Futures contracts perform two important
functions:
Price Discovery
Price Risk Management
Farmers
Efficient
Price Discovery/Forecast made by the exchange will
enable farmers decide cropping pattern and investment
on inputs.
Price Stability resulting from
equilibrium in supply and demand for a Commodities
would be possible through exchanges.
Get an extensive market opened
for them.
Get opportunity to trade, knowing
the national and international trends and standards.
Can sell the Commodities to the
customer without any agents.
Can decide the market even before
harvest.
Get an opportunity to gain profit
by spending only a small percentage of the actual
Commodities price.
There is an opportunity to keep
the Commodities in the warehouse and use the warehouse
receipt to deal with financial needs, as it is an
endorsable document. Can avoid deliberate decrease
in price in the name of quality.
Farmers can trade by asking the
help of the experts in trading organizations even
if they are computer illiterate.
Traders
Can trade by spending only the
margin amount.
Can sell the Commodities that
he buys from the ready market and can rescue himself
from the loss happening from price fall.
For those who have kept their
Commodities in the Central Warehouse, loans are available
on the basis of the stock. The benefit is that you
can keep the Commodities somewhere without blocking
the working capital in the stock.
Consumer,
Industrialist & Exporters
Can be sure that the Commodities
is available when they require it.
Can calculate the price since
it is predetermined and can arrange everything according
to that.
Can buy goods without agents.
Can buy them even while sitting
in their office.
Can be assured the quality of
the good.
Commodities can be purchased
with only margin amount instead of giving the whole
price.
