The Kenyan government has shown keen interest in replicating the agriculture futures trading and warehousing model of NCDEX even as the Indian government recently banned derivative trading in seven agriculture commodities on concern over high inflation.
Jane Mumbi Ngige, Chairperson, Warehouse Receipt System Council told BusinessLine that a high level council of members related to Kenyan agriculture trade is on a visit in India to understand the process of issuance of electronic warehouse receipts. They visited NCDEX eMarkets accredited warehouses besides meeting up with Warehouse Development and Regulatory Authority to understand the process and implement the same to benefit farmers.
The Kenyan government wants to cut down on wastage of agricultural produce by providing proper warehouses and help farmers store their produce. According to recent reports Kenya loses 30 per cent of food produced after harvest and of this about 20 per cent is wasted at the farm gate while the remaining is lost at the marketing stage.
The wastage in staple crop maize, which is harvested once a year, is as high as 40-60 per cent due to lack of storage facilities. The visiting high-level committee will share its inputs and recommend a detail guidelines to establish the eco-system for agriculture futures trading, said Ngige.
The country also grows rice, different variety of potatos, mangoes, avocado, tea, coffee and livestock. Its export of agriculture produce accounted for $150 billion last year. “We will be more than happy to invite Indian warehouse providers to set up shop in Kenya but it will not be viable unless they are provided proper incentives. The government will decide whether to provide incentive or do it using the local talent,” said Ngige.
Established in 1997, Kenya has a private Agricultural Commodity Exchange which provides information service to enhance price discovery and acts as a spot exchange. Futures contracts are not traded on Kenya Agriculture Commodity Exchange.
“Derivatives trading is an excellent tool for farmers to know the selling price of the commodity before they sow the first seed. It is a perfect platform for hedging prices,” she said.
Kenya also wants set up farmer produce organisations to help aggregate farmers’ produce and hedge the price risk on the platform. It plans to seek the help of experts in India to train the young population in Kenya on the IT front, she added