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The Pilot Project on Price Risk Management in East Africa was approved for financing by the Common Fund for Commodities (CFC) in 2001 with an overall objective to reduce the exposure of cotton market participants to fluctuations in world market prices. The practical aim of the project is to identify and test the feasibility of the use of various price risk management instruments by market participants in East Africa. Funding for the initial stage of the project was provided by the CFC for a consultancy to analyze the requirements and the potential for introducing market based risk management instruments suitable for the liberalized cotton markets in Tanzania, Uganda and Zimbabwe. Following a public tender procedure, the New York-based CPM Group was appointed as the consultant for the initial feasibility study: "Analyzing the Potential for Introducing Market Based Price Risk Management to Cotton Farmers and/or Co-operatives".
The CPM Group started work on the project on January 15, 2002 and has produced a detailed Work Program and concluded a first field trip to Africa on a fact-finding mission. The report of the Consultant should be finalized by May 15, 2002, outlining suitable instruments and hedgers, review of legal and regulatory framework, domestic intermediaries, telecommunications infrastructure and providers of hedging instruments. The report will address overall field test program operations, costs, capabilities, structure, constrains and obstacles. A regional workshop will be scheduled for June 2002.
During the first field mission in East Africa the CPM Group presented a detailed presentation on commodity price risk management programs and strategies, including specific information on cotton hedges, and on the mechanisms by which cotton hedges may be developed and managed. The CPM Group and the ICAC are posting the PowerPoint presentation and the Word report document on their websites for the benefit of cotton producers, coops, exporters and ginning mills in various countries.
PowerPoint presentation
(228K PDF)
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