Futures markets and possibility of stabilizing in agricultural product markets

VI ABSTRACT Turkey had been adopted an export substitution policy before 1980. In 1980 Turkey has started a liberalization program. Since agriculture plays an important role in Turkish economy, Turkey is searching for new ways to cope with price fluctuation problem which is a common characteristic of agricultural production all over the world. Parallelling to this development during recent years "futures markets" became a widely discussed matter. And soon research and investigations were initiated in order to establish a cotton futures market in Izmir. Main logic and principles underlying futures markets concept evolved from trading practices in developed countries. Today futures markets are an essential part of risk transfer strategies in developed countries. Different groups of the society can benefit from these markets in these countries. Two primary purposes of the futures markets are price risk transfer and price discovery (CBOT.1990). Futures markets help price stabilization and hence have great contributions to agricultural economy. Therefore investigation of price stabilization possibilities offered by these markets has a great importance for countries such as Turkey. In this study necessary and sufficient conditions for a futures market to be successful were investigated in the context of Turkish economic and agricultural infrastructure. Also, several agricultural commodities were analyzed in order to determine their suitability for futures trading. Taking into consideration production regions and regional commodity trading volume some trade centers were suggested for establishment places for futures market. And finally, some measures were proposed in order to overcome the deficiencies observed.