Commodity production and trade provide the primary livelihoods for millions of households throughout the developing world. The development of this sector is essential to poverty alleviation efforts and overall economic development. However, as witnessed in recent spikes in the price of wheat and soybeans, the commodity sector is challenged by severe price volatility and high marketing costs. Many believe that commodity exchanges provide a way to mitigate these risks and increase economic efficiency in a liberalized market environment. While such exchanges have proven successful in Asia and Latin America, successful implementation of commodity exchanges in Africa has been slow.

Senior IFPRI Research Fellow Shahidur Rashid has reviewed the potential for domestic commodity exchanges in Africa, examining the conditions necessary for a successful exchange and the special challenges that many African nations face in their efforts to stabilize commodity prices. Project findings suggest that commodity exchanges on the continent are often hampered by a lack of appropriate economic, political, and infrastructural preconditions. The study suggests that such challenges can be overcome through the development of regional exchanges and improved investment in transportation, information services, and other financial institutions.

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