Boost for farmers as plan for futures market takes shape
Kenyan farmers are now set to earn more from their produce following plans by the Rwandan-based East African Exchange (EAX) to establish a futures market in the country. The market will be the second on the continent after the one in South Africa.
EAX will be submitting their paper work this week at the Capital Markets Authority (CMA) seeking permission to start a futures market, a move that will come as a reprieve to thousands of farmers who have been exploited for a long time by cartels.
EAX Kenya Country Manager Constantine Kandie said the futures market will offer price transparency, organised marketplace and risk mitigation in Kenya’s grain sector.
“With the futures in place farmers in Kenya will be able to plan better given the assurance of a locked price for their produce,” said Ms Kandie.
The futures, which will run on the EAX commodities exchange platform in Kenya, will also help farmers to make decisions on cropping patterns based on price signals.
Ms Kandie said the exchange could address problems such as the absence of structured markets, setting of prices by the government, food insecurity, post-harvest losses. It will also help fight poverty.
The market, she said will also provide shared risks for both buyers and sellers since prices are agreed between both parties after taking into account fluctuations and appreciations.
The cartel menace in Kenya has over time hurt the country’s food security because of poor returns from farmers’ investments even as the government dithers on its plan to establish a commodities exchange.
Because of dismal earnings, farmers have been increasingly reducing the acreage under crop.
EAX is a regional commodity exchange established in 2014 and it links smallholder farmers to agricultural and financial markets.
EAX entered the Kenyan market this year, opening their warehouse in Eldoret. The firm has so far traded with some millers including Jamii and Unga Limited.
Through a commodities exchange, growers can trade contracts for future delivery of their produce. This could be deals for maize, beans, wheat or coffee. This way, a farmer is guaranteed a set price for their future production.
Currently, a farmer is left to the mercies of fluctuating prices. In some instances, farmers have recorded massive losses. They have also been battling cartels who take advantage of the lack of structured market to exploit growers.
Cereal Growers Association Chief Executive Officer Anthony Kioko said the futures market would go a long way in boosting farmers’ incomes.
“We welcome and support the establishment of the futures in Kenya as it will create a structured market for grain in the country,” said Mr Kioko.
He pointed out that the lack of such a market has opened room for cartels to thrive on price speculation, forcing farmers to sell their produce at a loss. “At the moment farmers are unable to invest heavily on agriculture as they are not certain whether they will make losses or profit at the end of the season,” he said.