24 April 2007

Market information systems and agricultural commodity exchanges

A recent report from CTA synthesizes discussions at a November 2005 Expert Consultation on Market Information Systems and Agricultural Commodity Exchanges: Strengthening Market Signals and Institutions.

The report defines a market information system (MIS) as a "service that involves the collection on a regular basis of information on prices and, in some cases, quantities of widely traded agricultural products from rural assembly markets, wholesale and retail markets, as appropriate, and dissemination of this information on a timely and regular basis through various media to farmers, traders, government officials, policy-makers and others, including consumers." A commodity exchange (or commodities exchange) is defined an an "exchange where various commodities and derivative products are traded."

The Consultation aimed to identify key factors that have supported success, and to discuss issues related to new opportunities for strengthening market signals and for gaining a better understanding of the conditions required to enable small-holder farmers to gain access to markets in a more sustainable and remunerative way.

Key Results and Conclusions

Management, ownership and partnerships: It was deemed inappropriate for an MIS to be solely within the domain of government (evidence shows that full government control has been fatal to emerging MIS). In fact, no one entity should even own an MIS. Ideally, a developing MIS should involve collaboration and competition among government, private sector, development groups and public-sector agencies.

Sequencing and preconditions: Most participants felt that sequencing of investment in market institutions was useful, following the order presented at the consultation, namely: market information services – warehouse receipt system (WRS) – auctions – commodity exchanges.

Sustainability: For an emerging MIS to be sustainable, the appropriate institutional arrangements need to be in place; opportunistic strategies should be avoided; governments need to be involved for the ‘public good’ aspect of the information; the private sector should pay for everything; and training (capacity-building) and universities.

See also a recent story on the Kenya Agricultural Commodity Exchange (KACE).


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