Forward Contracts

Contract

Introduction

AHCX forward contracts are a hybrid of standard OverThe Counter Agreements (OTC) contracts and futures contracts normally traded in advanced Exchange Models. AHCX forward contracts ensure suppliers of a minimum price of their commodity at a specific delivery period and location whilst earning a premium over the same when global market prices move favourably over the minimum set price.

The forward contracts are split into two sets of

  1. International dollar dominated forward Contracts spread across 5 months of delivery period.
  2. Domestic Kwacha based contracts spread across 2 3months blocks of delivery.

The Exchange will in 2015 season pilot a $40 million Pigeon peas and Soya beans for the international and domestic contracts respectively. It is also envisaged that Sugar beans, Groundnuts and Sunflower could be added to the basket later in the year.

Objective

  • To stipulate production of Legumes by assuring commercial and smallholder farmers of a market at set minimum prices in line with government’s efforts in promoting legume production and national export strategy.
  • To enhance access to credit facilities for production and aggregation of legumes in light of ready demand therefore assuring lending institutions of a solid disposal and recovery of the same.
  • To support local processors with steady flow of raw materials (commodities) for onward processing. The processors are therefore able to plan their processing, cash flow needs as well as exports.

Expectation

AHCX soya beans and pigeon peas forwards will attract a trade turnover of not less than $40million in 2015 and will continue to grow as production is stimulated to meet demand.

Target Audience

AHCX forwards target all stakeholders in commodity industry be it a farmer, trader, exporter and processors. Any person(s) who can manage to supply a minimum of the contract is eligible to take up a forward contract with the Exchange.