How Farmers Lost Price Power After the 2021 Suspension
By Vijay Shravan Gaikwad | Senior Agriculture Journalist & Policy Analyst
Mumbai: For a soybean farmer in Latur or Vidarbha, the market today is more uncertain than it was four years ago. Not because prices are more volatile — they always were.
But because one key tool that helped him understand and manage those prices is no longer available.
Since December 2021, India has suspended futures trading in several key agricultural commodities — soybean, mustard, wheat, chana, sugar and others. What was introduced as a temporary measure to control inflation has now entered its fourth year.
The ban continues. And for farmers, the consequences are real.
What Futures Markets Actually Do
A futures market is not an abstract financial system. For a farmer, it is a signal. It tells him what the market expects prices to be in the coming months.
A soybean farmer could earlier look at the NCDEX futures price for October delivery and decide: Should I sell now? Or store and sell later? That signal is now missing.
Without it, the farmer is dependent on local traders and commission agents — where pricing is neither transparent nor always fair.
When Price Visibility Disappears
The impact is not theoretical.
Take a soybean farmer harvesting in October. Prices typically fall during peak arrival season. Earlier, a farmer or an FPO could hedge — protect himself against a ₹300–₹400 fall in prices through futures contracts.
Today, that option does not exist. The farmer sells at whatever price the market offers. The risk stays with him.
Risk Has Not Disappeared — It Has Shifted
Agriculture in India is already risky. More than half of the cultivated land depends on rainfall. Weather is unpredictable. Climate patterns are changing.
Income uncertainty is a constant. Futures markets did not remove this risk. They helped farmers manage it.
With the ban, that risk has not gone away. It has simply been pushed back entirely onto the farmer.
Who Gains When Information Is Limited?
When transparent price signals disappear, someone fills the gap. In this case, it is the large trader.
Processors, exporters, and big market players still have access to better information, storage capacity and informal forward contracts. The small farmer does not have it. The result is a widening gap.
The market becomes less transparent, not more.
The Soybean Belt Feels It First
Maharashtra and Madhya Pradesh together dominate India’s soybean production. This is not a subsistence crop. It is a commercial crop linked to global markets.
Its price depends on Brazil’s harvest, US export trends, palm oil policies in Indonesia and global demand cycles.
A farmer in Latur is indirectly exposed to global markets. But today, he has no structured way to respond to that exposure.
A Policy Taken in the Name of Farmers
The ban on futures trading was justified as a step to control inflation and protect consumers. But the unintended effect is clear.
In trying to control prices, the system has reduced price visibility. In trying to protect farmers, it has removed one of the few tools available to them.
The Bigger Question
If futures markets were the problem, what has replaced them?
There is no alternative system that provides transparent price discovery, forward price signals and risk management tools.
The existing spot markets remain fragmented. e-NAM has not become a real national market. The ban stands alone — without a replacement.
Conclusion
Markets do not become stable because information is removed. They become opaque. For the farmer, the issue is not whether futures markets are perfect. The issue is whether he has any tool at all to understand and protect his price. Today, he has fewer.
Editor’s Note
At TheNews21, our ongoing “World Bank Loan Trap” and rural policy series have consistently highlighted a deeper pattern — policies designed to protect often end up weakening the very systems they intend to support. The suspension of agricultural futures trading raises a similar concern: whether removing market tools has made farmers more secure, or more exposed.
