Mr. Avinash Mohan, Executive Vice president – NCDEX discusses vital role of NCDEX in animal feed industry

Please share your views on the role that NCDEX could play in animal feed industry.

As a national platform to facilitate price discovery and risk management in the commodity space NCDEX could play a vital role in animal feed industry. Raw materials like Maize, Soymeal & other grains contribute approximately 80-90% of total feed cost. This makes this industry highly sensitive to price volatility. Historically we have seen that these commodities are volatile which exposes the industry to substantial risk. NCDEX provides an effective tool for price risk management. The feed industry is increasingly using this platform to offset their price risk. The other requirement of the feed industry is consistent supply of inputs which is also fulfilled by both NCDEX Forwards and Futures. The industry value chain has started taking deliveries of commodities through NCDEX platform.

 What kind of response you are getting on forward marketing concept?

The exchange has launched exchange-traded forward contracts named as “AGRIM SAUDA”. It’s a new concept and NCDEX is the only exchange to offer this segment in India. In the physical markets, trading forward contracts is a prevailing practice but there are huge risks associated in terms of price transparency, quality & quantity defaults. With exchange-traded forwards, all these challenges can be overcome. We have seen a good response from value chain participants for these contracts and active trading has been seen in Maize, Sugar, Castor, Turmeric, Coriander & Jeera. In Maize alone, exchange has delivered more than 4000 tonnes of goods through the Forwards segment. However these are early days and there is need to create awareness and explain the benefits of these contracts to the trade participants. On the back of the extensive outreach programs that the Exchange is conducting and the encouraging response received so far, we are positive that the forward contracts will bring about a paradigm shift in the physical trade in times to come.
What kind of initiatives could NCDEX take to involve Indian feed manufacturers?
We are closely working with Feed industry to align our products to meet their evolving requirements. In view of the emerging demand for Rabi Maize from Bihar, the Exchange has launched an innovative revolving basis centre concept for Maize. Gulabbagh is the basis centre for Rabi Maize and Nizamabad is the basis centre for Kharif Maize. This triggered an infrastructure revolution in areas earlier largely neglected for want of suitable infrastructure. This has not only benefitted the farmer in terms of better prices but also the procuring feed companies who were now able to get consistent supply at benchmark prices.
Could you throw some light on the status of integrating physical market?
Creating a national market for agriculture would help remove market distortions, create a level playing field for stakeholders and promote efficiency. It will remove the bottleneck in the supply side as it would allow a corporate/ buyer to work across the states and will help farmers get increased returns. Recognizing that farmers need to be incentivized through realization of reasonable prices for agricultural production, the Government has re-emphasized the creation of Unified Market Platform (UMP) as a way forward.
The UMP brings international best practices to offer risk management and trade fulfillment processes for spot markets in the state and also brings the allied services of scientific warehousing and grading under one platform. At NCDEX we have been working with several state governments to help them modernize their APMCs and also help them procure their commodities or sell their commodities for various welfare programs like MSP, PDS. We have been doing that through our subsidiary NCDEX e Markets Ltd.(NeML). The ‘Karnataka Model’ finds notable mention in the latest Economic Survey. With the government allocating Rs. 200 Crore under the central-sector scheme for promotion of national Agricultural Market through Agri-Tech Infrastructure Fund (ATIF), the migration towards a national market through implementation of a common e-platform for agri-marketing across all states seems a definitive reality.
We believe that last year an MOU has been signed between NCDEX and CLFMA. Could you spell out its main features?
NCDEX works closely with industry bodies to steer the development of the industry. Our MOU with CLFMA is a step in the same direction, wherein we are committed to undertaking joint efforts towards increasing the awareness of risk management solutions for the poultry and feed industry which is one of the most growing industries in India. Our efforts are focused on providing a transparent, national, online marketplace for the trade and help in efficient hedging and procurement for the industry.
Could you please share with us the theme and the purpose of recently concluded Maize Summit 2015 held in association with FICCI?
Maize production in India has increased at ~4.2% CAGR from ~19.7 million tonnes 2008-09 to ~24.3 million tonnes in 2013-14. However, its share in global production is only 2.5% and in recent past, exports from India have been limited (only ~3% of global exports in 2013-14) due to relatively lower quality and higher price. Going ahead, there lies immense long term potential to increase India’s importance in global maize landscape. Right from yield & quality enhancement to realization improvement to loss reduction, there lie opportunities galore. However, realizing it would require a focused, planned and collective effort from each stakeholder throughout the value chain right from production to marketing to storage.
The focus of the Maize summit has been to encourage collective brainstorming and debate. The summit was an attempt to take a macro outlook for Maize and the demand potential of Indian Maize from South East Asia. It provided a platform to ideate the way forward to place Indian maize on the global map. The objective was to identify key development areas and invite collaborative solutions & ideas from a diverse set of minds.
In order to achieve its objective, we partnered with FICCI to bring together stakeholders across the value chain including technology providers, producers, infrastructure providers and policy makers. The outcome and recommendations will then be presented to the policymakers.