Farouk Gumel

  Farouk gumel - A Commodity Exchange or Comex is a regulated market allowing the purchase and sale of contracts backed by commodities such as gold, silver, crude oil, and so on. Such an exchange serves as the central location for trading the commodities. Some of the major commodity exchanges in the world are Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), Carbon Trade Exchange (CTX), New York Mercantile Exchange (NYMEX), London Metals Exchange (LME), Tokyo Commodity Exchange (TOCOM) and more. In its simplistic form, the purpose of exchanges is to provide a centralized marketplace where producers can sell their commodities to those who want to use them for processing or consumption. In its simplistic form, exchanges connect buyers to sellers. The sales could be for products that exist today or those that would be produced at a “future date”. For the “future” transaction, the exchange enables the farmer to lock in the price and offtake of his/her crop months before har

  Recently, the media has been reporting about massive farmer protests in India against the implementation of certain agricultural reforms in Nigeria. The protest started on 9th August 2020 and most of the protesting farmers are from India’s two largest agricultural producing states (Punjab and Haryana). It is reported that these States are the largest beneficiaries of the Indian Government’s Green Revolution reforms.  The first important point to note is the farmers protesting outside New Delhi are among the wealthier farmers in the country who are the major beneficiaries of Government interventions including the Minimum Support Price (MSP), the India government’s grain procurement program which provides offtake assurance through government regulated physical markets. So the views of these large players may not be a fair representation of the millions of smallholder farmers in India.  The reforms proposed by the Indian Government comes are covered in three (3) new laws and, according

Farouk Gumel - Most governments intervene in their agricultural markets although the extent of these interventions depend in large part on the wealth of the country. In the last century or so, the most common of these interventions is the Minimum Support Price (MSP) mechanism. In this paper, I hope to explain in simple terms, what the MSP is and how it works. MSP is the price at which the government commits to purchase crops from the farmers. This acts as a ‘minimum floor price’ farmers will get for their produce thereby shielding them from adverse market conditions because of price drop. Furthermore, in the event of a bumper harvest where there is excess stock, farmers still have a guaranteed buyer as the government, through its agencies, will buy the entire stock offered by the farmers at the MSP. The prices of agricultural commodities often vary due to various factors. If a crop has seen a good harvest season during a particular year, it may see a sharp fall in its prices. This will