Price Risk Management Options in Wheat, Sugarcane and their Impact on Trade

1. Price Risk Management Options in Wheat, Sugarcane and their Impact on Trade Anandajit Goswami, Associate Fellow Centre for Global Agreements, Legislation and Trade Resources and Global Security Division, The Energy and Resources Institute (TERI) Email I.d. – anandjit@teri.res.in, anandag80@gmail.com An Outline of the Proposed Study

2. Structure of the Presentation • Research Problem • Research Methodology • Research Questions • Potential Data Sources • Possible Outcomes

3. Research Problem • What is the possible price risk of commodities like wheat , sugarcane pertaining to increased demand of these commodities for biofuel production? • What impact could the possible price risk management instruments have on the trade values of wheat, sugarcane?

4. Research Questions • What is the possible price risk of commodities like wheat , sugarcane pertaining to increased demand of these commodities for biofuel production? • Is there any possibility of price risk arising from the growing demand for wheat, sugarcane for biofuels? • Are there any linkages between the spot prices of wheat, sugarcane with rise in biofuel production? • Are there any differences in the nature of the price risks in the two commodities? • Are there any overlapping factors contributing to price risks in these two commodities?

5. Research Questions • Are there any differences in terms of the price risks once the spot and future price trends are considered? • Does the price behavior in futures market indicate that on the physical market?

6. Research Questions • What impact could the possible price risk management instruments have on the trade values of wheat, sugarcane ? • How does that impact the trade value of the two commodities? • Is there a need for regulation, capacity building for the management of price risks in these commodities? • Is there a need for administrative systems for registering, monitoring and auditing trading decisions? • What role commodity exchanges could play?

7. Research Methodology • Literature Review • Qualitative Analysis • Quantitative Analysis • Secondary Data Analysis • Primary Survey

8. The Two Perspectives • The research methodology would be carried out through two perspectives – • International Scenario • Indian Scenario

9. Research Methodology • The research questions associated with - • linkage between the spot prices of the selected commodities • possibility of price risk arising from the growing demand of selected commodities for biofuels • differences in the nature of the price risks in the two commodities • overlapping factors contributing to the price risks in these two commodities • TO BE CARRIED THROUGH LITERATURE REVIEW and QUANTITATIVE ANALYSIS

10. Research Methodology • The Research Questions associated with – • Application of futures, options for a predictable revenue from trade (export, import) in these commodities • Assessment of the consumption pattern of the produced commodities • Analysis of how demand in one country for these commodities really impact the prices of the commodities in another country • Examination of how growth of national and regional markets, price risks impact commodity trade flow • Assessment of the regulatory needs • TO BE CARRIED THROUGH QUALITATIVE AND SECONDARY DATA ANALYSIS, PRIMARY SURVEY AND STAKEHOLDER DISCUSSIONS

11. Research Methodology • The research question associated with – • Impact of spot and future prices of wheat and sugarcane on the trade value of the two commodities • Linkage between the price behavior in futures market and the physical market • TO BE CARRIED THROUGH QUANTITATIVE METHODS (ECONOMETRIC TECHNIQUES, STATISTICAL TECHNIQUES)

12. Potential Data Sources • UNCTAD Reports • Report of International Task Force on Commodity Risk Management • Report of International Food Policy Research Institute • Publications by MCX, NCDEX, MCE • Publications on Commodity Risks • FAO Reports • World Bank Reports • IISD Reports • Data through Primary Survey of Stakeholders

13. LINKAGE BETWEEN RESEARCH PROBLEM AND OUTCOME Analysis of how price risk impacts the trade in commodities like wheat, sugarcane Analysis of the possible price risk in commodities like wheat, sugarcane owing to demand for these commodities for biofuel producton • Better understanding of – • implications of possible price risks of wheat, sugarcane on trade • policy strategies for implementing suitable price risk management instruments for facilitating commodity trade • regulatory and administrative needs for price risk management in facilitating trade in wheat, sugarcane through management of possible price risks • role of Commodity Exchanges in attaining the objective of practical implementation of price risk management instruments/practices for facilitation of trade in commodities Analysis of how price risk management instruments impact the trade in the selected commodities

14. Possible Outcomes • Understanding of implications of possible price risks of wheat, sugarcane (owing to increase demand for biofuel production) on trade • Examining what policy should be taken for unhindered trade in these commodities through price risk management • Analyzing the role of the commodity exchanges in facilitating trade flows through application of price risk management instruments

15. THANK YOU