Posted on September, 27, 2018 at 09:34 am
TANZANIA Mercantile Exchange (TMX) will begin with maize trading, after two warehouse operators were approved by the regulator, the Chief Executive Officer, Mr Godfrey Malekano has said.
He told the ‘Daily News’ in interview yesterday that the two warehouse operators have been licen c e d by the Warehouse Receipt Regulatory Board (WRRB) as warehouse operators in maize growing areas in Iringa and Njombe Regions.
The licencing and implementation of warehouse receipt system in maize pave the way for maize trading on the exchange as farmers, farmers group and AMCOS will now be able to deposit their maize in the licenced warehouse and be issued with warehouse receipts.
Maize trading on the exchange will be followed by tea, peas, sisal, tobacco and livestock after finalisation of value chain analysis and other necessary preparations including key farmers awareness creation and other key stakeholders engagement, he said.
“A team of warehouse receipt system, cooperative society’s commodity exchanges operations has been dispatched in Iringa and Njombe to mobilise farmers to participate in the warehouse receipt system and trade through the Commodity Exchange," he said.
The team will also obtain firm maize sell order to enable the launch of trade. The team will also make final arrangements with key stakeholders in maize production value chain including farmers, traders and other market actors before starting operations,” he said.
He further noted that some of the issues in the final arrangements before month end is the payment modes which are convenient to both buyers and sellers like bank account and mobile money platforms.
The team which includes bankers and mobile money service providers will educate and sensitise farmers to open bank account and get registered with mobile money platforms.
As an organised marketplace, he said the exchange will provide a platform for buyers and sellers to come together to trade, assured of quality, quantity, payment and delivery.
He mentioned Silverlands in Iringa Region as one of the companies with modern Silos and other equipment for grading maize into high quality to meet local and international market standards.
He appealed to other investors to consider installing silos and such facilities in other grain growing areas particularly Songwe, Rukwa and Katavi to enable farmers to benefit from efficient structured marketing system.
Trading in the other five commodities will follow progressively as a thorough value chain analysis is being carried out to establish best way to introduce the commodity exchange system while incorporating the existing key stakeholders into the new system.
One of the challenges that to some extent delays trading of some commodities like tobacco is the existence of very few buyers of the crop. The TMX and other stakeholders will take measures to find new buyers of the crop in an effort to expand the current list of buyers to enable meaningful competition for effective price discovery.
“For the exchange to operate efficiently there should be many buyers on one side and many sellers on the other side of the market, thus where there is market monopoly or oligopoly the system cannot work,” he said.
Similarly, in order for the smooth implementation of the warehouse receipt system and the exchange market, there is a need to review the contract farming operating in some areas because it locks farmers into agreements with few traders thus denying them high market prices when the market permits.
Mr Malekano said further that comprehensive study is being carried out in order to start tea auction in the country instead of Mombasa that will give farmers and other players huge potentials to generate more returns due to increased transparency, trading efficiencies and reduced transaction costs.
He said also that TMX will also work with the Ministry of Livestock and Fisheries and WRRB to introduce livestock in the commodity exchange.
The team will seek to establish particularly on how best the warehouse receipt system and exchange trading can be introduced in livestock sub-sector in an effort to give key players more returns.
One of the challenges to be addressed here before starting the livestock trading through the exchange is the livestock grading parameters.
The TMX is a market platform where farmers, traders, exporters and other various market actors meet to trade, assured of quality, delivery and payment.
The objectives of the TMX are to provide market integrity and efficiency by operating a trading system where buyers and sellers use standardised contracts.
Market transparency will be achieved by disseminating market information in real time to all market players and public. The TMX will facilitate risk management by offering contracts for future delivery, providing farmers, processors and exporters a mechanism to hedge against price risk.
However, TMX will introduce contract for future delivery only after the TMX spot market trading has demonstrated to be successful. Farmers and traders will be able to access domestic and global market and obtain a fair price in selling or buying of commodities.
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.
Source: Daily News