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Agriculture Specialist Writer
THE Zimbabwe Mercantile Exchange (ZMX) has assured commodity buyers that wheat grades shown on the warehouse receipts when they buy the goods electronically are a true reflection of the grain quality.
Commodity buyers had expressed their reservations on ZMX’s adherence to accurate grading of the cereal during a breakfast meeting convened by the latter last week to convince them to consider wheat trading on the electronic Warehouse Receipt System and Commodities Trading platform.
Stockfeed Manufacturers Association of Zimbabwe (SMAZ) executive administrator Dr Reneth Mano said their colleagues from the Grain Millers Association of Zimbabwe (GMAZ) had always complained that there was inconsistence in grades, as advised by the Grain Marketing Board (GMB) and what they would find upon taking delivery of the wheat.
“GMAZ always complains of differences in the grades of wheat they get from GMB saying there is a difference between what private millers call premium grade versus what GMB calls such.
“GMB seems to be violating grading standards. Is there standardisation of grades within the ZMX trading platform? As ZMX what measures have you put in place to make sure that the acceptable premium grade is the same across all the designated warehouses?” asked Dr Mano.
The GMB could not comment on the matter with its chief executive Mr Rockie Mutenha saying he was in a meeting.
The commodity buyers that included Blue Ribbon Foods, Cairns Foods and Feedmix were seeking clarity on who would be liable if a farmer delivered good quality product that later deteriorated during storage. They also wanted to know who was responsible for the grading.
They further expressed concern that as buyers they were interested in getting good quality products at the lowest possible costs yet the ZMX trading platform had many hidden costs that came without clarity on who was supposed meet the costs, for instance, on storage.
The buyers even suggested it would be better if end users were buying commodities straight from farmers minus the warehouses.
ZMX chief executive Mr Collen Tapfumaneyi assured them that grading was done professionally and took them through the wheat trading process from start to finish on.
“To date ZMX has 22 designated warehouses (DEW), which offer handling, grading, inventory and storage management services. A farmer delivers his/her commodity in standard minimum quantities to the DEW that broadcasts the commodities to quality inspection companies (QIC) who issue the grading certificate.
“The DEW then produces the electronic warehouse receipt, which is a combination of the goods’ receipt number and the grading certificate,” said Mr Tapfumaneyi.
He added that after the issuance of an electronic warehouse receipt, brokers were involved in order management, matching and clearing.
A warehouse receipt is generated in the broker’s name containing the details of the commodity. For delivery of the goods, the buying broker must collect the commodity within 10 days of purchase, failure of which attract storage fees.
Mr Tapfumaneyi explained that grading of agriculture crops was one of the motivations for the warehouse receipt system (WRS).
“WRS acceptance of a grade is a contract on its own and there is recourse if its broken,” continued Mr Tapfumaneyi.
ZMX head of market operations and development Mr Tatenda Maswedza also weighed in saying, usually for grain the grade is valid for 90 days and if there is any grade disparity the warehouse is liable to pay the buyer compensation.
“However, the grade can deteriorate after 90 days necessitating the DEW to regrade and come up with a new grade. If the DEW sells a commodity under grade A without regrading, the buyer can seek recourse in the event that the received commodity is not under such a grade. The DEW will be asked to pay compensation for the grade differential or if the variance is enormous, ZMX can order cancellation,” further added Mr Maswedza.
The WRS is a contract between the warehouse facility and depositor with the commodity exchange coming in to regulate with full insurance of the value of the commodity.
The Agricultural Marketing Authority (AMA) disclosed that the work of ZMX was governed by various legislation pieces such as Zimbabwe Mercantile Exchange Rules SI 184 of 2021, Securities and Exchange Act (Chapter 24:25), Grain Marketing Act (Chapter 18:14), Agricultural Marketing Authority Act (Chapter 18:24) and Warehouse Receipt Act (Chapter 18:25).
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