Commodity Exchange to promote price stability for agriculture

By Ronald Owili

Kenya has been backed in her plans to establish a commodity exchange which experts say would boost farmers’ returns through price stability and at the same time minimize risks associated with price volatility.

Using a derivatives market to hedge on prices will also ensure that farmers are linked with financial services providers, this increasing lending and investments in the agricultural sector.

Coffee, tea and sugarcane farmers could perhaps explain better the pain they suffer when it comes to payments upon delivery of their produce.

Despite tea and coffee having an auction for the two main foreign exchange earners in the sector, things have not been looking up recently as cartels riddle the industry.

In order to ensure middlemen are eliminated, Kenya plans to set up a commodity exchange, where all agricultural commodities, minerals such as oil and precious metal are traded.

This is touted as an effective way for prices to be controlled and their trend predicted through derivatives.

London based INTL FCStone is now working with the government and stakeholders on commodity price risk management.

The firm will hold a two day conference on commodities to be held in Nairobi.

Meanwhile, Agriculture Cabinet Secretary Willy Bett has warned millers to stop inflating maize flour prices by incorrectly claiming that there is a shortage of maize in the country.

Bett says there are adequate stocks after the government during the last harvesting season bought maize at a low price of 2,300 shillings with 4 million metric tons of maize currently at the strategic grain reserves.

At the same time the CS says the government will not ban milk hawking but will instead require all informal milk traders to buy their milk from milk coolers to be availed by August this year.

The price of maize flour has in recent weeks increased steadily with millers blaming it on maize shortage in the country.

However, Agriculture Cabinet Secretary Willy Bett says that as much as farmers could be hoarding much of the maize in anticipation of an increase in prices, there are enough maize stocks that the government was able to buy at a low price.

Bett plans to hold a meeting with the millers to discuss the issue.

At the same time the government has received a grant worth 10 billion shillings from the Dutch government to finance acquisition of 900 milk coolers to be supplied across the country by August this year.

He says that once in place, informal milk traders will be required to buy their supplies from the milk coolers.

At the same time Bett is hopeful of getting another grant from the Dutch government to supply milk pasteurizers to make the milk safe for consumption.

Kenya is also set to receive 21 varieties of potatoes from the Dutch government that are fast maturing and water efficient.


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