NSE to launch farm produce market by June

The Nairobi bourse is set to launch a commodities exchange by mid this year, offering farmers a new safety net against the price turbulence that has diminished their earnings and left tonnes of agricultural produce to go waste.

The market, a product of a joint effort by the National Cereals Produce Board (NCPB), the Kenya Agricultural Commodities Exchange (KACE), Eastern African Grain Council (EAGC) and Nairobi Stock Exchange, is to be launched by June this year and is seen as the long term solution to seasonal variation in commodity prices.

A commodities exchange refers to a platform where futures contracts on commodities —whether in stores or in the fields — are traded, cushioning the farmer from the characteristic price fluctuations.

This means a wheat, sugar, maize, tea, coffee or pork farmer can sell future contracts that guarantee that his produce will be bought at a specific price several months before harvesting or actual delivery.

Prior determination of the price at which a farmer intends to sell his produce in future also shields the farmers from exploitation by middlemen who buy commodities at rock bottom prices during the harvesting season often characterised by market gluts.

Last stage

“The plan is at an advanced stage and the market should open before June this year,” said Dr Adrian Mukhebi, the KACE chairman

Deloitte & Touche, a consultancy firm, is searching for two senior managers who will act as the link between NCPB and the commodities exchange, signalling that the project that has been on the cards for three years has finally entered the last stage.

Deloitte has proposed a much leaner structure for NCPB that splits its commercial wing from the strategic reserve function as well as the establishment of the commodities exchange.

The board has recently advertised a number of senior and middle level positions to accommodate new structures aimed at turning the parastatal, which remains heavily dependent on the exchequer, into a commercially viable outfit.

“These advertisements confirm that we have started implementing the Deloitte recommendations,” Agriculture minister William Ruto told the Business Daily on the phone.

NCPB is to use its silos and warehouses to store produce earmarked for trading at the commodities exchange.

“The market will initially trade major grains produced in East Africa, including maize, wheat, rice and beans but will ultimately trade other agricultural commodities, including inputs such as fertilizers and seeds,” said Dr Mukhebi.

Last year, the NSE chief executive officer, Mr Peter Mwangi, confirmed that the bourse, which mainly runs a secondary market for shares and bonds, would launch a commodities platform once a credible price discovery mechanism is established.

Some commodity traders however remained sceptical about the country’s preparedness for a centralised commodity exchange, pointing at the wooly policy landscape.