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INTL FCStone: Commodity trading and risk management in Kenya

Earlier this month I was pleased to be able to attend and participate in a fascinating two-day seminar in Nairobi hosted by INTL FCStone, a specialist financial services firm and member of the Planet Earth Institute (PEI) Partners Forum. Entitled ‘Commodity Trading and Risk Management’, this was one in a series of African seminars coordinated by INTL FCStone, with previous events having been held in Nigeria and Ghana.

Agricultural production lies at the heart of many African economies accounting for 65% of Africa’s labour force and 32% of GDP and commodities exchanges have long been recognised as a significant enabler of agricultural development. It was because of this that the PEI began to explore the topic, co-hosting a high-level breakfast meeting with INTL FCStone in November 2015 with the title, ‘Evolution of Structured Markets: Challenges and Opportunities in African Agricultural Development’. The company has since become a supporter of the PEI and it was fantastic to be able to see first hand their commitment to engagement and education around the potential benefits of structured markets.

The seminar was very well attended with nearly 100 participants from a variety of different background including government policy makers, bankers, commodities brokers, cooperative representatives and charities. These different perspectives made for some fascinating discussions, with the organisers working hard to make sure everyone got involved and contributed their thoughts and ideas.

The interactive programme focused on the benefits of structured markets for commodities trading, the importance of market liquidity, the role of exchanges and the opportunity to develop derivative instruments to manage and transfer risk, as well as the opportunity for smallholder farmers to secure investment and improve yields and returns.

It is this latter element that the PEI is particularly interested in and I was pleased to see that the producers were given the attention they deserve. After all, it is small-scale farmers that typically face the biggest challenges and proportionally the steepest transaction costs if they are to participate in markets. However, as I learnt during the seminar, if an exchange is developed as part of a holistic commodity strategy that incorporates complimentary measures to improve the productive and marketing capacity of farmers, as well as investment in warehouses and other sector infrastructure, then structured markets can act as catalyst for an agricultural revolutions in Africa.

Though South Africa and Ethiopia boast functioning exchanges, we need only reflect on the failures in other African countries – including Nigeria, Uganda and Zimbabwe – to realise that this is no easy task. The seminar and the organisers did not shy away from these challenges and it is only through continued education and capacity building, which we can hope to achieve food security and prosperity on the continent. The PEI looks forward to working with INTL FCStone and other partners to help work towards this goal.

Stuart Ponder, Senior Vice President, EMEA, of INTL FCStone addresses the seminar

Stuart Ponder, Senior Vice President, EMEA, of INTL FCStone addresses the seminar

Stuart Ponder and Nick Staite, PEI Operations Director

Stuart Ponder and Nick Staite, PEI Operations Director

 

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