The Role of Ethiopian Commodity Exchange (ECX) in Crop Value Chain Development in Ethiopia

Abstract

This study intended to assess the role of Ethiopian Commodity Exchange (ECX) in crop value chain development with the aim of identifying agribusiness and Value Chain activities in ECX; identifying development intervention and its underlying impact and associated chain problems of ECX; identifying major value chain enterprises operating under ECX; and map the generic value chain for some selected commodities. ECX is Ethiopia’s latest attempt to enhance the performance of agricultural markets. Conceived as a meeting point for buyers and sellers of grains and coffee, the ECX seeks to organize efficient and transparent market operations. Before the establishment of ECX, agricultural markets in Ethiopia had been characterized by high costs and high risks of transaction forcing much of Ethiopia in to global isolation. With only one third of output reaching the market, only buyers and sellers tended to trade only with those they knew, to avoid the risk of being cheated. ECX developed a new method of exchange; a marketing system that coordinates better, links faster, and protects of both side of the trade. ECX is a modern trading system based on standard crop contracts, establishes standard parameters for commodity grades, transaction, size, payment and delivery, and trading order matching, while at the same time, preserving the origins and types of crops as distinct unlike the previous. Quality certification is also another important issue in value chain in ECX which is based on a modification of the previous quality grading system, with a new crop classification based on classes, types and grades of the commodity. The role of the ECX has been to specifically address the ways suppliers and exporters transact, with more efficient and transparent ways of trading as the main outcome. Despite the engagements of ECX have positive impact on the existing marketing system and for the development of agricultural value chains in Ethiopia, through creating a more reliable way to connect buyers and sellers in an efficient way to discover market prices, a way to level the playing platform by providing market information to all, there are still problems which are faced by all actors in value chain as infrastructural problems, legality problem, exploitation of farmers at the farm gate, marketing imperfections, systematic rigidity and traceability issue. In this regard, the study suggest ECX to develop strategies benefiting smallholder farmers in particular, facilitating financial and other logistics, promoting traceability in trading system for the private traders, creating regulatory platform for controlling the illegal traders operating in the system and capacitating the cooperative unions in the value chain.