National Commodity and Derivatives Exchange has entered into a strategic collaboration with Skymet Weather Services to deepen the understanding of the profound impact of weather on agricultural commodities and its essential role in minimising price risks for market participants.

Climate change across the world has emerged as one of the most critical challenges before agriculture and uncertainty in production is causing vigorous volatility in commodity prices. This volatility poses extreme price risk for almost everyone in the value chain including farmers, traders, processors and exporters. 

Enlightening farmers

Arun Raste, Managing Director, NCDEX said with this collaboration the exchange will be able to prepare farmers for changing weather patterns by enlightening them on 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, he added.

Weather risk to agriculture has come to the national policy-making focus in the last some years while its impact on production and yield has also getting starker. Weather has an impact on agricultural supply, which affects the quality, output, and earnings of primary producers.

Jatin Singh, Managing Director & Founder, Skymet Weather Services said weather risk is a key considering parameter impacting the agricultural sector and there is an urgent need to have tools like weather derivatives that would facilitate farmers, processors and exporters with an effective tool to hedge their price risk.

An important step in this direction was taken about three years ago when the two weather indices were launched and have got immense market feedback validating a strong appetite in the market for a tradable weather index, he said.