Corn and frozen chicken joined Iran Mercantile Exchange’s tradable commodities list this week, with the aim of keeping middlemen out of the markets for these products.
Commodities trading in Iran are dominated by middlemen who take the lion’s share of profit from the trade and drive prices to unreasonable heights, SENA reported.
The government is guaranteeing a base purchase price for the two commodities, but supply and demand on the IME will determine prices.
Corn and chicken will be traded in the spot market, unlike the major commodities markets in which futures trading dominates. Offering futures would help both producers and consumers a hedging option against market fluctuations.
The IME has yet to standardize contracts for these commodities.
“Our target is to make supply and demand more transparent, and meet demand in a timely fashion,” said Abbas Valouzi, commercial deputy of State Livestock Affairs Logistics, a government agency affiliated with the Ministry of Agriculture, which manages much of Iran’s animal feed imports.
The corn sold on IME last year came only from the province of Khuzestan, but Valouzi says producers from other provinces will also join in. It is unclear whether the government is giving them a choice on the matter.
The Iranian government has traditionally kept a firm grip on the market for agricultural products, with price controls, imports and guaranteed purchases. Government agencies are hoping this control can be exerted more easily through the IME, while leaving room for buyers and sellers to hash out prices.
The government also wants to know more about the dynamics of the market and the identities of the buyers and sellers.
“Everything is observable and transparent in IME’s trading and the data that the exchange offer can provide a roadmap for producing agricultural products and expanding the sector,” Jalal Mahmoudzadeh, deputy head of Majlis Agricultural Commission, said on Sunday.
Mahmoudzadeh was hopeful that the incumbent government would allow prices to be decided via trading.
“Government officials have intervened in trading on IME and put limits on the market. But as the incumbent government does not believe in setting prices, it seems IME’s efficiency will rise day by day,” he said.
Mohammad Ali Kamali Sarvestani, chief executive of the Chicken Producers Union, said last week that the government can let prices float but in times of shortage, it can regulate prices by using its strategic reserves or by removing import barriers.
