Modern grain warehouses will strengthen Zambia’s maize futures market, said business consultant mr. Victor Nyasulu.
He believes having adequate grain storage capacity will play a significant role in the efficient functioning of maize futures trading.
“These facilities will give farmers the ability to hold the commodity for future profit and make more money,” he said. A futures market is designed to avoid market volatility for producers and suppliers who sign a contract for delivery on specified future dates. An investor takes on the risk and reward.
The Zambian government is to build 98 warehouses at 79 rural sites – at a cost of US$73 million – to create an extra 430 000 tons of grain storage. “Adequate and efficient warehousing formed the necessary platform of trading in commodities futures,” Nyasulu said.
Landmark deal
Earlier this year, a landmark deal between the Zambia Agricultural Commodity Exchange (ZAMACE) and the Johannesburg Stock Exchange (JSE) was brokered to open the door for a futures market in Zambia.
Under the deal, the JSE provides Zambian referenced grain derivatives contracts in US dollars to non-residents, qualifying South Africans and common monetary area corporate entities.
Faced with a tumultuous marketing season, farmers are encouraged to use ZAMACE’s agricultural commodity exchange, supported by a warehouse certification and receipt system to enhance their liquidity. The warehouse receipt system allows farmers to store grain with ZAMACE and get a receipt as proof of having deposited commodities of a stated quantity and quality.
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