Agricultural market in Ethiopian has been long plagued by high transaction costs and non integrated market information. Small scale farmers came to the market with little information. Ethiopian commodity exchange, the newly established organization, is providing a market place where buyer and sellers can come together to trade and be assured of quality, delivery and payment. Currently, ECX has 496 members - 346 are suppliers and 150 sellers from the coffee industry. ECX started operation of trading coffee in November 2008. The main objective of this research is to create awareness about this infant organization and market system, its role for coffee export marketing system and at large its contribution for the development of the country's economy.
CHAPTER 1: BACKGROUND OF THE BUSINESS
In the Ethiopian context, Agricultural markets are characterized by prohibitively high transaction costs, evidenced by the lack of sufficient market coordination between buyers and sellers, the lack of market information, the lack of trust among market actors, the lack of contract enforcement, and the lack of grades and standards, implies that buyers and sellers operate within narrow market channels, that is, only those channels for which they can obtain information and in which they have a few trusted trading partners. Extensive empirical analyses of Ethiopian market behavior thus reveals that market actors conduct business across short distances, with few partners, in few markets, and with limited storage,
The persistence of these market constraints in Ethiopia points to the fact that market reforms alone, defined as the removal of policy distortions, are necessary but not sufficient to enhance market performance. This suggests that the new development agenda, not only in Ethiopia but throughout post-reform Africa, is to move beyond market reform to market development. In addition to policy incentives, key interventions are required to develop appropriate market institutions and build needed infrastructure. Since Ethiopia is producing unique flavors and coffee is paramount importance within the Ethiopian economy with 3% of international sale shares is not a significant one in world coffee market this reason to increase its coffee production and export make volumes. On the other hand, racing to increase production alone is worthless, unless quality coffee is the end result required to remain in the market.
Ethiopian government and its international partners are engaged in dialogue on a concerted set of interventions to enhance the performance of agricultural markets. In the year 2007, Government of Ethiopia restructured the existing coffee marketing system under proclamation 550/2007 by establish the Ethiopia Commodity Exchange with the vision of to revolutionize Ethiopia's tradition bound agriculture through creating a new market place that serves all market stakeholders. In the year to 2008, the Ethiopian commodity Exchange has been given an authority to control coffee quality and marketing system by proclamation number 602/2008.
Ethiopia Commodity Exchange represents the future of Ethiopia, bringing integrity, security, and efficiency to the market. ECX creates opportunities for unparalleled growth in the commodity sector by facilitating the most efficient market place (future market), free and fair market price, Global price convergence, quality improvement as grading, standardization, modern warehouse and granted time delivery and linked industries, such as transport and logistics, banking and financial services, and others.
The main purpose of the research is to create awareness and assessing the role of Ethiopia Commodity Exchange (ECX) in the Ethiopian trade practice, especially in the grain trade.
In order to make this research paper more accurate and reliable I have collected information, which the study depend through questionnaire, interview, different literatures...