7 November 2018

Tanzania: Commodity Exchange Billed to Boost Crop Price

THE solution for low crop prices offered by buyers centered on commodity exchange that provide transparency in commodity auctions, some stockbrokers have suggested.

The market already established in the country but yet to take off, would be crucial for quelling farmers and buyers price disputes in a winwin situation.

Orbit Securities said in its weekly financial synopsis that it is high time for the Tanzania Mercantile Exchange (TMX ) to be looked at as a potential solution.

"TMX was designed to provide transparency in commodity auctions and an efficient price discovery mechanism for commodities," Orbit said. The leading brokerage firm added that TMX "also allowing farmers to hedge against price volatility".

In recent days, cashewnut farmers refused to sell their commodity after price mismatch between them and buyers.

The incident forced the government to interfere the matter and issued a floor price of 3 ,000/- a kilo instead of 2,700/- a ceiling price proposed by buyers.

Also, Orbit said, investors are keen on the outcomes of cashew nuts harvesting and auctions as they will be crucial in the direction of the shilling.

"The stability of the shilling as well as maintenance of high foreign reserves will depend on the inflow of foreign funds into the country mostly from exports of commodities and tourism," Orbit report said.

TMX Chief Executive Officer Godfrey Malekano said the commodity is ready to start but delayed due to challenges arising from availability of warehouse facilities.

"TMX was to kick-off this month starting by trading maize... but despite having two certified warehouses in Iringa and Njombe costs of storing maize per year are exorbitant," Mr Malekano told the 'Daily News' yesterday.

He said they are currently looking for second plan of looking into possibility of using cooperatives or government warehouses since paying 90/- per kilo a year to private operators to store maize is out of reach for farmers.

"The warehousing price is too high for farmers to afford. We are currently working on plan B using cooperative facilities," he said.

He said they are also facing similar situation on cashew nut warehousing thus backpedals efforts to trade the crop at the exchange.

The facilities have to be certified by Warehouse Receipts Regulatory Board (WRRB) that regulates the warehouses in the country.

Under WRRB warehouses have to meet the set standards such as having a weighing bridge, ability to keep crop at required temperature and sorting crops and removing bad substances.

One of the operators is Silverlands, which is the best, in Iringa with modern silos and other equipment for sorting grading maize into high quality to meet local and international market standards.

TMX firmly believes that it would achieve its main objective when a Tanzanian farmer would be able to choose his/her cropping pattern based on spot and future prices disseminated by the exchange, rather than the practice of sowing a crop based on current prices.

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