Constraints and Driving Factors for Farmers’ Participation in the Futures Market: An Empirical Analysis

Dr. Gouri Prava Samal; Pranjali Das

doi:10.36948/ijfmr.2024.v06i03.22370

Constraints and Driving Factors for Farmers’ Participation in the Futures Market: An Empirical Analysis

Author(s)	Dr. Gouri Prava Samal, Pranjali Das
Country	India
Abstract	The governments at central and state level have taken several steps to improve the market linkages for small farmers. More focus has been placed on improving small-scale farmers' access to markets and managing risks since the beginning of the 2000s. Commodity futures and forward markets have developed as a result of this market-oriented strategy. For welcoming advantages, an important proportion of small-scale farmers must participate in derivative markets, either directly or indirectly. Though agricultural producers, individually and in groups, can benefit from the the futures market's price discovery effectiveness in a variety of ways, they are typically hesitant to engage in derivative market activity perceiving it as risky. With this background, the current study was designed with the goal to identify the crucial elements that limit or motivate the engagement of Farmer Producer Organization (FPO) members within the market for commodity futures. Field investigation was carried out in the Nabarangpur district of Odisha. A multi-stage random sampling technique was used in the investigation and a total of 400 responses from farmer members were collected through a structured schedule. Statistical techniques like descriptive analysis, exploratory factor analysis, Pearson's correlation analysis have been used to test the hypotheses of the study. The results of study revealed that all the respondents are aware about the futures market and the two FPO offices are the major source of information on commodity futures market. The exploratory factor analysis discovered that the speculative trading information, spot and futures price discrepancy, minimal intervention of exchange officials for illegal transactions and insufficient contracts and delivery centres mainly obstruct participation of farmers in the futures market. Similarly, stable market for risk management, low transaction cost, availability of storage structure and structured financing with reasonable interest rate are the factors those motivate farmers to engage in the futures market. Finally, it is proved that the correlation between the problems faced by farmers for participating in the market for commodity futures and their respective socio-economic status is statistically insignificant. However, their socio-economic status is significantly correlated to the factors driving them to take part in the commodity futures market. The study's conclusions will undoubtedly provide guidance to lawmakers and regulators on how to proceed with significant changes aimed at enhancing farmers' involvement in the futures market through FPOs.
Keywords	FPOs, Futures Market, Socio-economic, Exploratory Factor Analysis. Pearson’s Correlation.
Published In	Volume 6, Issue 3, May-June 2024
Published On	2024-06-08
Cite This	Constraints and Driving Factors for Farmers’ Participation in the Futures Market: An Empirical Analysis - Dr. Gouri Prava Samal, Pranjali Das - IJFMR Volume 6, Issue 3, May-June 2024. DOI 10.36948/ijfmr.2024.v06i03.22370
DOI	https://doi.org/10.36948/ijfmr.2024.v06i03.22370
Short DOI	https://doi.org/gtzjj9

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Constraints and Driving Factors for Farmers’ Participation in the Futures Market: An Empirical Analysis

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