Ethiopia's Commodity Exchange fights hunger through fair prices

Ethiopia's Commodity Exchange fights hunger through fair prices

The Ethiopia Commodity Exchange helps farmers know what their crops are worth, and earn a fair price. Photo by Erin Gray/Mercy Corps.
The Ethiopia Commodity Exchange helps farmers know what their crops are worth, and earn a fair price. Photo by Erin Gray/Mercy Corps.

"If more and better information within agricultural markets can make uncertainty recede like darkness in front of a candle, the Ethiopian Commodity Exchange is a bank of high-powered floodlights," writes Tate Watkins in GOOD magazine.

Here are some highlights from the article, "Fighting Famine with Markets: In Ethiopia, an Exchange Empowers Rural Farmers":

A commodity exchange that broadcasts crop prices to rural farmers not only helps them get higher prices for their produce, but also improves the food distribution system to resist shortages in times of drought.

Before it was established, lack of information and trust characterized Ethiopian agricultural markets... Often, the only way to determine the quality of a sack of coffee was to open it up, pour it out, and inspect the beans.

Watkins explains that farmers are using electronic boards, landline, mobile, radio and television to find out the going price of coffee, maize, sesame, and other Ethiopian crops traded on the Exchange, and requests for information have skyrocketed.

Users place more than a million calls into the system each month, 70 percent of which come from rural areas.

The Exchange... has also instituted a third-party grading system to reduce fraud and created contracting standards that decrease risk and transactions costs.

Watkins also notes that a study conducted prior to the Exchange opening indicated that a farmer could only expect about 35-38 percent of the final export price of coffee. Now they are regularly earning twice that amount.

...A regional coffee index could give East African countries more leverage on international markets, and provide more benefits for small-scale farmers in places like Ethiopia.

If a commodity exchange can not only increase farmers' earnings, but also avoid widespread famine by smoothing out shocks, that's a side effect worth aiming for.

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