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Sesame outpaces coffee trade
Online trading is coming to the Ethiopian Commodity Exchange (ECX). Since ECX began operating in 2008 with the goal of implementing a modern transparent trading system for major agricultural commodities traders had to bargain on the ‘floor’ of ECX headquarters near Mexico Square.
Now it will introduce online trading at a cost of USD 3.8 million.
As a result, now it will not be necessary to visit the ECX exchange center in Addis Ababa to trade thanks to a new technology brought in with collaboration from the Investment Climate for Africa (ICF).
ECX officials say they have already completed 95 percent of the preparations needed to start the electronic trading.
“We are in the trial stage and we are also giving training to traders,” Shimelis Habtewold, interim CEO of ECX said. The exchange will begin online trading in selected towns of Hawassa, Jimma, Adama, Humera and Gonder, according to ECX officials. The online trading system will be tested at the headquarters of the exchange.
“When it begins service, it will enable market actors to participate directly in trading from remote online trading centers established in different parts of the country including the towns mentioned above,” the head explained.
“Online trading is designed to increase access to ECX and its services. It will be more efficient and give traders the ability to accomplish more,” Shimelis added.
According to the head, the electronic trading system will help them make more informed decisions because they will have the ability to access more information.
High Tech Tracking
Another advantage of the electronic trading system is that it will involve a commodity traceability system allowing traders to keep track of their exchanges. The project will cost USD 1.3 million.
Traceability provides buyers with information about the origin and processing of the commodities being traded. “In addition to creating market access, traceability will enable ECX members and clients to meet the demands of international buyers who want to know the whereabouts of the commodity, ensuring sustainability, quality, safety and security of commodities,” the interim CEO said.
Products that are traceable when they are traded will have more value which in turn is good for the traders.
“The traceability system will be applicable with new software. We have come to terms with the company and it will be available soon,” Shimelis explained.
Moving on up
ECX hopes these new services will help it expand its trade volume by 20 percent compared with the past year’s achievement.
In this past fiscal year 586,164 metric tons (MTs) of commodities were traded on the floor of ECX and this year that number should rise to 697,137 MTs. “Agricultural production is forecasted to grow this year so we believe the trading volume will increase by 20 percent,” Abenet Bekele, chief strategy officer of ECX, said.
Another reason for the increase in trade volume is the emergence of the mung bean. It was included during the 2013/14 fiscal year, but the legal procedures for trading it were in the process of being finalized, now this year the exchange will be the exclusive place for trading the commodity.
“This will also increase the amount of items being traded,” he said.
In addition to coffee, sesame and white pea beans, traders and exporters will now be legally required to go through ECX to or buy mung bean. Previously people could trade using either ECX or alternative methods.
Soon, according to Abenet, ECX will also trade red pea beans, which will increase the number of products traded on the floor to eight. The exchange also facilitates the trade of haricot beans, maize and wheat using a different system.
This previous fiscal year, which just ended, USD 1.3 or 26.2 billion birr worth of commodities were traded.
Since the second CEO Anteneh Assefa left the country for the US a few months ago the exchange has been in the hands of interim CEO Shimelis Habtewold. He says the exchange has been experiencing magnificent success when compared with last year. The interim CEO who was appointed in March pointed out that this year’s 7.3 billion birr in earnings was a growth of 38 percent when compared with the earning in the 2012/13 fiscal year.
“This growth is the result of a increase in the value secured from all the commodities including sesame, coffee and white pea beans,” the interim CEO said.
Sesame trading heated up lately, becoming one of the reasons for the dramatic improvement in results at ECX. According to ECX report, sesame has become the leading commodity traded on the floor, growing by five billion birr this fiscal year.
“The 280,552 MTs of sesame traded at the exchange was 106 percent more than what we hoped to achieve,” the chief strategy officer of ECX, said.
On the other hand, coffee, which was greatly affected by fluctuations in international prices during the earlier part of this fiscal year still managed to grow by 1.7 billion birr but declined in volume when compared to the previous year.
A year ago coffee led the way with 240,551 MTs while sesame and white pea beans followed at 215,234 and 82,675 MTs respectively.
According to Abenet, the coffee trading this fiscal year met 88 percent of the target with an actual trading volume of 239,778 MTs, compared with the goal of 270,000 MTs.
White pea bean trading also increased. The exchange disclosed that transactions of white pea beans skyrocketed by 445 million birr worth of 65,702 MTs. Meanwhile 100 MTs of mung beans were traded at ECX last fiscal year.
The total traded volume of the commodities traded reached 586,164 MTs by the end of the 2013/14 fiscal year which is an increase of 47,000 MTs or nine percent more than the volume during the 2012/13 fiscal year.
“We have met 92 percent of our target,” the exchange head said.
Compared with the 2012/13 fiscal year performance the trading volume of coffee decreased slightly in the just ended fiscal year, while sesame trading demonstrated outstanding growth. The white pea bean trading volume also decreased significantly in the 2013/14 fiscal year compared to last year’s performance.
The exchange chief strategy officer said that the actual achievement of white pea bean trading volume was 65 percent, which is the weakest performance of the commodities.
According to officials of the exchange in the past fiscal year 13.5 billion birr worth of coffee was traded on the exchange, which made coffee the major commodity traded in terms of value. “Changes in the international market are contributing to an increase of coffee trading at the exchange,” one expert said. Abenet said that the international market is showing some improvement compared with the beginning of the past fiscal year.
The trading value of other major products; sesame and white pea beans was 11.2 billion birr and 1.1 billion birr respectively.
The focus of ECX is to facilitate a modern market system. It plans to offer futures trading and it has teamed up with market experts in Asia and North America to study the possibility.
“We plan to trade futures and we will implement this when the right time comes,” Abenet said.
In the past six years since ECX began operating, there have not been any defaults on transactions. There have been some illegalities that were tracked by the exchange and its regulatory body and this led to some prominent traders being suspended.