Pulses are a hardy bunch that efficiently convert sunshine and soil into the healthiest proteins for the human body and rejuvenate the fields in which they are planted, thus saving money and resources. But once the harvest reaches our hands, pulses become unnecessarily expensive for the consumer and risky for growers. We need to remedy this quickly. Else, these crops with a proud and ancient lineage, will not be able to take their rightful places on our plates.

At least 10 pulses are grown and consumed in more than a dozen countries. The International Year of Pulses 2016 was celebrated in 63 nations. Yet, there is not one efficient price discovery platform to give the right signals to buyers and sellers within the country and across the world. Farmers either undertake production contracts, and deferred delivery contracts or spot sales to local traders and the village middleman. Often, traders control prices received by farmers, blocking market signals for increased production.

The traders, including exporters, importers and multinational companies, are themselves living on a wing and a prayer. Although prices of pulses are rising, the movement is not in a straight line. Often, prices for individual pulses vary from their mean by 15% to 20%. Extremely high spot bids and record high forward contract prices cause farmers to overproduce. So, the pulses trade and industry face considerable price risks in stocking and marketing. Bulk of the consumption is far from production areas. Cargo transit times between continents are long. Since prices are affected by currency exchange rates, weather, government policy, carry forward stocks and production across geographies, volatility is high.

Supply and demand forecasts are always difficult because the situation is fluid, effected by changes in crop conditions in importing and exporting countries as well as changes in phytosanitary rules. Shippers and processors have no recourse to hedge risk. Consequently, defaults are high. The number of arbitration cases at GAFTA is steadily increasing.

Who is benefitting? Certainly not consumers. Due to ineffective price signals and inability to transfer risk, the value chain can make wrong storage decisions. Low stockpiling, from trader level to national level, contributes to gaps between producer and consumer prices and seasonal fluctuations in retail prices. Lack of reliable data in India, the largest producer, consumer and importer, confuses other nations that take their price cues from it. The market, therefore, overreacts to every news and sparks concerns about food inflation. The long processing and marketing chain, with fragmented, small players and frequent bankruptcies, adds to cost. The upshot is that low-income families that badly need nutrition, are unable to afford pulses.

To reduce risk and increase stability, the industry needs efficient hedging and price discovery. Futures markets permit information to flow. Hedging works by offsetting a loss in one market with a gain in another. It leads to better decision-making, with reduction in both risk and cost; better cash management and credit mobilization; enables a mechanism to identify, measure, manage and monitor risk; protects business margins. There are more incentives to improve trade-related infrastructure and better awareness of quality standards. In short, it enhances efficiency and competitiveness.

Sceptics say successful futures trading in pulses is tough due to the plethora of varieties and relatively small crop sizes, which make individual markets narrow and shallow. It is true that the sheer variety in pulses beats future market favourites such as soyabean, wheat, maize, cotton and coffee. Yet, in reality, chickpea sets the tone and trend for the entire basket. Farmers tend to use it as a reference price, especially those prevailing in India. Indian chickpea itself tends to move in tandem with imported yellow peas, which sets the base in the same way as crude palm oil for the edible oil complex. A flourishing chickpea futures contract in India, Canada, or Australia can easily provide the transparent price signals farmers, traders and processors are seeking world-wide, besides allowing the transfer of risk. All it needs is collective action.

By 2030, we will 23% more pulses as more consumers discover their magic. Unfortunately, the industry is so caught amid shortterm market gyrations that it is in danger of losing sight of these long-term trends. It urgently needs efficient tools to plan better, remove information barriers, compete strategically, and invest in research for the future. The resultant affordability and availability will help pulses become the cornerstone of a healthy lifestyle and a healthy planet. Just as Mother Nature intended.

(Ms Nidhi Nath Srinivas is Chief Marketing Officer, NCDEX. Views are personal)