June 16, 2011 / 3:44 PM / 7 years ago

Ethiopia commodity mkt eyes expansion, futures

ADDIS ABABA (Reuters) - Ethiopia’s commodity exchange (ECX) plans to double the agricultural items it trades to eight by next year and to introduce forward and future contracts within three years, Chief Executive Officer Eleni Gabre-Madhin told Reuters on Thursday.

The ECX was launched in mid-2008 and trades coffee, maize, sesame and white pea beans through an open cry system.

It plans to introduce sorghums, chick peas, lentils and niger seeds by expanding warehouse facilities, Gabre-Madhin said.

Africa’s biggest coffee producer, Ethiopia intends to boost its agricultural output by 2015, raising coffee to 700,000 tonnes from 300,000 tonnes, under a five-year economic development plan launched in 2010.

“Part of our capacity expansion is to meet the increase in the volumes of the commodities we already have, and also to increase the number of items traded,” Eleni told Reuters in an interview.

“Our idea is to introduce three to five new commodities each year for the next four years,” she said.

The exchange is planning to quadruple its capacity of 200,000 tonnes in its 16 warehouses throughout Ethiopia, but a dearth in modern storage facilities could hamper expansion, Eleni said.

“We have been doubling volume of trade every year for the last three years, but we now feel like we are reaching the constraint of the storage infrastructure,” Eleni said.

ECX wants to introduce future and forward trading in a country where hoarding is common among traders wary of price volatility.

Coffee traders have repeatedly held on to their stocks, reluctant to sell it through the new exchange saying prices were too low, sparking authorities to warn of seizures.

“Right now the extent to price volatility exposure is very high, and many businesses are taking a big hit,” Eleni said.

“I think this (future contracts) will make a big impact if we can design a contract for futures and forward trading that would enable people to manage price risks.”

Traded volumes through ECX reached 502,000 tonnes this year, up from 221,000 last year, according to company figures.

African coffee producers are expected to enjoy higher prices this year thanks to falling output in Colombia and Brazil, and rising demand in China and India, Eleni said.

Eleni anticipated Ethiopia’s export volumes to either equal or beat last year’s 176,000 tonnes.

“Last year we had 176,000 tonnes of coffee export. We would hope it will pass that, but we think it will be about the same,” she said.

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