A Study of the Price Differences Between the Lean Season and the Arrival Season of a Commodity

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Futures benefit to the farmers
A Study of the price differences between the lean season and the arrival season of a commodity

A Summer Project Report

Submitted By
Harish Ramesh
Summer Trainee, NCDEX Ltd.

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CERTIFICATE

This is to certify that the project report titled “Study of the price differences between the lean season and the arrival season of a commodity and the seasonality of the commodity to understand the impact of futures trading on the commodity” done by Harish Ramesh for “National Commodity and Derivatives Exchange Limited”, Mumbai is genuine and an original piece of work. This has been carried out as a summer internship project from April 02, 2012 to June 02, 2012 under our supervision and guidance for the partial fulfillment of the Masters Programme in Business Administration at the Bombay Stock Exchange Institute Limited (BIL), Mumbai.

Place: Mumbai
Date: 01/06/2012

Dhruv Keshan
Deputy Manager, NCDEX Ltd, Mumbai

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ACKNOWLEDGEMENTS

I take this opportunity to thank all the people who have given me their help and support during the course of this project which has helped complete the project. I would like to thank Mr. J. Sampath (Chief Compliance Officer, NCDEX Ltd., Mumbai) for providing me an opportunity to work on this project. I also take this opportunity to express my gratitude towards Mr. Avinash Mohan (Vice president, Market Intelligence, NCDEX Ltd., Mumbai) whose encouragement helped me to achieve the desired results during different phases of the project. I am also extremely thankful to Mr. Dhruv keshan (Deputy Manager, Market Intelligence, NCDEX Ltd, Mumbai) for guiding me at all stages of the project and whose insight into the project helped me achieve the desired result at the end of the project.

Harish Ramesh
MBA FM (2011-13)
Bombay Stock Exchange Institute Limited

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CONTENTS

Certificate……………………………………………………………………………………………………………………2 Acknowledgement………………………………………………………………………………………………………3 Abstract……………………………………………………………………………………………………………………….5 Chapter 1: Introduction and Background……………………………………………………………………..6 Chapter 2: Research Layout and Design………………………………………………………………………12 Chapter 3: Research Findings………………………………………………………………………………………16 Chapter 4: Analysis of Information……………………………………………………………………………...18 Chapter 5: Conclusion ………………………………………………………………….................................29 ANNEXURE 1 ………………………………………………………………………………………………………………30 ANNEXURE 2 ………………………………………………………………………………………………………………35 ANNEXURE 3 ………………………………………………………………………………………………………………40

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Abstract
This project has been taken up as part of a summer internship with NCDEX Ltd. The project aims at understanding whether futures trading benefit the farmers. The above mentioned aim is the hypothesis of the project and the project is done as an attempt to prove this hypothesis. To understand the benefits of futures trading, the project focuses on analyzing the price data for 10 agricultural commodities taken as a sample for the study. The price data for these commodities vary in accordance with the crop calendar, and this projects aims at analyzing the price data according to the lean and arrival season in the crop calendar of the crops considered. The project aims to show that the difference in the prices between the lean and the arrival season has decreased in order to enunciate the benefits of the futures trading to the farmers. The study also aims at understanding the relationship between the difference in the price data and the total availability of the crops.

The study attempts at understanding the relationship between the crop seasonality and the price seasonality of the crops considered. It also aims at studying the anomalies, if any, that exists in the price data after the analysis and offers to provide an explanation for the above mentioned anomalies. The path adopted for this project can be divided into three phases: 1. Data Collection

2. Data Analysis
3. Observations and...
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