GCX trades on first day

Rev. Daniel Ogbarmey Tetteh, DG, SEC

…but no trading information provided

There were trades executed in maize on the first day of trading on the Ghana Commodities Exchange (GCX) in Accra although curiously, there was no information available to farmers, traders, investors or the general public on the number, nature or value of those trades.

While a senior official of the GCX confirmed the execution of some trades there was no information about them on the Exchange’s website or indeed anywhere else.

This has created a curious – and hopefully extremely temporary – situation whereby a commodity exchange which is supposed to operate on full availability of information to ensure efficient price discovery, has started without any information at all. Efforts by Goldstreet Business to ascertain the number, nature and volumes of the trades consummated on the first day of trading from GAX itself also proved futile. However we can report that all the trades were executed in maize since trading in soy and rice is yet to be commenced by the Exchange’s managers.

The absence of trading information severely inhibits the GCX from achieving its highly laudable objectives. “We’re flying blind here” lamented one commodity trader yesterday evening. “How can we prepare our bid and offer prices if we do not know how the market is pricing the maize it has started trading and the volumes available and being demanded?”

Commodity exchanges, just like stock exchanges and even fixed income markets are supposed to provide traders and investors with full information in real time to ensure the efficiency of pricing and to match supply with demand. For instance both the Ghana Stock Exchange itself and the Ghana Alternative Market provide price and trading volume information in real time on every day that the markets are open for trading.

The GCX website, which is supposed to provide the requisite information to ensure pricing efficiency only provided trading information resulting from the pilot trading done on May 18 this year. On that day, three trades were executed. At the first session that day, white maize originating from Sandema in the Upper East region was traded at GHc 69 per ton. At the second session maize from Ejura in the Ashanti was traded at GHS72 while at the third session maize from the same place was traded at GHS73.

With the launch of the Ghana Commodity Exchange (GCX) on Wednesday, it is estimated that one million farmers, in the next 18 months will be integrated into the GCX and Warehouse Receipt System.

Speaking at the launch in Accra, President Nana Akufo-Addo indicated that through this system, Ghanaian farmers will gain access to a secured storage for their harvest and good warehousing management practices.

He noted that this will substantially reduce their post-harvest losses, and improving their take home sales, as well as ensuring affordable short-term loans using their commodities as sole collateral.

This would minimize the borrowers’ credit and default risks.

The GCX, which is a platform for buying and selling listed agricultural commodities, is the first in West Africa.

Although Ghanaian farmers are responsible for feeding a nation of some 29 million people, the President stated that they are amongst a class of workers in the country with no guaranteed incomes for their labour and efforts.

“On their own, some of them have to deal with commodity price volatilities, and many possess little to no knowledge of the true value of their produce. Even worse is the fact that most transactions in the agricultural sector are conducted by word of mouth or handshake agreements. Most often, there are no formal contractual agreements in place, resulting in trade disputes which undermine our marketing system,” he said.

These challenges, he stressed, have given rise to the employment of costly solutions and alternatives in dealing with them.

They include engaging out-grower schemes to tie producers to delivering outputs or extending considerable amounts of input financing, and investing in networks of collection centres where buyers are compelled to inspect produce themselves physically in order for them to be assured of what they are purchasing.

The President indicated that a decision has been made for the Exchange, as a start, to trade in agricultural commodities, specifically with food security crops, with additional commodities set to be traded at the Exchange.

By Toma Imirhe & Joshua W. Amlanu