INFLUENCE OF FUTURES MARKET ON PRICE BEHAVIOUR OF TURMERIC IN INDIA
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Date
2015
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ACHARYA N.G. RANGA AGRICULTURAL UNIVERSITY, GUNTUR
Abstract
The present study entitled “Influence of Futures Market on Price Behaviour of Turmeric in India” was undertaken to study the marketing practices of turmeric farmers, price forecasts, the extent of market integration among turmeric markets, the relevance of futures on price behaviour of turmeric, price volatility and export competitiveness.
The study was conducted in major turmeric markets in India viz., Kadapa, Duggirala and Nizamabad (Andhra Pradesh), Sangli (Maharashtra) and Erode (Tamil Nadu) which were purposively selected based on the maximum quantity of arrivals. The data pertained to the period from January 2001 to December 2014. The interdependence between futures and spot prices of turmeric was analysed using daily closing futures prices for the year 2014 collected from NCDEX and their respective spot prices from AGMARKNET. To study the marketing practices of turmeric farmers, Nizamabad district was purposively selected as it ranked first in area and production of turmeric in India. The study covered two mandals, four villages and 60 randomly selected farmers. To study the marketing costs and margins, a sample of 5 from each of the market intermediaries were selected randomly. The primary data for the year 2013-2014 were collected through a pre-tested schedule by survey method.
The analysis of marketing costs and margins revealed that the producer received relatively higher share of consumer’s rupee in channel III over channel I and channel II in the case of dried turmeric, whereas in the case of turmeric converted into powder, the producer’s share in consumer’s rupee was higher in channel V over channel VI. The producers of turmeric
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realized 60.71 and 50.56 per cent of the consumer’s rupee in channel III and channel V respectively which appeared to be reasonable in the light of functions performed by various functionaries. The price spread was lower for dried turmeric when it was sold directly in the regulated market yard. When dried turmeric was exported, exporter incurred higher cost and also realized a higher margin. The retailer realized higher margin by incurring higher cost compared to other intermediaries involved in the disposal of dried turmeric and turmeric powder in the domestic market.
The results of ARIMA model for turmeric indicated that the per quintal prices from January to March, 2015 would be ranging from ` 5,446 to ` 5,496 in Kadapa market, ` 5,350 and ` 5,399 in Duggiarala market, ` 5,916 to ` 5,972 in Nizamabad market, ` 7,253 to ` 7,330 in Sangli market and ` 6,532 to ` 6,581 in Erode market. When the forecasts were compared with the real time prices, it was observed that trend analysis and decomposition fit were relatively closer to real time prices of turmeric in Kadapa, Duggirala and Sangli markets, while double exponential smoothing and decomposition fit were better in Nizamabad market and ANN with regard to Erode market.
Monthly price series in the selected turmeric markets became stationary after taking first difference as revealed from ADF test. Johansen’s Multiple Co-integration test revealed the presence of three co-integrating equations at five per cent level of significance and confirmed the long run equilibrium relationship among the markets. Except Kadapa market, all the remaining markets attained short run equilibrium. The prices of turmeric in Sangli and Erode markets were influenced by their own monthly lags for the long run equilibrium. The causality test revealed a bidirectional influence of turmeric prices between Duggirala and Kadapa, Nizamabad and Kadapa and Erode and Nizamabad markets.
The findings of the ADF test suggested that daily futures and spot prices in all selected markets attained stationarity at their first difference. The co-integration test revealed the presence of three co-integrating equations at five per cent level of significance and indicated long run equilibrium relationship between futures and spot prices of turmeric in all the selected markets. The spot prices of Duggirala, Nizamabad and Erode attained short run equilibrium. The spot prices of all the markets were influenced by their own daily lags. Futures prices influenced the spot prices of Kadapa, Duggirala and Erode by one day lag and in turn were influenced by the spot prices of Kadapa. The causality test proved the unidirectional causality between futures and spot prices indicating that futures prices influenced the spot prices in all the selected markets but not vice-versa.
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The price series of Duggirala and Nizamabad markets showed the presence of price fluctuations as indicated by the sum of Alpha and Beta coefficients which were nearer to one whereas in the remaining markets, the volatility shocks were not quite persistent. Volatility in futures prices was also observed from ARCH-GARCH analysis. Nominal Protection Co-efficients were found to be below one indicating high export competitiveness of turmeric.
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D5123
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