Commodity exchange alone not a lifeline for the Ghanaian farmer

In a recent article by a seasoned journalist widely circulated in the Ghanaian media (including a front page in Ghana’s Daily Graphic), the establishment of a commodity exchange was touted as “a lifeline for the Ghanaian farmer”. I admit that a commodity exchange with all its facilities such as warehouses (that only accepts well-packaged commodities with pre-determined features), clearing systems, applicable rules and standard contracts, is an important institution that can bring a lot more transparency and vital information to various stakeholders and therefore helpful. However, it cannot (and should not) be described as a panacea to the many and varied challenges facing agriculture in the country, and more particularly trading in agricultural produce.

What will be more helpful to Ghanaian farmers are the kind of support that the government provides for cocoa farmers through an agency (Ghana Cocoa Board ) which includes a stable price, provision of free or subsidized inputs (application of chemicals for free and fertilizers at subsidized prices) and reliable mechanisms to transport produce from farm gates to warehouses. These can be expanded to include provision of affordable finance, application of standards (developed by Ghana Standards Authority but languishing on shelves), adoption of weighing scales (by all stakeholders, especially farmers), honest rehabilitation of and substantial expansion in Ghana’s irrigation facilities. These, coupled with investment in agricultural research and extension services, provided in a reliable manner are the support mechanisms that can form a “lifeline for the Ghanaian farmer”, not a mere commodity exchange.

The establishment of the commodity exchange is a project that can help in this direction but it is extremely difficult to imagine a scenario where the exchange alone will “not only help reduce inefficiencies in the market place but replace them with systems that benefit the poor” as suggested by the author. This is because if the author’s own definition (half) for commodity exchange is something to go by then we should not be witnessing the kinds of enormous inefficiencies characterizing agriculture in Ghana (from production through distribution to trading). Thus if “a commodity exchange is nothing more than an exchange where various commodities and derivatives products on commodities are traded” as indicated by the author, then there are already one thousand and one exchanges available in the country, as every market from the one in Agbogbloshie in Greater Accra region to Zasilari market in Upper East region, qualify to be a commodity exchange.

I have witnessed many futures being traded on our foodstuffs markets, but in a disguised format. Many people, especially caterers, have bought “futures” and paid in full or in part instantly for delivery at a future date and at a specified location. These futures take the form of the caterer asking the trader for a specified commodity (grade and quantity of the product) at a future date, may be to cater for a ceremony. So if the author would agree with me (based on his own definition) that all foodstuffs markets in Ghana are commodity exchanges then why haven’t they “reduced inefficiencies and replaced them with systems that benefit the poor”? I think this is an important question that could guide the evaluation of potential contributions that commodity exchange can bring to the Ghanaian farmer. A question I will attempt answering later.

There are pertinent issues that borders on the functioning of a commodity exchange and therefore how helpful it could be to all stakeholders, particularly farmers, but I will discuss them later. Nonetheless, it is important to comment on a related information put out there in the referred-to article. The author reported that “if this project takes off in December as promised by the Minister, Ms. Hannah Tetteh, the seasonal glut and scarcity of some commodities during certain periods of the year will be a thing of the past”. This is not likely to happen given the level of development of our agricultural sector which is a direct result of lack of support and investment by both the government and the private sector.

The assertion borders on food security in Ghana and appears to claim that the establishment of a commodity exchange in December will, immediately, deal with food scarcity in this country. This is clearly not likely to happen. Ghana, in the absence of supports enumerated above, will continue to import rice, inferior tomato paste, oil, and decade-old carcass as a way to address perennial food scarcity/shortages, whether the exchange is established in December or not. This is despite our ability to produce enough and save over a billion dollars used in importing these foodstuffs. On the issue of glut, I cannot accept that the establishment of the commodity exchange will make the seasonal glut of tomato (in the four key producing regions – Greater Accra, Ashanti, Brong Ahafo, and Upper East) a thing of the past. The “tomato glut”, other gluts and scarcities, can be a thing of the past if government and other stakeholders invest in the sector to wean farmers from their overly dependence on an unreliable rain which fall only at certain periods – not all-year-round.

In conclusion I want to urge the government not to be blind-folded by the establishment of a commodity exchange but commit more resources to agriculture, along with reasonable level of protection for farmers (including reasonable use of, and increases in, tariffs for now). Protection is more efficient if it takes the form of stable and reasonable prices. These are some of the steps that can practically attract the youth back into the fold of agriculture, as Ghana claims that average age of a farmer is 55. I also wish to urge our gallant farmers to continue working hard and not to be deceived by some of the reports making rounds about commodity exchange. The youth in particular, both educated and non-educated, should leave the streets and stop searching for non-existing jobs, but rather find something more useful in agriculture (from input dealership through production, distribution, trading, and to agro-processing).

By Amina H. Baidoo