Commodity derivatives have a crucial role to play in managing price risk especially in agriculture dominated economies. However, as long as prices of many commodities are restrained to a certain extent by government intervention in production, supply and distribution, forward and futures markets for hedging price risk in those commodities have only limited practical relevance. A review of the nature of institutional and policy level constraints facing this segment calls for more focused and pragmatic approach from the government, the regulator and the exchanges for making the agricultural futures market a vibrant segment for risk management.
