OPPORTUNITIES, CHALLENGES AND PERSPECTIVES OF COMMODITY EXCHANGE FOR SMALL HOLDER FARMERS: The case of Ethiopia Commodity Exchange

Abstract

The paper examines the opportunities of Ethiopia Commodity Exchange for small holder farmers, challenges faced by small holder farmers in using the service of the exchange and its perspectives. The data was collected from 100 small holder farmers found under cooperative unions and dispersed small holder farmers. The data collected has been analyzed using qualitative and descriptive techniques. The main findings of the paper indicates the opportunity of ECX in reducing transaction cost is significantly low for dispersed small holder farmers as compare to those found under cooperative unions. The benefits of storage facilities, price risk management and standard and grading are also better exploited opportunities by farmers under cooperative union. The advantage of ECX in improving price transparency and price discovery is relatively better accessible service for dispersed farmers in relative to the other services. The findings of the study indicates the obstacles in using ECX service are language barrier, minimum lot size set by ECX, pre-requisite procedures to be client, literacy level of farmers and infrastructure problem. The perspectives of the exchange in improving the service to small holder farmers are electronic trading which enable market users remotely from the exchange sites and the introduction of Mung Bean as new trading commodity.