Policy Brief No. Regional Network of Agricultural Policy Research … · 2017-11-05 ·...
Transcript of Policy Brief No. Regional Network of Agricultural Policy Research … · 2017-11-05 ·...
1
Agricultural Commodity Exchanges and the Development of Grain Markets and Trade in Africa:
Key Messages
• A comprehensive approach to overcoming tradebarriers in grain markets and trade is neededalongside the development of agricultural com-modityexchanges.
• Development organizations can play ameaning-ful role in developing agricultural commodity ex-changes.Theirroleshouldreflectthespecifictradechallengesandpolicycommitmentswithinindivid-ualcountries.
• Governments’aremosteffectiveinsupportingthedevelopmentofagriculturalcommodityexchangeswhentheyadopttransparentandsystematicmar-ketandtradepolicies.
Regional Network of Agricultural Policy Research Institutes
A Review of Recent Experience
PolicyBriefNo.4
Vibrant agricultural commodity exchanges will greatly enhancetheperformanceofAfrica’sagriculturalsectorsandcontributetooverall economic development. Yet specific conditions in grainmarketsarerequiredforagriculturalcommodityexchangestode-velop.Theabsenceorshort-livednatureofmanyofthesecon-ditionsexplainswhycommodityexchangesforstaplegrainshaveremainedstuntedinsub-SaharanAfricadespitestronginterestintheirdevelopmentby the internationaldonorcommunityandbymost elements of the private sector. This policy brief identifiesthesepreconditionsandassessesthescopeforgovernmentsanddevelopment organizations to support the sustainable develop-mentofcommodityexchangesinEasternandSouthernAfrica.
Barriers to developing agricultural trade and commodity exchanges in Sub-Saharan Africa
Six main factors impede trading on agricultural commodity ex-changesintheregion:
(1)limitedsuccessinattractingfinancialinstitutions’commitmenttocommodityexchanges,bothasagentswhoareabletocom-pletethetransferofpaymentsfrombuyertosellerandaslenderstoexchangeparticipants;
(2)thefailureofexchangestooffercontractsthatrespondtoun-mettraderneeds,especiallythoseseekingmechanismsforhedg-ingquality,priceanddeliveryrisk;
2
(3)theinabilityofcommodityexchangestoreducethetransactioncostsofexchange,whichisoneofthemajortheoreticalbenefitsofacommodityexchange.Theanonymousnatureof tradingonacommodityexchangecanexacerbate trading risks rather thanreducethemwhencontractsafeguardsaremissingandcontractcomplianceisonlyweaklyenforced;
(4)thepotentialforconflictofinterestamongbrokerswhoalsoactasoff-markettraders;
(5)thepotentialformarketmanipulation,whichoccurswhenmar-kets become thinly traded, for examplewhenmarketing boardspurchaseasignificantportionof thenationalmarketedoutputorwhenrisksassociatedwithtradingonanexchangeareasymmetricbetweenbuyersandsellers;and
(6)actors trading in thinmarketsare forcedtoabsorbhighfixedcostsassociatedwith theoperationof theexchange. Whenthecostsofoperatingtheexchangearenotspreadoveralargevol-ume of transactions, those that use the exchange must incurhighercostsoftradingontheexchangethanwouldbethecaseiftradingvolumeswerehigh.Exacerbatingallthesefactorsistheunpredictabilityofgovernmentinterventionincommoditymarkets.
Key indicators of market readiness for agricultural com-modity exchanges
Factors that signal a hospitable environment for the introductionofgraincommodityexchangesinclude(1)areadinessoffinancialandbankingfirmstofulfilcommodityexchangetransactionsandtolendtoactorsinthegrainsectorbasedonaperceptionthatitisprofitableforthemtodoso;(2)astrongdemandandwillingnesstopayamongactors in thegrain industry for risk-shifting instru-ments;(3)amanagemententitythatisperceivedtobetrustworthy,even-handed,andyetdecisiveinitsapproachtoresolvingcontractdisputes betweenmarket participants, based on clearly definedrulesofbehaviourforparticipatingontheexchange;(4)transparentrulesgoverningthebehaviourofbrokers; (5)acommitmentfromgovernmentstoadopttransparentandpredictablerulesfordirect
stateoperationsingrainmarkets,includingtradepolicies;and(6)vibrantspotmarketswithlargetradevolumesarealreadyinplace.
It is not necessary for all of these factors to be in place beforedonororganizationscanmeaningfullysupportthedevelopmentofagriculturalcommodityexchanges.Theimportantpointistocon-ceiveofsupportforcommodityexchangesholistically,recognizingthatallcommodityexchangesoperatewithinasystem,and thatsupportforovercomingweakaspectsofthegrainmarketingsys-temwillbeneededaspartofacomprehensiveprogramtosupportthedevelopmentofagriculturalcommodityexchanges.
Development partners role
Developmentpartnerscanplayacatalytic role insupporting thedevelopmentofagriculturalcommodityexchangesaslongasthereissufficientcommitment,firstfromactorsinthefinancialandcom-moditysectors,andsecondlyfromgovernmentstoensurestableandpredictablecommoditymarketingandtradepolicies.Donorscouldprovideinterimsupportforbasic“nutsandbolts”strength-
eningofthegrainmarketingsystem(e.g.,warehousecertificationservices,collateralmanagementandsettlementservices,contractdispute resolutionprocesses, investments in transportation infra-structure),whilealsosupportingtherealizationofthesixconditionsspecifiedabove.
Governments’ role
Fortunately, therearesignsof increasingcommitment to thede-velopmentofcommodityexchangesbysomegovernmentsintheregion.Detailedconsultationsareneededtoensurethatgovern-mentsunderstandhowcommitmenttothedevelopmentofcom-modityexchangeswouldcircumscribetheirbehaviourandpolicychoices. Inparticular,prospects for thesustaineddevelopmentof commodity exchanges are highest where governments areprepared to accept amore limited and predictable approach tointervening ingrainmarketsand to tradepolicy. Todate,mostgovernmentshaveconsideredsuchcommitmentsto imposeun-acceptableconstraintson theirmandate toensurenational foodsecurity.
Developing commodity exchanges as a comprehensive and multi-faceted approach to food security
Amajorconclusionfromthisstudyisthatcommodityexchangesshouldnotbe viewedaspanaceas for rectifying themanychal-lenges facingAfricanagriculturalmarkets.Thedevelopmentofacommodityexchange isnotanend in itself,but is ratheran im-portantcomponentintheprocessofdevelopingefficientmarketingandtradingsystemsthatpromotesocialwelfare.Whilecommod-ityexchangescanimprovetheefficiencyofmarketsintheregion,theycannotbeexpected to imposeorderondysfunctionalmar-kets.Onlyoncethemajorgrainmarketsoftheregionareabletoachieveminimumthresholdlevelsofpolicystabilitywillinvestmentincommodityexchangesbegintocontributemeaningfullytomar-ketperformanceand toadvancingnational foodandagriculturalpolicyobjectives.
“ There are signs of increasing com-mitment to the development of com-modity exchanges by some govern-ments in the region...”
3
JayneT.S,SturgessChris,KopickiRon,SitkoNicholas.2015.AgriculturalCommodityExchangesandtheDevelopmentofGrainMarketsandTrade inAfrica:AReviewofRecentExperience.ReportcommissionedbyFoodTrade/EastandSouthernAfrica,DaresSalaam,Tanzania,availablefrom:http://fsg.afre.msu.edu/gisaia/Ag_Commodity_Exchange_Report_FoodTrade.pdf
MbengMezui,Cedric,LamonRutten,SofianeSekioua,JianZhang,MaxMagorN’Diaye,NontleKabanyane,Yannis,Arvanitis,UcheDuru,BlemingNekati,GuidebookonAfricanCommodityandDerivativeExchanges,AfricanDevelopmentBank,2013.
Rashid,S.,A.Winter‐Nelson,andP.Garcia.2010.PurposeandPotentialforCommodityExchangesinAfricanEconomies.
IFPRIDiscussionPaperNo.01035.Washington,D.C.:InternationalFoodPolicyResearch
Whitehead,Eleanor,2013.Africa’sAgriculturalCommodityExchangesTakeRoot,ForbesandAfricanEditionof theFinancialTimes,August15,2013.LastaccessedMay26,2014:http://www.forbes.com/sites/skollworldforum/2013/08/15/africas-agriculture-commodity-exchanges-take-root/
Suggested Readings
4
RegionalNetworkofAgriculturalPolicyResearchInstitutesinEastandSouthernAfrica
SecretariatattheIndabaAgriculturalPolicyResearchInstitute,LusakaZambiaPleasedirectenquiriestotheChairman,
Mr.ChanceKabagheEmail:[email protected]
Funding for underlying research provided by:
Food Trade Eastern and Southern Africa, Dar es Salaam Tanzania.
We recognize the contributions from researchers in ReNAPRI: 1. The Institute of Social and Economic Research (IRES), University of Kinshasa, Democratic Republic of Congo;2. Tegemeo Institute of Agricultural Policy and Development, Egerton University, Kenya;3. Centre for Agriculture Research and Development (CARD), Bunda College, Malawi;4. The Research Center for Agricultural and Food Policies and Programmes (CEPPAG),
Eduardo Mondlane University, Mozambique;5. Bureau for Food and Agricultural Policy (BFAP), Universities of Pretoria and Stellenbosch, South Africa;6. Department of Agricultural Economics and Agri-business, Sokoine University of Agriculture (SUA), Tanzania;7. Indaba Agricultural Policy Research Institute (IAPRI), Zambia.