The prospects for farmers in rural India - some of the poorest people on the planet - have improved dramatically as a result of new opportunities to trade their produce with the rest of the world, according to this fascinating article in the Financial Times.  For the first time, these poor Indian farmers in the poorest states in India have the opportunity to access market prices that are not interfered with by either the government or the local middle-men who rigged the local market in their favour.

But the entry of modern market institutions such as the NSE – a unit of the Multi-Commodity Exchange (MCX), the country’s largest commodity market – into neglected states such as Bihar is part of what is increasingly being recognised as one of India’s most important social and economic crusades: to extend the benefits of modern trade and finance to India’s rural masses.

Here's how it works, and what kind of effect the opportunity to access export market prices through a spot market exchange is having on some of the world's poorest communities:

Sensing an opportunity, MCX and its smaller rival, National Commodity & Derivatives Exchange, have launched spot markets and begun building warehouses in rural areas to handle the physical delivery of trades. They have behind them some of the biggest names in global finance. MCX, controlled by entrepreneur Jignesh Shah, is part-owned by Fidelity, Citigroup and Merrill Lynch. NCDex is controlled by Indian institutions with an investment from Goldman Sachs.
NSE operations, which began a year ago, now span 60 locations. In April, it decided to experiment in economically backward states such as Bihar, which on development indicators ranks alongside poorer African countries.
At Maheshkhunt, a farmer typically brings his maize to the NSE’s warehouse, where it is tested for quality. If it qualifies for sale on the NSE, the farmer names his price, which is entered on the exchange’s terminals. The goods are stored in the warehouse until a buyer pops up on the exchange. In the meantime, the farmer can take the NSE receipt for the deposit of his goods and use it as collateral for a bank loan. This fulfils a key goal of financial inclusion by providing bank credit to farmers and removing them from the clutches of the moneylenders.
Once a buyer emerges, the farmer is paid immediately – again, an improvement on middlemen, who can take weeks or months to pay.
NSE officials claim that before they appeared, middlemen were buying maize in Bihar at Rs730 ($15.30, €10.50, £9.60) per quintal (100kg) and selling it on at Rs900 a quintal. Now, farmers who use the exchange are achieving a price of Rs780-Rs790. The government price is Rs840 but the state lacks the infrastructure to procure from most.
Already, the emergence of the exchange is bringing a positive “cluster effect” on the surrounding economy. Mr Keshari, the farmer, shows off a warehouse on the other side of Maheshkhunt that he has built and licensed to the NSE. Here he keeps produce to be sold on the exchange by the surrounding villagers. Previously, this would have been kept by the roadside or in fields while the farmers waited for the middlemen to collect it, leading to losses of 10 per cent or more from spoilage and wastage.
Contracting his warehouse to the exchange is highly profitable for Mr Keshari – he makes more from one acre of warehousing than he would from 19 acres of farming, he calculates. But while the presence of the exchange has quickly benefited entrepreneurial farmers such as him, when it comes to helping small landholders, critics say the system has a way to go.