An Overview of Commodity Exchanges in Africa

A commodity exchange is an incorporated association that operates on a non-profit basis to put in place rules and regulations for the trade of commodities and investments . Commodity exchanges trade mainly in primary products rather than manufactured products, and since Africa is chiefly an agricultural continent, African farmers stand to benefit from an increase in involvement on commodity exchanges both on the continent and worldwide. Coffee, wheat, maize, sugar, oil and cocoa are a number of the products that are traded on the commodity exchange and these are products that are prevalent on the African continent. The supply and demand for a product will determine whether its volume of trade on the commodity exchange, and the product’s price will be determined by the demand for it . Commodity exchanges operate on a contract basis, such as spot prices, forward prices, future contracts as well as options on future contracts . These contracts offer farmers stability and consistency of prices for their produce, in particular future contracts protect farmers against drops in prices.