Kadri Alfah : With the COVID-19, the Ghana Commodity Exchange has lost 30 to 40% of its members
Kadri Alfah, CEO of the Ghana Commodity Exchange (GCX) explains to CommodAfrica that it has registered a drop of 30 to 40% in farmers registering to sell their products with the Covid-19. Buyers are difficult to find and some farmers have even taken back their products either to feed themselves or to find aother ways to sell it. But the Exchange is adapting its system and continues educating farmers in commercial transactions.
How has the Covid crisis impacted the Ghana Commodity Exchange ?
It has impacted us in a very adverse way. In the Exchange process, we usually sign up those farmers who are producing and they bring their commodities to us and we find the markets. Currently, because of the Covid-19 situation, it is very difficult for us to be able to do that because most of the farmers are very worried of the future. So they don't want to come to the Exchange and formalise and I don't know where they are going to find buyers. We see that there has been a drop of about 30 to 40% of members who list on the Exchange to trade commodities. This is a huge blow to us. Last year by this time, the membership was very high, around 100 to 150 new members coming. Currently, we have less than 20.
It is those who actually come as buyers or sellers of commodities. It can also be financial institutions.
You know, the business model of the Exchange requires farmers to bring their commodities to us and store it and we find markets. Most of them are not bringing their products to us for their own food security reasons and those who have left their commodities with us are withdrawing it to try to sell it elsewhere because they want to ensure their food security. This has affected our revenue quite substantially.
And we also look at the offtaking side. We are actually trading raw commodities, currently maize and soyabeans. These commodities are usually bought by processors for food and animal feeds. These buyers who are processors are facing many challenges and they have a lot of pressure currently and some are out of business. Because the logistic and transport system internationally are all messed up, it is very difficult for them to process these raw materials.
So the impact on the Exchange activity has been big.
How long can the commodities you have in storage last ?
It is dried food. So some of them have been stored since the harvest season, last November-December. So they have been there for 7 months or so. The average shelf life for commodities such as maize and soyabeans would be about 8 or 9 months. So there is a risk and some have already exceeded their shelf life. This means that the Exchange would have to pay. When the farmers bring their commodities to us, we guarantee the quantity and the quality throughout the duration of storage. So if there is any deterioration or degrading, the Exchange would have to pay the cost.
What is the volume of the products you have in storage ?
We have about 2,000 tonnes. This is quite significant in terms of smallholder farmers who are producing an average of 1.2 tonne and they store 1 tonne with us . So when you look at 2,000 tonnes you can see the huge impact it has on the livelihood of these farmers.
Who carries the financial burden ?
Our platform allows producers to come and sell their products. They keep the ownership on their product. They get paid when there is a buyer. Now, some of the services we offer them like the testing, cleaning, grading and others, they don't pay it in advance. They have to sell their product before we get paid. So if the farmers do not find markets for their products, the Exchange is also affected. The carry-cost is progressive and so if they are not able to get markets, there is a high carry-cost and it affects their profit margin.
Do you think this might impact future members ?
It is all about confidence. Those who bring in their commodities have confidence that we will find the market and preserve the quantity and quality of their product, and that they will get a fair price. This hasn't changed.
The only thing is that we know Covid-19 has actually changed a lot of things. We are not in a normal system. What we are doing as an exchange is that we continue to educate our market actors on the effect of the Covid-19 on our business itself so that they can differentiate a normal trading system and a system where we have a Covid-19 impact.
Are food aid agencies, such as the World Food Program and others, buyers of the commodities you have stored ?
We were actually counting on the national buffer stock buying from us but they also have some logistic issues. But because we don’t actually dictate the prices, any buyer who is not ready to negotiate, it is going to be very difficult to buy from us. The issue here is that we don’t rely on world prices ; the farmers who are the owners of their products have their own prices and these prices usually reflect their production costs. So it will be a production cost plus a margin . So the more the commodity stays in the warehouse, the higher will be the price they are seeking. So, at some point, the farmers will seek to sell their commodity on alternative markets and outside the commodity exchange.
Turning to the future, what are your perspectives ?
We don't know how long will this Covid-19 last. Eventhough we are seeing that it is stabilizing, it still is an issue. At present, our market system requires that buyers and sellers need to come in to negotiate on a platform. For the future, we actually have instituted a new mean of conducting trade so that sellers and buyers can trade from remote positions and they can trade online. So we have moved towards that type of contacts, individual and group contacts.
We are also looking at supporting those farmers and producers that have not been able to get markets, internally or externally. So we need to know how to get to these markets.
The other side that we are looking at is for buyers not to have to come to the warehouse to get their commodities but have it delivered to them.
So there are a lot of changes that we are making so that markets react better. Education is very important so we take measures to educate our farmers on their rights and how to safeguard them.