The Contribution of Ethiopia Commodity Exchange for Promoting Exports of Agricultural Products

Abstract

Commodity exchange can play a major role for agricultural development as an instrument to bring efficient agricultural market by providing lower transaction cost, efficient and transparent means for price discovery, managing risks related with prices volatility and provide a forum for exchanging information about supply and demand condition. The objectives of the present study are to examine the contributions of ECX for exports, to identify the respective gainers and losers in using ECX for exporting agricultural products, to assess the effect of ECX for generating foreign exchange and to address the feeling of exporters towards the contribution of ECX. The primary data were collected through distributing questionnaire for exporters and interview with executive officer of the company, while secondary data collected from journals, market bulletin, articles and company website. In order to achieve the stated objectives, the focus of the study was on the contribution of ECX in providing market information, grade and standard, contract enforcement, storage, ordering the market, and price discovery. The study employed cross sectional survey design. Even though 148 structured questionnaires distributed to the exporters, only 84.5% of the questionnaires are returned. The sampling design of the study was census survey. Moreover, semi-structured interview conducted with executive officer of the company. Data collected through questionnaire were analyzed quantitatively using descriptive statistics with the help of SPSS version 16; whereas data collected through interview were analyzed qualitatively. The research result indicated that the grading and sampling system of the company has a problem of bias, lack of knowledge and equipment; there is distrust between the seller, buyer and the exchange; there is high penalty cost imposed by ECX for delaying of withdrawing the commodities on time; problem of intolerable fee for membership seat and also there is a problem of dispute resolution mechanism. Finally, to enhance complete contribution to the exporters the researcher recommended to make grading free from corruption and bias by avoiding the problematic behavior through training and behavioral change of its employees, providing fair  membership seat price, avoidance of  imposing exaggerated penalty cost and creating acceptable dispute resolution mechanism to the exporters.

Keywords: Exchange (ECX), contribution, Agricultural Products, Promoting, export.