ISLAMABAD: Minister for National Food Security and Research Syed Fakhar Imam on Monday said that hedging can play a role in enhancing the trading potential of cotton and other agricultural commodities in the country.
The food minister while chairing a meeting on cotton with the Pakistan Mercantile Exchange (PMEX) also said that cotton hedging can be used as an alternative source of marketing and to facilitate a smooth flow of national and international trading in cotton.
During the meeting PMEX Managing Director Ejaz Shah discussed the proposal regarding cotton hedging with the food minister. He informed that hedging provides protection against the risk of fluctuations in price by facilitating a smooth flow of national and international trade in cotton.
He further explained that hedging is a delivery contract that involves delivery of cotton on the dates of maturity. He added that the mechanism of hedging was introduced by the Karachi Cotton Association in 1934 to balance future supply and demand and to deal with sudden and periodic fluctuations in prices of cotton.
Cotton hedging was later given a legal cover and was managed under the Cotton Act 1957, he added.