As part of the Building and Sustaining Markets Program,
NYU Africa House hosted closed presentations in conjunction with Development Research Institute and CTED
Seminar Topic: “Exploring International Coffee Prices and the Ethiopian Commodities Exchange”
Speakers: Prof. Yaw Nyarko, Director NYU Africa House/CTED/DRI
Mr. David Johnson, PhD student, NYU Dept. of Economics
About the Ethiopian Commodities Exchange (ECX)
The Ethiopia Commodity Exchange (ECX) commenced trading operations in April 2008. The Ethiopian Commodity Exchange was started to benefit and modernize the way Ethiopia was trading its most valuable assets – its commodities. Ethiopia needed a change from the traditional means of trading to better support the needs of all those involved in the trading and production. Before ECX was established, agricultural markets in Ethiopia had been characterized by high costs and high risks of transacting, forcing much of Ethiopia into global isolation. With only one-third of output reaching the market, commodity buyers and sellers tended to trade only with those they knew to avoid the risk of being cheated or default. Trade was done on the basis of visual inspection because there was no assurance of product quality or quantity. This drove up market costs, leading to high consumer prices. For their part, small-scale farmers, who produce 95 percent of Ethiopia’s output, came to market with little information and were at the mercy of merchants in the nearest and only market they knew, unable to negotiate better prices or reduce their market risk.
ECX offers an integrated warehouse system from the receipt of commodities on the basis of industry accepted grades and standards for each traded commodity by type to the ultimate delivery. Commodities are deposited in warehouses operated by ECX in major surplus regions of the country. At the ECX warehouse, commodities are sampled, weighed and graded using state-of-the-art technology grading and weighing equipment. ECX warehouses issue an Electronic Goods Received Note and provide the depositor or his/her representative with a signed print copy. The Electronic Goods Received Notes are not negotiable, transferable, and do not represent legal title to the deposited commodity. The depositor has to get an Electronic Warehouse Receipt issued by the ECX Central Depository in order to establish legal title to the deposited commodity. The Deposited commodities are stored using global standards of inventory management which rely on First-In-First-Out principles, rotation, and careful environmental control. ECX Inventory Management system guarantees the quality and quantity of the commodity throughout the pre-determined period of storage. Further, ECX warehouses are insured at maximum coverage to protect against loss and damage of deposits.
ECX warehouses provide the following services:
Sampling, grading, weighing, and certifying of the grain and coffee coming to each warehouse using equipment provided by ECX according to ECX established standards
Weighing, receiving and issuing Electronic Goods Received Note which matches ECX automated system
Recording system for incoming and outgoing grain and daily stock position reports
Proper handling of the commodity at the warehouse (store layout stacking, bin no, inventory management)
Reporting system and formats for up-to-date information exchange between ECX and the area warehouses
Maintain the quality of received products.
ECX Market Data
The ECX Market Data strategy involves harnessing the power of modern information and communication technologies (ICTs) to empower all market actors, including smallholder farmers to access markets more efficiently and profitably. The key market dissemination channels at ECX are rural based market information tickers, mobile phone Short Messaging Services (SMS), Interactive Voice Response (IVR) services, mass media (TV, radio, newspaper) and websites (www.ecx.com.et).
ECX collects, processes, updates, and disseminates market information in real-time to all market actors and other market intermediaries through the MIS. The market information includes prices of commodities in different markets, commodity offers to sell and bids to buy, as well as short extension messages.
The application of ICTs is taking the market to the door-step or farm-gate of the farmer, commodity dealers, processors, exporters, and importers. The components of the ECX MIS are:
Mobile Phone Short Messaging Service (SMS)
Interactive Voice Response (IVR) service
Bulletins – Market Commentary
Mass media (radio, TV, print)