(HERALD) Agric stakeholders hit out at Commodity Exchange

Agric stakeholders hit out at Commodity Exchange
Wednesday, 02 February 2011 23:32 Agriculture
Herald Reporter

THE recently established Commodity Exchange could have serious implications on food security and drive farmers away from farming, agriculture sector stakeholders argue. Sources said once food crops are traded on the exchange, Government would have no control and that posed a threat to national food security.

According to the sources, the exchange has the potential to disrupt contract farming of some cash crops such as cotton because farmers will be tempted to engage in side-marketing.

They questioned the relevance of the exchange given the role of the Agricultural Marketing Authority. A senior Government official said the Commodity Exchange as shrouded in a lot of secrecy and the entire Agriculture Ministry was not consulted in its creation.

“Officials in the Ministry of Industry and Commerce are actually very hostile to officials in the Agriculture Ministry, from the Permanent Secretary downwards,” said a Ministry of Agriculture official speaking on condition of anonymity.

“The fact that the Commodity Exchange is bei-ng proposed to start trading in maize, wheat and small grains, yet not even a single cent was put into the production of these crops by any investor except Government and the Presidential Inputs Scheme, will seriously impact on the food security situation at a time farmers are just beginning to produce food crops in abundance.”

No comment could be obtained from the Ministry of Industry and Commerce.
According to the sources, the exchange will not pay cash to farmers who have the capacity to deli-ver their produce. The farmers will be given warehousing recei-pts yet there will be need for cash to prepare for the next season.

Those farmers who cannot deliver their crop on their own will be at the mercy of brokers who can buy at unfair prices and benefit from the end price when they take the produce to the excha-nge.

“All this begs the questions, who are the pla-yers behind the Commodity Exchange and why has it not been subjected to Cabinet scrutiny?

“What’s the motive behind wanting to put food crops in the hands of the private sector when we are still under sanctions and how nationalistic is this private sector?”
An AMA official said the Grain Marketing Boa-rd seemed to want to “play a go along game”.
“This commodity exchange will be a parallel structure which eliminates the benefits AMA’s functions are to achieve such as contract farming and provision of a regulatory framework.”

The Commodity Exchange was established to among other things:

* Provide a platform to trade agricultural pro-ducts which include maize, wheat, soya beans, barley, sorghum, cotton, coffee, tea, sugar and livestock.

* Determine prices on the sole basis of supply and demand.

* Provide a regulatory framework for stakeholders.

* Employ brokers who will trade on behalf of farmers and be the interface between farmers and buyers.

* Hire GMB depots for warehousing of the tradable products.

In addition to promoting fair marketing and pricing of agricultural produce, AMA’s functions are to:

* Regulate participation in production, buying or processing of any agricultural products by producers, buyers, or processors or classes of products, buyers or processors of any agricultural product upon such terms and conditions including as appropriate the fixing of quotas, as may be prescribed.

* Promote contract farming of strategic crops.

* Review annually the general economic condition and prospects of the agricultural industry and, in particular, the marketing of agricultural products.

* Promote efficient administration of marketing of any agricultural product, whether on local or export markets, at all times keeping abreast of local and international market dema-nds and trends

The AMA official added: “Brokers on the exchange work to fulfill the needs of their principals — the buyers — whose motive is profit and not farmers’ viability.

“AMA is mandated to protect the interests of the producer, including those in the communal and resettlement areas.”

He said the GMB’s function as a buyer of last resort needed to be maintained to safeguard farmers’ interests, especially smallholders who will have no influence on the exchange.

“GMB has of late been setting very competitive floor prices for maize and wheat and what needs to be done is to capacitate it to pay on time and not this exchange business, which has the potential to disrupt the land reform programme.”