Agricultural Commodity Exchange Research Articles

Significance and perspectives for development of commodity exchange trade in agricultural products

Exchanges are intermediaries in the trade of commodities, financial instruments that have commodities in their base or credit instruments that are secured by commodities. Commodity exchanges have gained in importance in recent decades. Commodity exchanges have evolved from the place where the physical purchase and sale of goods takes place to trade in commodity derivatives where standardized contracts−futures and options−are traded. The role of commodity exchanges in the development of the agribusiness sector has changed significantly from the initial stage of development when in the beginning the main role was to ensure efficient and transparent exchange of commodities, until the early 1970s when instruments were developed to enable risk management in the agribusiness sector. The largest volume of tradе on modern commodity exchanges is realized in standardized derivative contracts. Financial derivatives are one of the most successful financial innovations, with the volume of turnover increasing significantly. Within this chapter, special attention is paid to the analysis of the situation in the field of commodity exchange trading in the Western Balkan region. According to the results of the analysis, developed agricultural commodity exchange trade is not available to the farmers in these countries, nor are business risk management instruments available to participants in countries with developed commodity exchange systems. Analyses have shown that the sole commodity exchange with a significant volume of trade in the countries of the Western Balkans is the Novi Sad commodity exchange, trading on the spot and non‒standardized term market. In terms of the directions of development of regional commodity trade, the experience so far shows that high trading volume is a paramount for well‒developed commodity exchange. Therefore, the path to the development of commodity exchange trading is the establishment of a regional commodity exchange that would be a place of trade for all of the Western Balkan’s countries. By establishing a regional commodity exchange, participants in the agricultural sector would have the opportunity to securely and transparently trade and manage the price risk that have a pronounced volatility in recent years.

AgTech: Volatility Prediction for Agricultural Commodity Exchange Trading Applied Deep Learning

AgTech: Volatility Prediction for Agricultural Commodity Exchange Trading Applied Deep Learning

Foreign Experience in the Legal Regulation of Agricultural Commodity Exchange and its Possible Practice in Ukraine

Foreign Experience in the Legal Regulation of Agricultural Commodity Exchange and its Possible Practice in Ukraine

Identifying ripple effects from new market institutions to household rules -Malawi’s Agricultural Commodity Exchange

The introduction of new rules in an institutional field provides agents with a new set of opportunities and constraints on which they can leverage to change the rules in other institutional fields. Inspired by Elinor Ostrom, we term this causality a ripple effect, born out of the initial institutional changes. In this article we enquired in what ways women farmers could transfer genderblind changes in the market to the household. We developed a diagnostic tool to capture this propagation of effects and tested our framework with a study of the Agricultural Commodity Exchange for Africa (ACE) in Malawi. We found that the introduction of ACE has produced weak but positive effects for women, some of which rippled the changes in the rules to improve their household situation. Some women see in trading with ACE an opportunity to retain freedom and avoid a constraining married position in the household.

Determinants of Use of Information and Communication Technologies in Agriculture: The Case of Kenya Agricultural Commodity Exchange in Bungoma County, Kenya

Access to markets by Smallholder farmers has conventionally been constrained by lack of market information. Efforts to strengthen access of farmers to markets has triggered the mushrooming of several projects that embrace ICT tools in promoting access to competitive market information. Nevertheless, most farmers still lack access to accurate market information, such as existing commodity prices. This study examines the determinants of the use of ICT tools among smallholder farmers for agricultural transactions. The study uses Kenya Agricultural Commodity Exchange (KACE), one of the ICT-based marketing platform, as the case study. The objectives of the research are to determine the factors that influence access to agricultural information, and establishing factors that determine the intensity of use of ICT tools in accessing agricultural information. Survey was conducted among 136 smallholder farmers in Bungoma County. Both purposive, and multi-stage sampling were used to obtain the sample for this research. The study finds that several farmer characteristics, farm and capital endowment factors affect the use of ICT tools, particularly mobile phones. Gender, age, literacy level, affordability, perceived importance, mobile ownership and group membership were found to be significant in influencing the decision to use KACE ICT tools and the intensity of use of these tools for agricultural transaction activities. The study further recommends for policies that support the expansion of ICT projects, training on their applications and sensitization on the use of these platforms. The study suggests for policies to address gender disparities on access and use of ICT tools for agricultural transaction.

Price Discovery and Efficiency of Indian Agricultural Commodity Futures Market: An Empirical Investigation

This study examines the price discovery process and relative efficiency of ten most liquid agricultural commodities’ futures contracts, traded on the largest agricultural commodity exchange of India (National Commodity and Derivative Exchange Limited). Three different common factor methodologies—component share method (Gonzalo and Granger in J Bus Econ Stat 13:27–35, 1995), information share method (Hasbrouck in J Financ 50:1175–1199, 1995), and modified information share method (Lien and Shrestha in J Futures Mark 29:377–395, 2009)—have been employed to determine the extent of price discovery contribution by spot and futures markets. The sample consists of daily data for the period from January 1, 2009 to October 20, 2015. Stationarity and Cointegration test results reveal that spot and futures prices are integrated and cointegrated for all commodities. The price discovery results show that the futures market leads the spot market in case of six commodities, i.e., castor seed, coriander, cottonseed oilcake, soy oil, sugarM and turmeric. Whereas, in the case of four commodities (chana (chickpea), guar seed, jeera, and mustard seed), price discovery takes place in the spot market. Therefore, it could be inferred that futures market is more efficient in price discovery of agricultural commodities. Policymakers could use these results to design futures contracts on other commodities or to plan concrete policies to curb speculation without hampering the efficiency of the agricultural commodity derivatives market.

Linking farmers to markets in Kenya: The evolving KACE model

The Kenya Agricultural Commodity Exchange Limited (KACE) was incorporated in 1992 but formally launched in 1997 to address the challenges facing farmers in Kenya, especially poor smallholder farmers, in accessing input and output markets. A commercial for-profit model was chosen in order to charge clients modest fees for services rendered and raise revenue to sustain the services in the long term. The KACE model has evolved through various stages over time, with KACE developing, testing and experimenting with various platforms to link smallholder farmers to more remunerative markets. This article describes the various platforms, the challenges that were experienced and how they were addressed at each stage in the evolution. Chronologically, these platforms consisted of a physical trading floor, market information points (MIP), information and communication technology (ICT)-based platforms (short messaging service - SMS, interactive voice response service - IVRS, Internet based website and electronic database and radio), market resource centres (MRC), and a market call centre (MCC). Thus, the challenge experienced by KACE has been to find the right mix or portfolio of appropriate and affordable technology platforms, with complementary human skill and capacity, to efficiently manage the technologies, as well as the revenue flows, towards increased technical and financial sustainability. Despite the challenges, the KACE model continues to evolve and function, with a social entrepreneurial spirit of determination, to provide a solution to the social problem of poor smallholder farmers in Kenya, and God and technology willing, in the rest of Africa. The ICT platforms are being upgraded to improve technical and financial performance and efficiency, and the MRC staff are being trained to improve their capacity to generate and manage revenue efficiently.

Why are African commodity exchanges languishing? A case study of the Zambian Agricultural Commodity Exchange

Food price volatility and high transactions costs remain major problems in African food markets. These persistent problems provide a strong theoretical justification for the development of commodity exchanges. However, the majority of African commodity exchanges remain underdeveloped. Through a case study of the Zambian Agricultural Commodity Exchange (ZAMACE), this article explores why agricultural commodity exchanges in the region have thus far failed to develop into sustainable trading platforms and identifies the most important changes needed to enhance their performance.Drawing on interviews and group discussions with the primary participants on ZAMACE, five main factors that impede volumes traded on the ZAMACE exchange are identified and analyzed: (1) the limited success in attracting financial institutions’ commitment to commodity exchanges; (2) the anonymous nature of trading on a commodity exchange exacerbates the risks associated with contract non-compliance and opportunistic behavior; (3) the potential for conflict of interest among brokers; (4) the potential for market manipulation in a thinly traded market; and (5) the high fixed costs that are imposed on actors trading in a thin market. Exacerbating all these factors is the unpredictability of government intervention in cereal markets.

The Role of ICT-Based Market Information Services in Spatial Food Market Integration

The government of Malawi in 2004 initiated an ICT-based Malawi Agricultural Commodity Exchange (MACE), a market information service project, to improve access by farmers to market information. MACE was intended to improve the efficiency of agricultural markets as part of the strategy to improve food security. This study uses quantitative methods to examine whether MACE has contributed to efficiency of rice markets in Malawi. It especially tests if MACE has contributed to spatial integration of rice markets. As hypothesized, the study finds that the tendency of rice prices to move together in spatially separated markets has significantly increased since the implementation of MACE. It concludes that ICT-based market information services project enhances linkages between markets and can therefore improve the efficiency with which agricultural markets perform. The study discusses implications of this finding for policy.

Commodity Exchange and Institutional Changes :Case of Iranian Agricultural Commodity Exchange

In this study, an attempt is to figure out the institutional changes that initiate the agricultural commodity exchange (ACE). To assess the affecting factors, new institutional economics approach has been chosen. The framework consisting of four levels of social analysis introduced by Oliver E.Williamson is used to analyze the social environment, institutional rules, institutional arrangements and finally the agency level economics (Neo-classical economics). Regarding this framework, the institutional changes that have initiated the Iranian ACE is analyzed and its constraints to further improvement are discussed.

On the Dynamic Relationship between U.S. Farm Income and Macroeconomic Variables

This study examines the short- and long-run effects of changes in macroeconomic variables—agricultural commodity prices, interest rates and exchange rates—on the U.S. farm income. For this purpose, we adopt an autoregressive distributed lag (ARDL) approach to cointegration with quarterly data for 1989–2008. Results show that the exchange rate plays a crucial role in determining the long-ran behavior of U.S. farm income, but has little effect in the short-run. We also find that the commodity price and interest rate have been significant determinants of U.S. farm income in both the short- and long-run over the past two decades.