197
with seed funds from the Ethiopian government and USAID and was operated
as a public-private enterprise. Quickly the ECX was a success as it provided
better market information, standardization of products, and standard contracts. The ECX promotes the following services:
1. Market integrity, by guaranteeing the product grade and quantity and operating a system of daily clearing and settling of contracts.
2. Market efficiency by operating a trading system where buyers and sellers
can coordinate in a seamless way based on standardized contracts.
3. Market transparency by disseminating market information in real time to
all market players.
4. Risk management by offering contracts for future delivery, providing sellers and buyers a way to hedge against price risk.
The information transparency provided the ability to track coffee movement
from farm to buyer organization in an efficient manner, promoting better
transportation planning and inventory management. Trucks were able to be
scheduled, rather than just being available when they happened to show up at
a warehouse. This was particularly important since there was a shortage of
delivery trucks in Ethiopian and any inefficiencies were costly. All this
resulted in lower costs of supply chain as well as improved crop yields from
reduced spoilage.
Behind the ECX is a market information system that ties the various trading systems together. This includes electronic tickers at 200 market sites
across the country for disseminating information; farmers’ access to mobile
phones to disseminate market information via text; a fully automated telephone system which allows traders to access market information 24 hours a
day, 7 days a week; and the ECX website that provides real-time data for all
commodities traded. The rapid progress of technology was manifested by the
increased penetration of mobile phone technology in the nation. Between
2008 and 2016, the number of mobile phones increased from under 2 million
to over 50 million for a population of 102 million people.
For all the benefits that the ECX proposed, today it is still primarily an
export exchange for spot pricing of two primary crops – sesame and coffee.
More works need to be done to find a better platform for smallholder farmers
to access a larger portion of the overall commodity profit pool.
1
Ethiopian Commodity Exchange website, http://www.ecx.com.et/
http://www.2merkato.com/news/alerts/5008-ethiopia-mobile-subscribersreached-53-million
(continued)
7 Innovation and the Quest to Feed the World
with seed funds from the Ethiopian government and USAID and was operated
as a public-private enterprise. Quickly the ECX was a success as it provided
better market information, standardization of products, and standard contracts. The ECX promotes the following services:
1. Market integrity, by guaranteeing the product grade and quantity and operating a system of daily clearing and settling of contracts.
2. Market efficiency by operating a trading system where buyers and sellers
can coordinate in a seamless way based on standardized contracts.
3. Market transparency by disseminating market information in real time to
all market players.
4. Risk management by offering contracts for future delivery, providing sellers and buyers a way to hedge against price risk.
The information transparency provided the ability to track coffee movement
from farm to buyer organization in an efficient manner, promoting better
transportation planning and inventory management. Trucks were able to be
scheduled, rather than just being available when they happened to show up at
a warehouse. This was particularly important since there was a shortage of
delivery trucks in Ethiopian and any inefficiencies were costly. All this
resulted in lower costs of supply chain as well as improved crop yields from
reduced spoilage.
Behind the ECX is a market information system that ties the various trading systems together. This includes electronic tickers at 200 market sites
across the country for disseminating information; farmers’ access to mobile
phones to disseminate market information via text; a fully automated telephone system which allows traders to access market information 24 hours a
day, 7 days a week; and the ECX website that provides real-time data for all
commodities traded. The rapid progress of technology was manifested by the
increased penetration of mobile phone technology in the nation. Between
2008 and 2016, the number of mobile phones increased from under 2 million
to over 50 million for a population of 102 million people.
For all the benefits that the ECX proposed, today it is still primarily an
export exchange for spot pricing of two primary crops – sesame and coffee.
More works need to be done to find a better platform for smallholder farmers
to access a larger portion of the overall commodity profit pool.
1
Ethiopian Commodity Exchange website, http://www.ecx.com.et/
http://www.2merkato.com/news/alerts/5008-ethiopia-mobile-subscribersreached-53-million
(continued)
7 Innovation and the Quest to Feed the World