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Commodities exchange can transform farming

By Editorial Updated Friday, February 14th 2014 at 00:00 GMT +3
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Kenya: News that Kenya will host a regional commodities exchange could not have come at a better time. The face of Kenya in the recent days has been one of extreme want. Tens of thousands of Kenyans are at risk of starvation.

Already, there have been the sordid tales of affected families eating poisonous fruits and other dehumanising cocktails — including the canine meal that should never have been.

Kenya’s food security is a narrative of extremes. One season of a glut is immediately followed by an acute shortage. Commodity prices predictably oscillate between rock bottom and sky high within weeks of harvesting. Farmers have no chance against middlemen and hardly earn a cent on their investment.

Farming, unlike other economic activities, has been left to the poor with even financial institutions closing doors on the sub-sector because of its uncertain returns. It is this scenario that makes for a powerful case for a commodities exchange in the region.

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At the core of Kenya’s food crisis is the downright neglect of smallholder farmers who account for up to 80 per cent of food production.

Their lot continues to suffer several challenges including limited capital for inputs, inadequate access to information on where their produce could fetch them the best price and of course exploitation by mighty brokers.

The launch of a commodities exchange that focuses on smallholder farmers is therefore well meaning and a step in the right direction. By its design, a commodities exchange will allow farmers to transact contracts for delivery in the future. This has the singular ability to limit wide swings in prices caused by gluts or scarcities.

Besides helping cut down on post-harvest losses, the intended adoption of warehouse receipting of the commodities will also be key to unlocking farmers’ access to credit without having to sell their produce for a pittance.

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