Description

Establishment and support of commodity and futures exchanges at which agricultural goods are traded, and collection and sharing of market data (market price information systems). Purchasing and sales decisions as well as the financial support for the value chain by rural banks are simplified. Banks and insurance companies can provide long-term support for establishing these exchanges. Commodity futures exchanges generally require government approval and control and need a solid financial foundation for their clearing business.

The worldwide food price crisis has significantly boosted the relevance of commodity futures exchanges to the agricultural sector. The trend towards price hedging has intensified.

Requirements

• A properly functioning country-wide administration and monitoring system with access to the relevant information and sufficient technical and human capacities for its design, implementation and monitoring
• Clear and coherent political strategy and targets for policy-makers and public authorities
• Close cooperation and knowledge sharing with local advisory services
• Close cooperation and knowledge sharing with research institutions
• Market price information systems
• Regulated and legally protected payment structures
• Skilled / specialised personnel to man the respective institutions / provide the respective services
• Suitable facilities
• Regulatory framework
• Transparent exchange supervision and administration

Possible Negative Effects

• The exchanges are controlled by dealers, so farmers do not receive fair prices
• Corruption and personal gain
• Distortions caused by exchange manipulations that could threaten the livelihood of all market participants