The Ethiopia Commodity Exchange (ECX) in July requested the New York Board of Trade (NYBOT) for transmission of each others' real-time trading prices. “Negotiations will start soon because there is a positive response,” said Eleni G. Madhin (PhD), chief executive officer of the ECX, told Fortune.
In June this year, Parliament endorsed a proclamation on quality control and marketing of coffee in a bid to create a tight chain from producers to exporters. The exchange, therefore, aspires to establish coffee control and inspection units (Coffee liquoring units) that directly connect with the main trading centre.
The ECX held discussions on the way forward with 190 coffee producers on August 22, 2008, and another 140 producers earlier. It envisages launching registration for memberships on September 15.
Tadesse Meskela, general manager of Oromia Coffee Cooperatives Union, is one of the producers that are eagerly awaiting the launching of the trading. “It has a great deal of advantage for us exporters and the country,” he said.
When the real coffee prices at the trading floor of the ECX are displayed on the NYBOT, the country’s coffee is expected to grab international attention. In turn, Ethiopia will transmit the real time prices on the NYBOT locally so that farmers and exporters know the international prices on the spot.
Out of all coffee exporting countries in Africa and Latin America, it is only Ethiopia that does not have deliverable grade status. Authorities seem prepared to reverse the case.
“Our aim is to be considered one of the markets in the world where prices are referenced,” says Eleni. “And to make Ethiopia a global commodity market of choice.”
The ECX is also planning to install 10 price display boards in Humera, Metema, Gondar, Hawassa, Jimma, Sodo, Dilla, Bonga and Gimbi. It will procure an additional 40 electronic boards.
Coffee is not the only commodity ECX intends to launch. Five months after it first began trading three commodities - wheat, haricot bean and maize - the ECX is making preparations to incorporate sesame, chickpea, sorghum, barley, teff and niger seed in the trading.
This is, however, considered an ambitious move at a time when the exchange is not even trading the existing commodities on a regular basis. The ECX currently trades through the open outcry method every Wednesday. Nonetheless, often the tradings are not regularly held according to schedule, and the number of traded items sometimes drops from three.
For instance, for the past two consecutive weeks, only white maize was taken to the trading floor in Alsam Tower around Mexico Square. Officials at the exchange attribute this to adverse market conditions, such as a shortage of supply and high inflation.
As the country moves into the new harvest season, the ECX also has planned to start field warehousing, a system that aims at leasing smaller warehouses close to smallholder farmers. These warehouses conduct pre-screenings of supplies from farmers, saving them from traveling to the hub warehouses.
“The cost decreases for the farmers,” says Eleni. “And there is a risk of rejection after traveling long journeys to the main warehouses.”
The CEO also says that the Exchange would start inventory financing in the 2008/09 fiscal year. This gives farmers an opportunity to collateralize their warehouse receipts against credit from banks.
Commodity exchanges, first created in Chicago, United States, in 1948, provide a centralized trading venue for member businesspeople. They also disseminate market information instantly, collecting statistics, publishing price quotations and setting rules and standards for trading.
