Invasive market practice sprouts price hikes

Speculation and conspiracy has escalated the price of sesame seeds at the Ethiopian Commodity Exchange (ECX) leading to record prices every day over the past couple of weeks.
On Friday May 3, during trading at ECX, sesame seeds maxed out at over 7,120 birr per quintal for Humera Type, which had been trading at 6,600 birr on Tuesday April 30.
Experienced exporters are angry and say the government must take action to avoid a disaster waiting to happen.
One person who works in the sector said the current maximum contract registered at Bunna International Bank is about USD 1,700. However, the actual purchasing price is higher than the real international market.
“The current price rate the total cost of the product including FOB Djibouti is about USD 2,655 per ton, if we consider that a quintal of sesame seeds is at 1,700 birr. While the maximum contract observed recently based on the information of Ethiopian Pulses, Oilseeds and Spices Processors-Exporters Association (EPOSPEA) is USD 1,730 per ton,” the expert told Capital.
They went on to tell Capital that they wonder how the USD 925 difference can be covered.
A person who works in sesame trading notes several conspiracy theories currently taking place. Speculation is running rampant that the government may soon devalue the birr against the dollar.
“Some of the active traders say the birr will decline in the coming weeks and are buying sesame at a high price and then storing instead of exporting them. However, the government has not indicated that the birr will be devalued,” one trader said.
However, an owner of a long established exporting company, who did not want to be named, told Capital that those buying the seeds at high prices are new comers trying to get hard currency.
“When companies ask banks for hard currency they are not able to get it immediately. As a result, several new exporters have emerged in the past few years,” he said. “Most of us that are old exporters are not active on the market due to the price hikes,” the exporter said.
Exporters are complaining to the Ministry of Trade and Industry, who has promised to change operations and impose strong controls on trading.
According to reports from the trading floor the day price for sesame seeds is ranging from ten percent up our down from the previous day’s closing price.
People exporting and trading sesame say sesame seeds trading reaches the maximum ten percent increase allowed every day. “The government has to act on this issue and allow people playing by the rules and trading for the right reasons to be on the trading floor,” a trader complained.
“Relevant government bodies have to cross check how those buying the seeds for this huge amount of difference are compensating their loss are they acting under invoice or money laundering,” they stressed.
“If this isn’t stopped it will not only affect exporters but the entire system and the country.”
One of the traders claimed that the National Bank of Ethiopia or relevant government body should release a statement regarding devaluation speculation.
“Due to the price escalation I have been forced to terminate my contract. We have to sell the product on the time otherwise the market will be affected,” one of the exporters said.
Traders say if the current trend continues it will be even more severe in the coming rainy season in July and August.
Last rainy season a record price, at the time, for sesame seeds was observed due to similar devaluation speculation at around 5,800 birr per quintal.
Before the price hike was observed in the past three weeks, the average price of Humera type sesame seeds, which is a high quality, was ranging from 4,800-5,100 birr, while the Wellega type average price was 4,200 birr per quintal. According to the April 30 trading numbers, the Wellega type was sold at a floor price of 5,300 birr.
Exporters also claim that the price of soybeans has hiked in the past few weeks.
During her latest meeting, Fetlework Gebregziabher, Minister of Transport and Industry (MoTI), told exporters that, like coffee, sesame seeds contract should be registered at the central bank before transfer to commercial banks, and the contracts of other exporting items will be registered at the ministry. This is considered one instrument to control the export market.
Capital’s effort to talk to Misganu Arega, State Minister of MoTI, which is responsible for overseeing of sesame trading was unfruitful.