Monday, October 8

Better management of foodstocks will lead to less famine!

Ethiopia is a country which is in the news for all the wrong reasons. If it is not war then its famine. But now the country is embarking on a remarkable exercise, to implement a commodities exchange which will allow for better price formation, manage the wild swings of prices, better hedging, better knowledge of inventories, better foodgrain production and management of buffer stocks. Some quotes:


The government of Ethiopia, which has one of Africa’s most state-dominated economies, is stepping into uncharted territory by launching a commodity exchange to help alleviate food shortages and encourage the commercialisation of agriculture.
The exchange will create a pool of liquidity and reference prices that reflect the amalgamation of demand from across the country, thereby reducing the price volatility caused by the existence of multiple fragmented markets.
Price tickers at 200 rural sites will give farmers independent access to price information from Addis Ababa, enabling them to negotiate a fairer deal with middle-men and giving them incentives to produce.
Traders, meanwhile, will be able to profit from arbitrage opportunities by buying cheap grain in areas of surplus and selling it at higher prices closer to areas where
there are shortages, which will itself facilitate food distribution.


I know, I know, delivery and execution risks are huge, corruption is always present, but given the fact that these chaps are starting from negative territory, even this government driven initiative is welcome news for me!
Perhaps sometime in the next century, they will actually take the step which will remove famines permanently, and that's the Amartya Sen's prescription: DEMOCRACY. Its not the lack of food which causes famine, its the lack of governance which does it.

All this to be taken with a grain of piquant salt!!!

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