tawandamusarurwa
Nelson Gahadza
The continuous addition of commodities on the Zimbabwe Mercantile Exchange (ZMX) is a cause for excitement as the platform is enhancing commodity price discovery, farmers have said.
This comes as the ZMX recently added trading in three new commodities: soyabean, wheat and barley.
Marketing and trading of the commodities were liberalised following the gazetting of Statutory Instruments 129 and 130 by the Government on July 21, 2023.
The on-boarding of maize on the platform provided a boost for the exchange, and at an auction held last Wednesday, the price of the cereal firmed to US$315 per tonne from US$310 per tonne the previous Wednesday.
In an interview, Zimbabwe Farmers’ Union (ZFU) director Mr Paul Zakariya said the forces of supply and demand are now helping to determine where a commodity’s price should be.
“That is now beginning to guide even other markets in terms of where the actual price of a commodity should be.
“We are excited to see more commodities being added to that market, and its performance to date has been very transparent and is giving real value to commodities,” he said.
He said there is need to continue raising awareness among farmers, as marketing is a function of trust between the buyer and the seller.
“Therefore, if the sellers are not confident enough, the volumes will remain low,” he said.
Mr Zakariya said there is also a need to take care of issues of side marketing from contracted farmers to the ZMX.
“Those are the things that, in most cases, destroy good markets, so we need to ensure that there is integrity,” he said.
One of the key objectives of the ZMX is to provide an open market for commodities, with willing buyers and willing sellers providing price discovery mechanisms.
The exchange also ensures a timely settlement of transactions on a willing buyer, willing seller basis, with both parties agreeing on the price.
Mr Zakariya said the prices continue to firm, which is an indication of where the actual commodity value lies.
“If things were equal, we would not be talking about adding commodities to a list; a market would attract business. So, it should come naturally that all commodities should be given a fair chance.
“When we add, it means the market is being controlled. So, it is where you need to allow your market forces to prevail; you do not put in controls because it is a market to demonstrate the relationship between demand and supply,” he said.
He noted that the price of maize on the ZMX, at US$315, is good, compared to the US$335 producer price, whereby US$200 is paid in USD, with the balance of US$135 paid in the local currency at the prevailing official rate.
Mr Zakariya said farmers need to gain more confidence, hence there should be more efforts to share stories about the ZMX, how it is performing, how long it takes to go through the process and get paid, comparing that with the traditional markets, and then ask a grower to make a choice.
“If the farmers trust that market, they will be talking about ZMX throughout the country,” he said.
Zimbabwe Commercial Farmers’ Union (ZCFU) president Dr Shadreck Makombe said the market has been useful, though it has not been very pronounced. He added that, according to those who are aware, there is activity and prices are firming.
“This means, if more people are made aware of its existence, it will be quite active,” he said.
Last month, the ZMX warehouse receipt instruments were conferred liquid asset status by the Reserve Bank of Zimbabwe (RBZ), a move that can benefit farmers with greater financial flexibility and better price stability.
According to ZMX, this means, as a tradable and negotiable instrument, the warehouse receipt instrument is now considered an asset that can be easily converted into cash.
A warehouse receipt is a legal document that provides proof of ownership of a commodity stored in a certified and approved warehouse, providing evidence of the quantity, grade and quality of the item.
Mr Collen Tapfumaneyi, the ZMX chief executive, said the commodities exchange is anchored in a robust warehouse storage facility. But so far, most of the storage facilities are biased towards grains and oilseeds, he added.
“We are now assessing horticulture cold chain facilities, as well as cattle pens, for those who can speak to livestock agriculture, and these will be coming on board,” he said.
He said: “Out of the possible 12 listed products that anyone can trade at any time, we brought in maize into the special auction, and when people were getting used to it, we decided to add a few more commodities that should also be subjected to the Wednesday auction.
“So, we have added wheat, soya beans, both red and white sorghum, and groundnuts, and these started trading on the 2nd of August 2023, and we will be adding more commodities.
“In addition, in the next few months, we are going to add horticultural commodities,” said Mr Tapfumaneyi.
According to results for the weekly commodities auction held last week, despite a marginal drop in maize volumes traded, the average price has set the tone for viable returns to farmers.
Maize volumes traded dropped from 327 tonnes the previous week to 185 tonnes.
Tinaye Agere
Online Reporter