Commodities prices up five percent as GCX recovers from pandemic shock

Commodity prices are recovering from a pandemic-induced fall on the Ghana Commodity Exchange, closing about five percent higher on Monday, June 22.

Disruptions to supply chains from COVID-19 pushed trading volumes down 40 percent, causing prices to plunge ten percent year-on-year.

“Prices fell due to low market activity and the subsequent withdrawal by sellers to trade on the alternative market,” Dr. Kadri Alfa, Chief Executive Officer of GCX said.

Both demand and supply of commodities dropped since the outbreak, attributable to shutdowns and restrictions on movement to curb the spread of the virus.

But market activity on GCX is rebounding after restrictions on movement were eased, and bulk buyers (food processing companies) scaled-up production.

Grade one white maize traded from the Ejura Warehouse (GEJWM1) closed at GHS 1,240.00 on Monday, 17 percent lower than the opening price of GHS 1,500.00.

At the same warehouse, GEJWM2 and GEJWM3 closed trading at GHS 1,200.00 CEDIS and GHS 1,100.00 cedis, down 10 percent and 26 percent from the opening prices respectively.

“We are rebounding from the pandemic which affected our operations significantly. So far, trading has returned to some level of normalcy but we expect to do better to achieve our short to medium-term goals,” Dr. Alfa added.

Listed contracts on the GCX are white maize, yellow maize, sesame, sorghum and soya beans.

Impact of the pandemic on traded volumes

The halt in economic activity destructed demand as food processing companies whose operations were either on break or operating below capacity.

Supply volume contracted 45 percent within the same period, as smallholder farmers who supplied 90 percent of traded commodities in 2019, retained their produce “over fears of personal food security,” Dr. Kadri noted.

“It resulted in significant revenue losses for both GCX and trading partners, particularly the nearly 300,000 smallholder farmer groups supplying the exchange,” he added.

Performance of listed contracts

The exchange went live with white and yellow maize contracts late 2018 and later listed soya bean, sesame and sorghum, as it sought to diversify its portfolio and meet market demands.

But, maize and soya bean have been the maximum traded contracts, leaving sesame and sorghum scrambling to register presence.

The exchange is awaiting approval from the regulator to enlist paddy rice, milled rice, and cashew contracts by the end of the second quarter.