1. Ethiopia: Commodity exchange encourages farmers to produce more and better crops (Blog World Hunger, International Food Policy Research Institute)

| August 4, 2008

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Aweke Teshome was in for a pleasant surprise the first time he brought his crops to the Ethiopia Commodity Exchange. Although he is an experienced farmer, he never knew the market price for his produce or how it rated. At the exchange his crops received the lowest grade, but he knew that he was paid a fair market price. He left with a strengthened resolve to produce larger yields of higher quality.

The Ethiopia Commodity Exchange, or ECX, opened its trading floor in April. It is a new system to connect farmers and traders around the country, making commodity trading easier and more reliable for both parties.

Farmers are now assured a fair market price for their products. Previously, Mr. Teshome was at the mercy of local traders. He was unable to negotiate price, but rather forced to sell his product for whatever price was offered. Through the ECX, farmers can access information about market prices at any of 200 locations.

Mr. Teshome explains that the ECX also ensures that he can sell any surplus. Since he does not have any storage facilities, he used to lose money during times of surplus. The ECX, however, runs six storage warehouses spread throughout the country, so farmers are always able to sell their crop. Mr. Teshome explains that the system encourages him to produce higher yields for this guaranteed market.

Eleni Zaude Gabre-Madhin is an Ethiopian economist who was the driving force behind the founding of the exchange. She was struck by the fact that Ethiopia can have a bumper harvest one year and severe shortages the next. Or that there can be surpluses in one region and famine in another.

Ms. Gabre-Madhin worked with farmers, traders, and the Ethiopian government to develop the ECX. She says the exchange will help to balance out the surpluses and shortages by improving farmers’ access to the larger domestic market. It should also open up access to the export market.

Ms. Gabre-Madhin expects that more farmers like Mr. Teshome will be encouraged to produce more food, thus reducing the risk of severe food shortages in the future.
Farmers will also have more information to help them decide which crops to plant.

So far, six commodities are traded through the ECX: coffee, sesame, haricot beans, wheat, maize, and a traditional grain called teff. It’s expected that small scale farmers will make up 95 per cent of the contributors to the ECX.
Click here to see the notes to broadcasters on the Ethiopia Commodity Exchange