Post-harvest profile of red gram - Agmarknet

Forward contracts are broadly of two types:a) Specific delivery contracts: Specific delivery contracts are essentially merchandisingcontracts, which enable producers and consumers of commodities to market their produce andcover their requirements respectively. These contracts are generally negotiated directlybetween parties depending on availability and requirement of produce. During negotiation,terms of quality, quantity, price, period of delivery, place of delivery, payment term, etc. areincorporated in the contracts. Specific delivery contracts are of two types:i) Transferable specific delivery contracts (T.S.D.).ii) Non-transferable specific delivery contracts (NTSD).In the TSD contracts, transfer of the rights or obligations under the contract is permittedwhile in NTSD it is not permitted.b) Other than specific delivery contracts: Though this contract has not been specificallydefined under the act, these are called as ‘future contracts’. Futures contracts are forwardcontracts other than specific delivery contracts. These contracts are usually entered into underthe auspices of an Exchange or Association. In the futures contracts, the quality and quantityof commodity, the time of maturity of contract, place of delivery etc. are all standardised andcontracting parties have to negotiate only the rate at which contract is entered into.Benefits:Futures contracts perform two important functions i) Price discovery and ii) Price riskmanagement. It is useful to all segments of economy.Producers:Traders/Exporters:Millers/Consumers:The other benefits of future trading are-It is useful to the producer because they can get idea of price likelyto prevail at a future point of time and, therefore, can decide timeand planning of production that suits them.The future trading is very useful to the traders/exporters as itprovides an advance indication of the price likely to prevail. Thishelps the traders/exporters in quoting a realistic price and, thereby,secure trading/export contract in a competitive market.Futures trading enables the millers/consumers to get an idea of theprice at which the commodity would be available at a future point oftime.i) Price stabilization: In times of violent fluctuations, futures trading reduces the pricevariations.ii) Competition:Futures trading encourages competition and provides competitiveprice to farmers, millers or traders.iii) Supply and demand: It ensures a balance in demand and supply position throughout theyear.iv) Integration of price: Futures trading promotes an integrated price structure throughoutthe country.48