FURTHER FEASIBILITY STUDY OF WHEAT BASED CONTRACTS

INDEX• Executive summary• Wheat Data• Existing contract• Objective • Research methodology• Analysis and Key findings

– Client interaction– Mandi visit– Tradeflow analysis

• Conclusion• Bibliography

EXECUTIVE SUMMARY India is 2nd largest producer of wheat after china with total production of around 90 MMT.The project emphasizes on studying the existing contract, exploring the data related to production, Consumption and market of the commodity wheat.There was interaction with traders across the states and visit to mandi’s to sense the physical market and actual tradeflow across the states.The analysis was made based on the verities of wheat, their prices in all the regions and the dispatch centers (major consumption market).

WHEAT DATA Major wheat producing states in India:

Uttar Pradesh Punjab Haryana Rajasthan Madhya Pradesh Gujarat

Total production of wheat in India in 2014-2015 was 93 MMT and UP(Approx 35%) is the leading producer followed by Punjab(Approx 20%).

MAJOR VARIETIES Sharbati Lokwan Mill quality Malwa Raj/Malwa shakti Tukadi PD 147 4037,1544

BROAD CLASSIFICATION

Bread (Triticum Aestivum)

• It contribute around 95%• Uttar Pradesh, Punjab, Haryana, Rajasthan,

Bihar, West Bengal, Assam, Parts of Madhya Pradesh, Himachal Pradesh, Jammu & Kashmir

T.Durum(Macaroni)

• It contribute around 4%• Madhya Pradesh, Maharashtra, Gujarat,

Southern Rajasthan and few locations in Punjab

T.diccocum(Emmer Wheat) • It contribute around 1%• Karnataka, Maharastra & Tamil Nadu

EXISTING CONTRACT

Type of Contract

Futures Contract

Name of Commodity Wheat

Ticker symbol WHEAT Trading System NCDEX Trading System Basis Ex- Warehouse Delhi exclusive of Sales Tax/VAT Unit of trading 10 MT Delivery unit 10 MT Maximum Order Size 500 MT

Quotation/base value Rs/Quintal

Tick size Rs. 1.00

Quality specification

1. Damaged Kernel (Other than infestation damaged)

2% max. The limit of ergot affected grains shall not exceed 0.05 percent by weight

2. 3.

Infestation damaged Kernel Foreign Matter (Organic/Inorganic)

1% basis 1% max (minerals not more than 0.25% and animal Origins not more than 0.1%)

4. Other edible grains 2% max

5. Shrunken / Shriveled / Broken grains (not damaged)

5% basis

6.

Total defects sum of : a) Foreign Matter b) Other edible grains c) Damaged Kernel

(Other than infestation damaged)

d) Shrunken/Shriveled/Broken grains (not damaged)

10% basis The limit of ergot affected grains shall not exceed 0.05 percent by weight

7. Moisture 11% basis. 8. Test Weight 76 Kg/hl basis

Quantity variation

+/- 5 %

OBJECTIVE• The main objective of the project is Further Feasibility Study Of

Wheat Based Contracts in North & West.• The project was to study the existing contract with all the details,

exploring the data related to production, consumption and market for wheat so as to analyze the patterns of wheat trade flow.

• It is also to know the feasibility of new contracts or change in the contract and addition of any new variety in the contract etc

• In India there is large number of traders in wheat commodity in physical market, it is important to encourage their participation so as to make the contract successful in terms of liquidity and volumes to be traded.

• In a nutshell objective of the project is to get the better idea on mandi trade flow, state wise trade flow, verities of wheat and rate variation of respective variety across the states as well as traders’ & processors’ approach towards the wheat commodity.

RESEARCH METHODOLOGY• The research methodology used is based on studying the

existing data, the data collected is combination of primary data and the secondary data available.

• The primary data was collected through survey done among the clients, traders, food processing companies.

• The Mandi visits across the three states covering majorly seven Mandis were helpful in data verification.

• The exploratory technique was used in the process and the whole of the analysis is done based on the qualitative data collected and made available through secondary sources.

• The conclusion was so far taken by analyzing the data and some assumptions were made to get the proper result out of the research done.

ANALYSIS & KEY FINDINGS• Interaction with stakeholders including the traders, brokers

and food processors across the various regions.• The project involved visit to various stakeholders in Delhi,

Madhya Pradesh and Rajasthan in various regions.• The information about the verities and tradeflow in all the

state as well dispatching locations of each of the states were identified.

• The information with respect to rates of each of the verities was taken from all the stakeholder.

• The probable factors responsible for every price variation across the states were explored for each of the verities.

COMPARISON

Microsoft Office Excel Worksheet

The excel sheet given below gives the comparison of statewise varieties ,production and rates.

CONCLUSION

.• The mill quality is most traded variety across the states

visited in the research.• The quality of this milling wheat varies from state to state and

region to region in any particular state.• Lokwan is 2nd most traded variety in MP and Rajasthan .• The South India (Tamilnadu,AP,Karnataka and Kerala) is the

major consumption market for wheat from all the states in west and north

• A separate contract for lokwan wheat can be launched with Kota as base centre and Indore,Banglore as additional delivery centers with premium and discounts wherever applicable.

CONCLUSION

.• The mill quality existing contract can be modified with respect

to additional delivery centre as Indore or Itarsi and Banglore in south with consideration of quality parameters.

• Though the wheat is largest commodity in India but the futures contract is not equivalently successful so volumes and traders participation is required to generate more liquidity which will lead to more volumes as a whole.

BIBILOGRAPHY

. The bibliography mainly includes the secondary data collected through

various websites and the primary data is through direct interactions and observations.

Following are the websites:• http://listz.in/top-10-wheat-producing-states-in-india.html#ixzz48E5UW6J

6• http://www.krishijagran.com/farm-data/farm-statistics/2014/11/State-wis

e-Area-production-yield-crops-2011-12-and-2012-13/Area-Production-and-Yield-of-Wheat-during-2011-12-and-2012-13

• http://agricoop.nic.in/Admin_Agricoop/Uploaded_File/Wheat.pdf • http://farmer.gov.in/imagedefault/pestanddiseasescrops/wheat.pdf• http://agmarknet.dac.gov.in/OtherPages/Commodity.aspx• http://www.commoditiescontrol.com/eagritrader/commodityknowledge/

wheat/wheat1.html• www.ncdex.com

Q&A