FUTURES MARKETS AND PRICE RISK MANAGEMENT: EVIDENCE FROM INDIAN RAW JUTE MARKET (Pages 53-68) by Dr. Ansuman Sahoo* and Mrs. Gouri Prava Samal** in THE INTERNATIONAL MANAGER / ISSN: 2348-9413 (Online); 2348-9405 (Print)

In an agriculture-dominated economy like India, farmers face not only yield risk but also price risk as the Government has reduced its direct market intervention to encourage private participation based on market forces. This has led to increased exposure of agricultural produce to price and other market risks. Commodity derivative market is recognized as one of the well-known instrument that has been devised to achieve price risk management. In this context, an attempt has been made in the present paper to evaluate the effectiveness of commodity derivative market in the management of price risk with reference to the raw jute derivative market in India. The study utilized daily futures price and spot price data of Raw Jute provided by National Multi Commodity Exchange (NMCE) during the period 2010-14. Trend of spot and future prices in raw jute was analyzed by using descriptive statistical measures, like mean, standard deviation and coefficient of variation. Empirical evidence suggests a higher extent of variation in spot and futures prices of raw jute. However, spot prices marked an equal variation as that of futures prices in raw jute market. Price volatility is somewhat equal in all seasons over the study period. Futures market in raw jute manages price risk efficiently as basis risk is found lower in comparison to spot price risk. Thus, it would provide an additional advantage for the hedger to enter the derivative market in order to share price risk effectively. The results of this study are useful for various stakeholders who are actively participating in agricultural commodity markets such as producers, traders, commission agents, commodity exchange participants, regulators and policy makers. Keywords: Commodity Market, Price Risk Management, Futures price, Spot price, Raw Jute.