As per indication, 80% of the national population depends upon agriculture for their source of economy, but unfortunately it has been covering the least portion of the national (Nepal) GDP, which enables one to guess the competitiveness of Nepalese economy from a negative perspective. Factually, Nepal does not even produce enough food to support its own population. Various factors can be held responsible for such pity full status of the agricultural economy of the nation. But, the inefficiency in the agriculture business management is responsible for much of the share. However, we can still say that the agro-economy of our nation is not left to remain in dark for the rest of the time. There are still options of light that can glow this sector.
My basic point is that, a sophisticated market mechanism can of course eliminate the hurdles of agricultural economy. And technically, Commodity market mechanism can be identified as the right fit. Therefore, it can be understood that, implementing the principle of commodity market in the agricultural sector can literally inflate the volume of the agro-economy and ultimately increasing the national economy. In top of that, it seems to be that Commodity market is making a bullish run and even exceeding its trade volume against stock exchange within the short-period of 5 years of establishment in Nepal. This certainly proves that there exists high positive sentiment over commodity market. Now, the question remains, is that: how can commodity market be god-like to the agro-based economy of the nation?
Well, much of the answers remain in the principle and mechanism of the commodity market. Basically, Commodity market works on behalf of the benefit of the producer, intermediaries and the market itself. Commodity market establishes the (certified) agricultural products as a financial instrument or a sector of investment. Therefore, to acknowledge the agricultural product as a standard financial instrument, it needs to have a standard form quality, which sought for the standard warehousing/function to preserve the product. Certainly, if the agro-industry enters the commodity market then, the agriculture products can take advantage of the standard warehousing stores available in the market. Furthermore, the positive sentiment of market is enough to encourage the needed investment and entrepreneurship in the warehouse system. Availability of warehousing system certainly mitigates the compulsion of the farmer to have their products sold as soon as possible at any minimum price in order to escape product loss. The elimination of this problem can put the farmers at the advantage side. By becoming able to control the storage function, they can charge the products as per the co-ordination of efficient market demand and supply. Furthermore, warehousing system also assists the farmers to certify their production as collateral via the warehouse receipts that are provided against the products stored in the warehouse, which can be in turn used against bank loan. Technically, a warehouse receipt is a kind of document which contains the standard quantity and valuation of the stored commodity and also can be used as money instrument. The bottom line is that, the availability of the finance through the warehouse receipt for the farmers who were always in short of it can take advantage of it for further investment in productivity and quality of their farm.
Similarly, distribution part of commodity market mechanism can also play a vital role in agro-economy development. When the commodities are being traded in the future contract, there is a stipulated delivery date that needs to be maintained. Hence, this market needs efficient distribution mechanism to meet the required standard, which in turn, emphasizes for proper transportation infrastructure development. However, this part of the infrastructure requires a massive investment; so, excess effort is expected from the market for the purpose to develop this field. Therefore, being involved in this sector enables the farmers to take advantage of such distribution mechanism, which is the major hurdle of current agro-economy.
In this way, the various other feature of Commodity market can help establish the agriculture sector, into a potential investment sector, securing more and more investment and entrepreneurship. Furthermore, Commodity market mechanism enables the farmers (the currently disadvantaged ones) to take a winning side in the whole market process thereby turning traditional agriculture into commercial one, which instead shall boost the agro-economy, thereby enhancing the national economy or GDP.