Tuesday, February 8, 2011

Commodity exchange ready next year

Government says the operation of the commodity exchange and development of a regulated warehouse receipt system to create huge opportunities for the agricultural sector and ensure price stability would be ready by 2012.

“Ideally, by 2012, the operation of the commodities exchange should take-off, if we are able to complete the regulatory framework and the implementation of the strategies within the timelines set,” Ms. Hanna Tetteh made this known at a media interaction in Accra.
“Government has set up a special body made-up of officials from Ministry of Finance and Economic Planning, Food and Agriculture, Trade and Industry as well as the Securities and Exchange Commission (SEC) to design models that would be adopted to the country’s business environment,” She disclosed.

SEC, the lead promoter of the commodities exchange and warehouse receipts system in the country, is mandated to develop the needed regulatory framework to facilitate establishment of the exchange once government accepts the recommendations.

The legal and regulatory framework, which will regulate the modalities in which commodities exchanges may be established, organised and operated, is to ensure that all those in the supply and value chain in agriculture sector benefit from their involvement.

The exchange when fully operational could raise the hopes of millions of farmers, especially large-scale farmers and make their lives more meaningful. It provides for market transparency, efficient price discovery and standardisation, and the attendant improvement in quality standards assists farmers to gain easy access to ready markets - both local and international.

The exchange’s establishment will help to deal with challenges facing the supply of agricultural produce, which in turn will deal with food inflation. It will as well provide a potent tool for a farmer to manage price fluctuations, stabilise his/her income and gain access to relatively cheaper credit.

Ghana has suffered three failed attempts towards the establishment of a commodities exchange, due to the unavailability of a regulatory framework.

A commodities market or exchange is a platform where various commodities and derivatives are traded.

Most commodities exchange trade in agricultural products and other raw materials like wheat, barley, sugar, maize, cocoa, coffee, cotton, milk products, oil and the metals.

“There is no doubt that a commodity exchange for futures trading is necessary for the efficient functioning of an economy,” a commodity price expert has opined.

In West Africa, and across sub-Saharan Africa, it is rightly envisaged that properly functioning exchanges that play a big role in poverty alleviation initiatives would increase the incomes of agricultural producers.

Ghana will be the fifth country in Africa, after South Africa, Nigeria, Kenya and Ethiopia, to operate a commodities exchange that aims to embark on an aggressive overhaul of its agricultural sector.

This will promote the use of derivatives like forwards, futures and options in Ghana as the door is opened to foreigners to participate in speculating on agricultural products or metals traded on the exchange.

Private enterprise operators have welcomed government’s decision to speedy establish the commodities exchange.

“Since Ghana’s economy is basically agricultural, it would make a lot of sense to see to the establishment of an effective commodity exchange that would not only eliminate the regular post-harvest losses through the buying of produce for storage, but also put money in the pockets of farmers in the short-term to facilitate their downstream operations,” trade analyst stated.

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