Myanmar Agriculture Commodity Exchange

MINGALABA

Myanmar Agribusiness Forum 2013

Commodity Exchange – A change Agent for Agricultural Economy9th October 2013

PRESENTER

InterContinental Systems Inc. Ltd.| www.intercontinentalsystems.com

ICS Technology Consulting for Exchange Ecosystems Software/System Development for Market Participants

Santosh Pradhan Chief Executive Officer [email protected]

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www.intercontinentalsystems.com

Commodity Exchange – 3 Stories


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Multi-Commodity Exchange of India, India - MCX Ethiopia Commodities Exchange, Ethiopia – ECX AHL Commodities Exchange, Malawi - AHCX

MCX INDIA

In the three years of its existence, MCX had grown to a 250 billion dollar a day turnover with a direct presence in 800 cities and towns in India, and an indirect presence (through its brokers) in hundreds more. Although still new, its impact has been felt:

Many physical markets now only start once MCX starts trading, as everyone wishes to know current market conditions

Many farmers stop selling when they see that Exchange prices are much above the prices that traders offer them

Farmers are now demanding the quality of seeds that allow them to produce goods of a quality that can be delivered to MCX

Farmers are making planting decisions on the basis of MCX prices.

Multi Commodity Exchange of India


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ECX Ethiopia

In the three years of its existence, ECX has grown to a 10 million dollar a day turnover with Warehouses in more than 20 cities and towns in Ethiopia

The Commodities like Coffee and sesame are traded exclusively at the ECX.

Farmers are paid on a T+1 Basis. The farmers credit situation has significantly improved.

Farmers are now concentrating on the proper handling and post harvest practices to produce goods of a quality that can be delivered through ECX;

76% of the FOB Value of Sesame goes to farmers’ Pocket Exporters have less funds blocked in maintaining Stocks, and are

assured of a quality

Ethiopia Commodity Exchange


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AHCX Malawi

Malawi- A country dependent on tobacco The Commodities like Pigeon peas and Soybean have a huge

potential. AHL, The auction floor for Tobacco Trading has set up a private

sector initiative - AHL Commodities Exchange and help in diversification of the agricultural exports,

An end to end Exchange system, integrating Grading, Collateral Management, Trading and Clearing- Settlement with Market information systems

A Model of Public Private Partnership Started Live Operation in 18 July 2013

AHL Commodities Exchange, Malawi


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Commodity Exchange Ecosystem


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Testing & Certifying Companies

Logistic Companies

Spot Market

Futures Market

Warehouse Receipt System

Lending Agencies

USERS SUPPORT AGENCIES

Storage & Transport RequirementQuality Certification Requirement

Farmers & Farmer Cooperatives

Local Mandies

Traders

State Civil Supply Cooperation

Central and Regional Warehousing Corporation

Private Sector Warehousing Companies

Commodity Information

Ecosystem Participants


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Commodity

Exchange Ecosyste

m

Quality Certificati

on Agencies

Consumers (Retail/ Institutio

nal)

Producers (Farmers/

Cooperatives/Instituti

onal

Clearing Bank

Traders (Speculators/Arbitrageurs/Clients)

Hedger (Exporter/Miller/Indu

stry)

Warehouses

Transporters/

Support Agencies

Farmer Farmer Cooperative Institutional

Producer


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Exporter/ Importer Miller Industry

Hedger


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Quality Testing & Certification Commodity Grading & Certification Cargo Inspection

Quality Certification Agency


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Public/Private Warehouse – Warehouse Man Bulk Handling Loading/Unloading Logistics

Electronic Warehouse Receipt (EWR) Warehouse Receipt Financing via Lending Agencies

Warehouse


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WAREHOUSE

WAREHOUSE

RECEIPT

PLEDGING

BANKING/FINANCIAL

INSTITUTION

INSPECTION

GRADINGINSURANCE

FARMER EXPORTER PROCESSOR

EWR Advantages


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Distress Sell Scientific warehousing Lower cost of financing efficient supply chain Increased trade and finance higher return to farmers & better service to consumers

EWR Challenges


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Timely accreditation of vast warehousing network

Requirement of high quality manpower to roll out processes and

meet commitments

Creating scientific storage structures

Developing standards/grade specifications for all agricultural

commodities

Developing expertise in grading of commodities

All banking transaction Internet Banking T+1 fund settlement

Clearing Banks


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Information Services Trade Consultancy and Support Warehouse Audit and Accreditation Collateral Management

Transport/Support Agencies


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Speculators Hedgers Arbitrageurs

Traders


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Production isn't enough: we need proper market Price Discovery For Commodity Players Hedging Against the price risk Easy Availability of Finance

Economic Impact: Exchange Ecosystem


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6.8 Billion Export - Main export Agriculture, Livestock, Natural Gas 61% of labor force 44% of Export Earning 34% of GDP on Agriculture

Crops 26% Livestock and Fisheries 7%

Myanmar Agriculture: The Golden Opportunity


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Complies with Commodity Exchange Ecosystem Spirit Domestic

Quota Released on all crops like rice, sugarcane, cotton & Rubber Trade Freely in Domestic Market

Export Marketing Rice Export to Private Companies Pulses, Oilseeds no restriction

Myanmar: Trade Policy


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Myanmar: Possibilities


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Government Controlled Export Pricing Common Market for national/international buyers sellers Trade associations working with national exchange

Successful Exchange Operations


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Creativity of

Management

System and

Process

Management

Structure & functioning

Trading

Information Management

Surveillance & Control

Settlement & Delivery

Requirement Analysis

Product and Service Design

Independent Management

Clearing and Settlement System

Busi

ness

Fun

ction

Efficient Exchange Prerequisites


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Independent self sustaining entity Operational Expertise of the management An Effective Trading, Clearing and Delivery Mechanism Continuous Feed Back from Users Continuous Education Depth and breadth of the market

Legal Structure Commodity Exchange Regulation Warehouse Act

Awareness among stakeholders One of the important trade hub in South East Asia

The Way Ahead


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THANK YOU FOR YOUR TIME

Economy & Finance

Myanmar Agriculture Commodity Exchange