Farmers face numerous challenges each year, including adverse weather conditions such as high temperatures, drought and stormy winds, which can jeopardize their crops. This raises concerns about income stability. Recently, Minister of Internal and Foreign Trade, Tomislav Momirović, highlighted efforts to enhance predictability for farmers through collaboration with the Novi Sad Product Exchange.
Momirović noted that farmers could use the futures market to secure prices for cereals and oilseeds while the crops are still in the field. However, the readiness of Serbia’s market for such measures is in question.
Understanding futures markets
A futures contract is a standardized agreement traded on a futures exchange where goods or instruments are bought or sold at a pre-determined price for a future date. The futures market is intended to provide price security and predictability, but Serbia’s current market lacks the necessary trading frequency, liquidity and depth to support a robust futures market.
Current state and challenges
Galetin, an agroeconomic analyst, suggests that while the idea of a futures market is beneficial for agricultural producers, Serbia’s market is not yet prepared. The lack of sufficient trading activity and market depth presents a significant hurdle. Farmers can, however, engage in futures trading through foreign exchanges like MATIF in Paris or the Chicago Mercantile Exchange.
Professor Ljubodrag Savić from the Faculty of Economics in Belgrade argues that the concept of a futures market may be premature for Serbia. He believes that the local market is not yet ready for such a system, given that many farmers prefer to hold their produce until they receive payment to mitigate risks.
Education and risk management
Galetin mentions that educational initiatives have been undertaken to familiarize Serbian farmers with futures trading, but risks inherent to the market cannot be eliminated. While futures markets can provide protection against price volatility, they also involve risks, and no system guarantees complete certainty.
Recommendations and support
Savić suggests that before implementing a futures market, the government should focus on supporting farmers with subsidies for fertilizers, oils, and insurance to reduce their risks. He argues that farmers bear the greatest risk in agricultural production and should be supported to ensure their financial stability.
Overall, while the futures market holds potential for enhancing income stability for farmers, Serbia’s market infrastructure and farmer readiness need significant development before such a system can be effectively implemented.
