mayhem and as a result, high volatility has been seen in the commodity’s prices, which needs to be addressed to protect profitability margins of the cotton value chain participants.”

“There definitely can’t be a better alternative than commodity derivatives exchanges such as MCX, which offer an efficient hedging platform, and a cost effective mode for risk management,” he added.

The programme was aimed at educating the cotton stakeholders about the need to manage price risks and volatility associated with cotton prices. They explained in detail about the MCX cotton contract, which has been well accepted by the cotton value chain players across India─millers, ginners, exporters, and spinners, among others. The interactive session further focused on fundamentals of commodity trading, introduction to cotton futures, benefits and importance of hedging.

The experts while highlighting about the benefits of commodity derivatives market in India, explained that, besides the primary benefits of its twin economic functions of price discovery and price risk management, commodity futures market has also played an instrumental role in integrating various fragmented components of the commodity ecosystem, thus developing the infrastructure of agricultural commodities marketing in the country.

N Muthappa, Assistant Vice President-Business Development, MCX said, “The increased linkage of Indian markets with global markets coupled with increasing share of cotton exports amidst high production have resulted in high price volatility. This trend continues unabated, implying that high price volatility is rendering large sections of the cotton economy — from farmers to millers — vulnerable and often unviable.”

“ It is essential that the cotton stakeholders embrace price risk management to not only protect themselves against high price volatility but also to stay competitive,” he said.

MCX offers the benefits of fair price discovery and price risk management to the Indian commodity market ecosystem. Various commodities including agri produce are traded on MCX. The exchange has forged strategic alliances with various Indian and International commodity exchanges and business associations. 

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