1. Forward trading in agribusiness involves risks associated with seasonality, price fluctuations, and perishability of agricultural commodities. It allows farmers to hedge against these risks. 2. Inventory management is important in agribusiness due to the perishable nature of agricultural raw materials. It involves costs of storage, losses during storage, and preventative measures. 3. Forward markets provide benefits to farmers such as assured pricing, risk shifting to buyers, and dissemination of market intelligence to inform production decisions. It facilitates smooth flow of produce from farmers to consumers.

1. Forward Trading In Agribusiness Presented By Sarita Das

2. Seasonality Of Production Demand for the Product through out the year. Price may goes up and down according to demand and supply and availability. Risk in marketing as well as procurement of such commodities is very high. Risk means danger arising from the uncertainty of future prices. Peculiarities Of Agricultural Commodities

3. The inventories which are kept by the household are now the Risk is associated with inventories by the players in supply chain. The supermarket and organized retail chains who handles large number of commodities/products, depend on highly effective supply chain management to reduce the risk and cost of inventory. Less perishable and high perishable in raw forms are vegetables ,fruits and milk ,higher the risk of perishability,lower the opportunities for speculation on prices the risk can be reduced by improved techniques of handling ,transport and storage is used to preserve the quality and reduce deterioration. Continued

4. Loss of crops at farmers level Loss of crop and damage during shipment Loss of crop during storage Price risk Accident Risks Changing Environment Risks Types of risks involved in marketing/procurement of agricultural commodities

5. Gather as far as possible accurate and reliable information about the conditions determining the present and future supply and demand condition and then plan the procurement and inventory operation. Match stock by specific delivery” forward sale’. Calculate maximum inventory one can have in mind keeping in mind total cost of inventory of commodity plus cost of storage. Keep inventories of processed or manufactured commodities instead of raw materials.(ground oil instead of ground seed. When the risk is minimized the total marketing cost is reduced. Minimize the risks of price variation

6. Three tiers of regulation of commodities forward trading in India. Central govt (Ministry of Agriculture, Department of Consumer Affairs and recognized Commodity Exchange/Associations. In forward trading where future contracts for goods and stocks are sold for future delivery. A future contract purchase is made now at the quoted price while actual delivery takes place on future date to be specified in the contract. Speculation –Purchase and sales in cash as well as in future markets are made with the objective making profit. The activity of buying and selling are not necessarily opposed to each other. It is not necessary that the two types of transaction should be of equal quantity. Under speculation the speculator purchase goods and sells them when prices rises as per his expectations Forward Trading

7. Hedging-The purchases and sales in cash and futures markets are made to protect oneself against excessive price fluctuations. The activities of buyer and sellers are always opposed to each other. It is obligatory to buy and sell the goods in equal quantities in the two markets. The commodities are not stored by traders. Only the difference in the price is given or taken on the due date.

8. Smooth flow of produce from farmers to the consumer. Merchant can purchase goods from farmers at any time and even in advance of production. The farmers enjoy freedom in marketing, he can sell his produce to any merchant he wants and once the contract is signed he is sure of money he is going to get.Somemay sell futures against stock of the produce Benefits of forward Market to primary Producers

9. While the farmers hold the stock of commodity he has already sold the risk and cost associated with stocking are passed to the buyer. Thus the risk shifting benefits the farmers directly. Futures prices affect the farmer’s production are more reliable than historic data and hence more helpful for crop sowing decisions. This is because these provide market expectation of the future. There is wide dissemination of market intelligence in variety of commodities. The dissemination takes place through newspapers, broadcasting over All India Radio in regional languages, TV channels ,websites and organization like e-choupal of ITC ,krishi vigyan Kendra etc.

10. Inventory- In simple terms inventory means keeping stock of raw materials and finished product in stock. In procurement management primarily concerned with inventory of raw materials at purchasing stage and before production stage. In supply chain management where integrated approach is followed where inventory is spread through out the chain from raw materials at purchasing stage ,work in progress intermediary and semi finished products and finished goods. Inventory Management in Agribusiness

11. Agricultural raw materials are perishable in varying degree. Food grain to protect these from pest, rodents and microorganism. Keeping inventory means cost of protecting the food grains without much loss of quality and quantity. Some agriculture produce are highly perishable such as milk, vegetables and other horticultural crops..These materials must consumed or processed immediately or the product suffers significant loss in quality, quantity and economic value. Perishability and Seasonality Of Agriculture Produce

12. Some food grains are seasonal they are generally stored till next harvest. So various public sector unit started Procuring FCI,CWC,SWC. Though they are seasonal and highly perishable in nature there must be proper adequate facilities for post harvest management practices for handling the produce. For such crops scientific management at production and post harvest stages must go hand in hand with business management to assure the quality and quantity at reasonable price. Continued

13. Infrastructure Cost- Cost of capital invested for godowns,cold storage etc.It can goes on hired basis then rent paid for them. Material Cost- Cost of raw materials including price and cost incurred in handling, packaging and transport. Cost due to losses during storage-Weight loss, loss due to pest and disease attack,spoilage,deterioration of quality. Cost of preventive measures. On chemicals (pesticides and Insectides used and other preventives measures. Miscellaneous cost. Covering security, theft and insurance. So proper planning and use of scientific and technological methods including the modern information technologies can go along way in reducing mismatch between supply and demand Cost Involved with Inventory and Procurement Stages