Published: 30 September 2013

Zimbabwe has a commodity exchange that is yet to start operating due to lack of funds. However the Ministry of Industry and Commerce has indicated its working to ensure that the exchange is functional.

Commodity exchanges were established to improve the performance of agricultural commodity marketing.

Improving agricultural marketing systems is important in ensuring successful implementation of various agricultural development initiatives which have been launched to raise agricultural output and productivity.

Successful agricultural commodity exchanges, though by no means a panacea for all the weaknesses in the agricultural sectors in Africa, are seen as having the potential to improve the functioning of agricultural markets by improving price formation, market transparency and regional trade, thereby raising farm output and rural incomes as well as enhancing food security.

The purpose of commodity exchanges is to provide a centralised marketplace where commodity producers (commercials) can sell their commodities to those who wish to use them for manufacturing or consumption.

The beauty of a commodity futures exchange is that someone like a corn farmer can lock in a price for his crops months before they are even harvested. This process increases business survival among farmers and the exchanges always make sure there is a buyer for every seller, provided their prices meet.

Commodity exchanges certainly make the economy much more efficient by providing a standardised price for a commodity that would be difficult to establish if there was no centralized system.

The lack of a commodity exchange forces producers and users to be dependent on individually finding buyers and sellers, this may led to commodity producers probably going bankrupt without the ability to hedge their operations with the use of a commodity exchange.

That in turn leads to higher prices for commodities and higher operational costs within the country.
- herald

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