Background Image
Category: Commodity Trading

Commodity exchange plan is the way to go

Plans of establishing a commodity exchange in the country have taken too long and it is time decisive action is taken to make this a reality.

With the present global commodity super-cycle, the need for a commodity exchange has only become more urgent and we cannot continue engaging in empty talk as farmers faced the pain of fluctuating prices.

The turmoil in the commodity markets is something the government had foreseen but failed to expedite the implementation of either the Warehouse Receipt System for grain farmers or even the proposed commodities exchange.

Other countries in the region including Ethiopia and Rwanda acted swiftly and set up commodity exchanges to cushion their farmers and we have no excuse for not taking similar action.

The Ethiopian Commodity Exchange (ECX) has proved a big success and is today a case study on how efficient agricultural market systems can support food security by ensuring farmers remained motivated through good returns from their produce.

The ECX has enabled farmers to get access to real time pricing information, improved profits and productivity, reduced market segmentation and boosted export quality.

Food security

Rwanda’s recently established East Africa Exchange (EAX) too holds a huge promise of boosting food security and earnings for producers.

Farmers in this country deserve better treatment because of the vital role they play in feeding the population and by extension contributing to the GDP.

Already hard-hit by high operation costs and erratic weather pattern, it is unfair that farmers are still subjected to the uncertainty in commodity market prices.

This kind of scenario directly compromises the country’s food security because no sensible person would continue pumping resources into a venture whose end result is unknown.

Like any other business or investment, farming requires certainty and farmers must be accorded the right treatment to flourish. Cartels have been known world over to frustrate efforts of establishing structured markets and we must not fall prey to similar machinations here.

Middlemen and cartels loath efficient and transparent market systems because it robs them the opportunity to manipulate trade and make super profits at the expense of farmers who toil so hard to brig produce to the market. A commodity exchange is an idea whose time has come and the government should not waste time in setting up one.

A major advantage of this platform is that a farmer will have a clue of the price at which he will be able to sell his produce even several months before harvesting.