National Commodity and Derivatives Exchange Ltd. (NCDEX), India’s leading Commodity Exchange, has announced a strategic collaboration with Skymet Weather Services, a renowned expert in weather analytics, to deepen the understanding of the profound impact of weather on agricultural commodities and its essential role in minimizing price risks for market participants.
Climate change across the world has emerged as one of most critical challenges before agriculture and uncertainly in production is causes vigorous volatility in commodity prices. This volatility poses extreme price risk for almost everyone in the value chain including farmers, traders, processors, and exporters. The signing of a MoU between NCDEX and Skymet Weather Services is a profound step in the direction of linking farmers with weather in a scientific way, NCDEX said in a press release.
“We hope that by empowering farmers with this collaboration we would be able to prepare themselves for changing weather patterns. Through this partnership, NCDEX and Skymet Weather Services hope to raise knowledge of how weather patterns and agricultural commodities are linked. The goal is to equip market players with insightful information that will help them make better decisions, effectively manage risks, and support the general stability of the agriculture industry,” said Arun Raste, MD & CEO, NCDEX.
Skymet Weather Services has been working with the Agri ecosystem to help stakeholders understand weather dynamics. Weather risk to agriculture has come to the national policy making focus in last some years while its impact on production and yield has also getting starker day by day. Weather has an impact on agricultural supply, which affects the quality, output, and earnings of primary producers. Collaborating with this market specialist will help our awareness campaign on commodity derivative hedging.
“Weather risk is a key considering parameter impacting the agricultural sector and we feel an urgent need to have tools like weather derivatives in our country that would facilitate the farmers, processors, exporters etc with an effective tool to hedge their price risk. We had taken an important step in this direction around 3 years ago when we launched two Weather indices. Now in the last 3 years, we have got immense market feedback validating a strong appetite in the market for a tradable weather index. This MoU is a concrete step in that direction,” said Mr. Jatin Singh, MD & Founder, Skymet Weather Services.
Earlier, NCDEX had on June 09, 2020 launched two national-level rainfall-based indices – the Indian Monsoon Index (Cumulative Monsoon Index) and Indian Rain Index (Monthly Cumulative Rainfall Index) that track the systematic rainfall movement in the country in partnership with Skymet Weather Services. The two indices are only representative indices of rainfall in the country and are not available for trading.
The monsoon continues to be the most discussed factor affecting India's economy and agriculture sector. NCDEX, primarily an agricultural derivatives market, has an impact on the trading behavior of accessible commodities. As a result, this also becomes an important aspect among the many topics about which NCDEX IPFT tries to raise awareness.