We as a nation are hardly futuristic which costs us dearly in many fields. In this context, the most recent introduction of crude oil futures at the National Commodity Exchange Limited would inevitably fuel the otherwise lukewarm future commodity market by boosting trade volumes.
Prior to this, the sword of oil price volatility chopped number of business around mainly due to the absence of shielding oneself against unfavorable movements. Therefore, the dollar-denominated contracts would allow direct association with the international market, which being more liquid would facilitate a relatively more rational future trade through the local platform.
Although, the introduction of oil futures in the local market is commendable but predominantly being an agri economy, the country needs to be more focused in nurturing the agri-based future commodity market, which is largely dull and undeveloped as these words are being written.
Just one of major commodities, rice, is currently being traded in the futures market but its progress to date has been rather lackluster for a variety of reasons, which need to be addressed in order to reap the gains. It would indisputably lead to the growth of other futures contracts, related to agricultural products including wheat, maize and sugar etc.
The need of the time is to introduce main crop commodities such as wheat and sugar to the future list as it provides transparency that leads to well-organized price discovery. But, the lack of awareness among masses and largely unregulated farmers community, the farmers get exploited as the absence of a rational market robs them of their deserved crop prices. The development of futures commodity market facilitates the stakeholders by providing them the necessary price barometer and comparable price structure throughout the country.
Some suggestions in the direction of making marked improvements in the agri-related commodity market wouldn go a waste. First, there is a dire need to create commodity futures awareness among masses, especially among farmers, as their unawareness and illiteracy deprive them of potential benefits that are there to be taken.
Taking the commodity and trade associations, for instance, Rice Exporters Association of Pakistan and Trading Corporation of Pakistan, on board and involving them to ensure their active participation in the future markets should also send vibes of hope and trust among the farmers.
Lastly, given the under-developed nature of our market in the broader context, seeking guidance from foreign consultants such as USAID would also be of great benefit. But, the worrying sign is the low volumes in futures market are partly because of the reasons mentioned above and partly because of the low acceptance of the future trading in our predominantly Islamic society. So, the related authorities need to work on the former in order to maximize the volumes as resolving the latter issue seems highly unlikely.