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Agricultural commodity markets in developing countries are characterized by high transaction costs and risks that reduce trade flows among spatial markets. We examine whether institutionalized agricultural commodity exchange markets reduce transaction costs and hence spatial price dispersion using the introduction of the Ethiopian Commodity Exchange (ECX) as a quasi-experiment. We use a commodity level Difference-in-Difference identification strategy to compare the spatial price dispersion of cereals that are traded at ECX (maize and wheat) with a cereal traded only at the local market (teff). Results show that ECX significantly reduces the spatial price dispersion of maize and wheat compared to teff. This effect varies depending on crop type and the time length since the ECX started trading the commodity. The longer the duration, the larger the reduction in price dispersion. We also find that dissemination of price information is the main channel through which the commodity exchange affects spatial price dispersion.
In this paper, I study the impact of the Ethiopian Commodity Exchange (ECX) market on farm prices and farmer total revenues in rural Ethiopia. After the establishment of ECX in 2008, and its wide spread success story, unlike other African countries' counterparts, some theoretical researchers suggest that ECX has provided farmers with higher and more stable prices by reducing transactional costs and decreasing informational asymmetry. To test this theoretical hypothesis, I use a panel dataset and the non-linear as well as the difference-in-difference econometric models in search for changes made by this market and their statistical significance. I used distance from warehouses to create the treatment group definition to understand the impact between the treatment and control groups. The results are fairly consistent with the theoretical assumptions, expecialy for coffee, showing that people closer to the ECX warehouses have in fact received higher prices, and hence revenues relatively, although some of the estimators were not statistically significant. The fact that the datasest ranged until only 2009 is a major time horizone limitation of the study as the impacts made by ECX couldn't have been fully realized just a year and a half as it only had a few warehouses operating at that time. However, I hope that the research will give an empirical understanding of how a ECX has affected the primary stakeholders: the farmers. I believe, with a better set of data of wider time horizon and more variables, these analyses can be advanced to shed light on successful markets and inspire others to build systems where they don't exist especially in the agricultural sector of developing countries like Ethiopia.
Africa has longed for commodity exchanges since early 1990s. Among such countries in this continent where agricultural commodity exchanges were established in the 1990s are Ghana, Nigeria, South Africa, Nigeria, Uganda, Zambia and Zimbabwe - characterized by seasonal price variability. The Ethiopian Commodity Exchange (ECX, 2008) has been a successful private-public exchange for which other African countries and the whole continent would like to model commodity exchanges for the highly volatile Agricultural sector. Financial and mathematical models are introduced to prevent losses by estimating VaR, a java GUI prepared for the proposed futures and forwards trading for ECX as a risk management tool via hedging and a validation of the tableau platform used at the data analysis department done with R statistical software which gives a more detailed numerical interpretation for critical decisions and investment.
The lack of reference price information is often regarded as one of the most pervasive aspect of incomplete commodity markets in developing countries. Previous studies on the effects of price information emphasize the market participation and performance of rural households. This paper argues that access to reference price information influences farmers' crop choice decision, the most important decision in farming activity. The study exploits the variation in timing and spatial distance of the publicly run Ethiopian Commodity Exchange (ECX) price tickers as an indicator for variation in the intensity of access to reference price information among rural villages in Ethiopia. The paper finds that access to price information increases the average farm-gate prices for traded commodities and incentivizes farmers to allocate more land, fertilizer and improved seeds to commodities traded in the ECX. It also nudges farmers to produce more of the traded commodities, increasing the output share of ECX-traded commodities.
To plan a suitable organizational growth as well as for great contribution for the economy, ECX need to identify the basic problems.Hence, the purpose of this study is to examine the basic challenges of ECX on coffee: with the reference of yirgachiffe, sidama, harari and jimma coffee.The findings result from this study reveal that shortfall of agricultural product, physical infrastructure, macroeconomic instability, price fluctuation, lack of adequate warehouses that accommodate ECX participants request, . Higher penalty cost imposed on the participants for not withdrawing their commodity from the warehouses, poor quality of warehouse service insufficient time to store and transfer the commodity, inefficient and inadequate in store credit; discouraging the membership requirement of ECX, expensive membership seat fee and exposed for corruption were found to be amongst the fore front challenges to the success of ECX
While the Ethiopian Commodity Exchange (ECX) is widely credited to be a successful on several accounts, there has been little rigorous empirical investigation. This paper attempts to fill that gap by analyzing how ECX has influenced the international-domestic price relationships of coffee -- the largest traded commodity on its floor. We examine three aspects of price dynamics -- market interdependence, volatility transmission, and structural breaks -- using a spatially disaggregated prices of five coffee varieties. The results indicate that contrary to popular media stories, ECX's success in improving coffee price relationships has been limited. The results appear to be robust under all three sets of analysis.
Focusing on global value chains and their importance to trade, this edited collection explores the strategic role of logistics and supply chain infrastructure in the development of Africa. Skilled authors present critical analysis of the current state of logistics in Africa, and suggest improvements to policy and practice which address the issue of poor trading relationships. This book will engage entrepreneurs, academics and policy-makers interested in international business, raising awareness of the need for better trade infrastructure in Africa in order to ensure the continent’s economic development.
Commodity exchanges can provide emerging market economies with orderly, transparent, and efficient markets by acting as mechanisms that mitigate price risk, discover equilibrium prices, and connect buyers and sellers. Exchanges can also reduce transaction costs and information asymmetries by using technology to disseminate market information while creating better supply chains. The Ethiopia commodity exchange is striving to transform Ethiopia's agriculture sector from a fragmented one marked by high transaction costs and low quality standards to a thriving and reliable part of the country's economy. Ethiopia's exchange continues to expand its activity across the farming regions of the country.
This open access textbook introduces the emerging field of Development Engineering and its constituent theories, methods, and applications. It is both a teaching text for students and a resource for researchers and practitioners engaged in the design and scaling of technologies for low-resource communities. The scope is broad, ranging from the development of mobile applications for low-literacy users to hardware and software solutions for providing electricity and water in remote settings. It is also highly interdisciplinary, drawing on methods and theory from the social sciences as well as engineering and the natural sciences. The opening section reviews the history of “technology-for-development” research, and presents a framework that formalizes this body of work and begins its transformation into an academic discipline. It identifies common challenges in development and explains the book’s iterative approach of “innovation, implementation, evaluation, adaptation.” Each of the next six thematic sections focuses on a different sector: energy and environment; market performance; education and labor; water, sanitation and health; digital governance; and connectivity. These thematic sections contain case studies from landmark research that directly integrates engineering innovation with technically rigorous methods from the social sciences. Each case study describes the design, evaluation, and/or scaling of a technology in the field and follows a single form, with common elements and discussion questions, to create continuity and pedagogical consistency. Together, they highlight successful solutions to development challenges, while also analyzing the rarely discussed failures. The book concludes by reiterating the core principles of development engineering illustrated in the case studies, highlighting common challenges that engineers and scientists will face in designing technology interventions that sustainably accelerate economic development. Development Engineering provides, for the first time, a coherent intellectual framework for attacking the challenges of poverty and global climate change through the design of better technologies. It offers the rigorous discipline needed to channel the energy of a new generation of scientists and engineers toward advancing social justice and improved living conditions in low-resource communities around the world.