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What is the forward sale that farmers are looking for and why futures trading in Serbia is difficult to implement

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Farmers received promises from the Government, tractors cleared the intersections, all the same as in May of this year. Perhaps the only significant difference compared to the spring protests is one of the demands of the farmers and herders, the so-called forward sale.

Namely, in addition to the standard requirements that are reduced to either higher government payments (subsidies per hectare) or reduction of costs (non-payment of excise duties and VAT on diesel), which are reduced to ad hoc measures, one systemic demand appeared – for the regulation of the goods market, that is, the stock market.

Namely, judging by the statements of some of the organizers of the protest, the demand is to enable the forward sale of agricultural products, that is, grains, following the example of Budapest and Paris.

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In contrast to our Product Exchange in Novi Sad, where spot buying and selling takes place, i.e. where buyers and sellers are found and the transaction is carried out immediately, the futures market is something completely different.

By definition, the futures or futures market is a type of financial market where economic entities, through a market contract, commit themselves to the delivery of a certain quantity of a commodity in the future.
According to experts, papers are traded on the futures exchange, not goods. According to Žarko Galetin, agroanalyst and former director of the Product Exchange in Novi Sad, these papers change hundreds or thousands of hands and in the end there is often no change in ownership of the goods.

Forward sales from Chicago to Paris

Goran Živkov, a consultant in agriculture and former Minister of Agriculture, points out that in the world only the Chicago Commodity Exchange (CBOT) functions as a real futures exchange.

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Even the stock market in Paris, in which so much has been invested, does not work as they would like. The same was tried in Budapest, but a millionth of the total trade takes place in derivatives. If they couldn’t, these demands for the futures market in Serbia seem like utopia to me. Institutions are needed for that, first of all stock exchange institutions, then insurance and most importantly trust – Živkov notes.

There is futures trading at the Product Exchange in Novi Sad. As Galetin explains, the seller can contract with the buyer to sell the goods at some future date and the seller undertakes to deliver the goods and the buyer to pay for them at a predetermined price. However, the so-called forward contracts are not traded.
In contrast, a futures contract is not a bilateral contract, but can be bought by anyone.

Experts point out that the future price of wheat, say in Paris, and the price of wheat on the spot market here in Novi Sad cannot be compared.

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