Agri commodity trading as we know it today is the result of the establishment of Bombay Cotton Trade Association in 1875. Agri trading went out of the picture for a while after the 1960s as the country went through droughts, famines, and poor government policies. It laid dormant for almost four decades. But with stability and progress, commodity markets made a comeback. Agriculture commodity trading started in earnest in 2002. Agricultural products contribute to 12% of the total commodity trade that happens in India. This commodity trading happens across three nationwide multi-commodity exchanges namely Multi Commodities Exchange (MCX), National Commodity and Derivatives Exchange (NCDEX), and Indian Commodity Exchange (ICEX). These operate in a similar manner to stock markets, except that when it comes to commodity trade, the physical commodities have to be delivered to the buyers.
The most common agri products are grains(rice, Basmati rice, wheat, maize, jeera), oils and oilseeds (castor seeds, soy seeds, castor oil, refined soy oil, soy meal, crude palm oil, groundnut oil, mustard seed, cottonseed, etc.), spices (pepper, red chili, jeera, turmeric, and cardamom), and pulses (chana, urad, yellow peas, tur dal). But edible agricultural produce aren’t the only agricultural commodities being traded. Inedible produce from agriculture and allied sectors like cotton and fiber, hides and skins also factor into the top traded commodities.
Factors affecting agri commodity trading
Agri trading is often affected by many factors. Since agri trade commodities are physical, and often perishable, there are high risks involved in agri trade.
As with all trade, demand and supply affect agri commodity trading prices. However, both these factors can fluctuate. For example, demand for agri products can be affected by change in people’s tastes, rise of alternatives, the consumption level of agricultural commodities in the market for alternate applications (e.g. sugar, palm oil and corn are used as inputs in the making of bio-fuel). On the other hand, supply can be affected by extreme weather fluctuations. For example, the recent heat wave adversely affected tomato pricing. Produce that rely on the monsoons may have to resort to irrigation when there is a shift in rainfall patterns. Similarly, timely transportation affects the pricing of agri products. Another main component of successful agri trade is the quality of post-harvest processes like storage and handling. In an ideal situation, agri commodities would be stored in dedicated warehouse with temperature and moisture regulation facilities. However, most agri produce are stored in silos or rudimentary storage units which leads to a lot of wastage. Similarly improper handling at the packing, sorting, grading, and even transportation stages can affect the quality of the produce. Therefore good post-harvest practices can easily ensure that high-quality produce is available all year round.
Government regulations too can affect the prices, especially in the case of certain price sensitive commodities. This is done to prevent hoarding and too much speculative activity. Apart from these challenges, geopolitical tensions, global economy, fuel prices, environmental factors, pandemics, etc. can all affect the value of agri trade commodities.
Top 10 Agriculture Commodities in India
India is the 2nd largest producer and the biggest exporter of rice in the world. It is also the most consumed agricultural produce in the country. Rice production in the country has gone up from 536 lakh tons in FY 1980 to 1200 lakh tons in FY 2020-21. There are 20 popular varieties of rice grown in the country including brown rice, Basmati rice, jasmine rice, red rice, etc.
The major rice producing states in India are: Punjab, Odisha, Assam, West Bengal, Uttar Pradesh, Tamil Nadu, Andhra Pradesh, Bihar, Chattisgarh and Haryana.
India is the second-largest producer of wheat in the world, China being the top producer. India has been consistently increasing its wheat output over the years and has had bumper crops over 1000 lakh tons since 2019. Wheat is also procured by the government owing to high domestic consumption.
Major wheat producing states are Punjab, Uttar Pradesh, Madhya Pradesh, Haryana and Rajasthan.
India produces milk worth Rs 8.5 lakh crore annually. India is the highest producer of milk and value-added milk products in the world (with 22 percent of global production)and this has come about as a result of the White Revolution of 1970. The value added milk products we mentioned before include butter, ghee, cheese, milk powder, butter milk, etc.
Major milk-producing states include Uttar Pradesh, Maharashtra, Himachal Pradesh, Madhya Pradesh, Punjab, Rajasthan, and Tamil Nadu.
Mango is the ‘King of fruits’ for all Indians. India is the world’s largest producer of mangoes. We produce around 1.09 crore tons of mangoes every year and contribute to about 56% of the total mango production worldwide. There are 1,500 mango varieties grown in India of which 1,000 are sold commercially. Some of the famous varieties include Alphonso, Kesar, Dasheri, Totapuri, Safeda, etc.
The top five mango-producing states are Uttar Pradesh, Andhra Pradesh, Bihar, Karnataka, and Gujarat. These five states contribute to more than 60% of the total mango production in India.
Believe it or not, guavas are one of the top 10 agri commodities traded in India. India contributes to 45% of the world’s guava production. Popular guava varieties are Allahabad Safeda, Sardar (Lucknow 49), Pant Prabhat, Lalit, Dhareedar, Chittidar, Arka Mridula, and Khaja (Bengal Safeda). The pink guava varieties are used by food processing companies to make fruit juices and other products.
Major guava producing states of India are Uttar Pradesh, Punjab, Maharashtra, Karnataka, and Tamilnadu.
Bananas are a major fruit crop in India. 15-20 varieties of bananas are commercially cultivated in India. Banana production in the country has been growing steadily from 200 lakh metric tons in 2006 to 300 lakh metric tons in 2017. India and China account for over 40% of the world’s total banana production, but most of it is consumed by the domestic market.
The major banana producing states in India are Andhra Pradesh, Tamil Nadu, Gujarat, Maharashtra, Karnataka, and Uttar Pradesh.
Potato is part of the famous TOP (tomato, onion, potato) commodities produced and consumed In India. India is the second largest producer of potatoes after China. Almost a third of the global production of potatoes can be attributed to China and India. Some of the popular potato varieties include Kufri Jyoti, Kufri Sinduri, Kufri Bahar 3797, Kufri Neelkanth, Kufri Alankar, Kufri Chipsona, LR Potato (Lady Rosetta), Diamond Potato, etc.
Major potato producing states in India are Uttar Pradesh, West Bengal, Bihar, Gujarat, Madhya Pradesh and Punjab.
India is the largest sugar producer in the world after Brazil. The Indian sugar industry’s annual output is worth around Rs.80,000 crores. As of 2017, there were 732 installed sugar factories in India with sufficient crushing capacity to produce around 339 lakh metric tons of sugar. Apart from being an edible commodity, sugar is also used to create sucrose required for ethanol production.
The major sugarcane producing states in India are Uttar Pradesh, Maharashtra, Tamil Nadu, Bihar, Gujarat, Haryana, Andhra Pradesh, Punjab and Uttarakhand.
Cotton from India accounts for around 25% of the total global cotton production. India also ranks first in the world in terms of cotton acreage with 120.69 lakh hectares under cotton cultivation. Called ‘White Gold’, cotton is also one of the largest contributors to India’s net foreign exchange.
The ten major cotton producing states in India are Punjab, Haryana and Rajasthan, Gujarat, Maharashtra and Madhya Pradesh, Telangana, Andhra Pradesh, Karnataka and Tamil Nadu.
Groundnuts are an important oil seed commodity in India. In fact, India was the world’s leading exporter of groundnut oil in FY 2021. According to estimates by the ministry of agriculture and farmer welfare, groundnut production in 2020-21 stood at 101.19 lakh tons. Major groundnut producing states in India are Gujarat, Rajasthan, Tamil Nadu, Andhra Pradesh, Karnataka, Madhya Pradesh, Maharashtra and West Bengal.
Start trading on the Bijak app
If you are an agri trader, you probably face two challenges – lack of access to trustworthy counterparties and timely payments. These are the two key factors that keep most agri traders limited to their known circle of traders, and dependant on inefficient payment cycles that prevent them from growing their business. Bijak, one of the most trusted agri tech companies in India is well aware of these challenges. Keeping these factors in mind, Bijak onboards Buyers(commission agents) and Suppliers after a thorough vetting process. Once these Verified Buyers and Suppliers start trading on the Bijak app, they often start trading using the Bijak Market feature. Their performance in terms of order fulfilment and timely payments are tracked and they are given ratings based on this. This in turn makes them more attractive to other traders. We have noticed that transparent professional business dealings often result in more business for the traders. There are countless such stories of agri traders who have used the Bijak app to double or triple their trade.
Apart from the above agri commodities, Bijak oversees trade in over 150 agri commodities. This makes it one of the best apps for commodity trading. The mandi rates (mandi bhav) feature ensures agri traders can check the commodity rates before trading on Bijak Market feature. The app is available in 11 languages to enable easy pan-India trade. Secure payment gateways ensure that agri traders can make payments at any time, even on weekends. Thanks to the recent integration with eNAM, Bijak now allows 1.73 crore farmers, 2100 FPOs, and around 1 lakh commission agents registered on the eNAM site to trade on Bijak. This is good news for all ambitious agri traders who want to connect with a wider user base.
We hope you enjoyed reading this article. If you are an agri trader, then we would love to hear your views on the current state of agri commodity trading in the comment section. Stay tuned for more articles from experts on the Bijak blog. Bijak is India’s most trusted Agri trading platform that brings together farmers, Buyers (commission agents), and Suppliers from across the country to trade in over 150 commodities. Please like, share, and follow the Bijak blog for weekly updates.
Sources: Samco, Beginners Guide To Agri Trading, Top 10 Agricultural Commodities, How To Trade Agri Commodities, Indiainfoline, Motilaloswal, Rice: Top 10 Rice Producing States, Index, Wheat: fas.usda.gov, Times Of India, The Hindu, Commodity Intelligence Report, Milk: Dairy Products, Byjus, Business Standard, fao.org, Guava: abcfruits, Banana: abcfruits, Potato: Researchgate, Sugarcane: dfpd.gov.in, Byjus, Economic Times, Cotton: Texmin.nic.in, Groundnut: pib.gov.in, pjtsau.edu