We have grave concerns in today’s world agricultural commodity markets, and I’m not speaking of trade houses’ shrinking profit margins.  There’s fear of a global food shortage and fear that we cannot succeed in the war on poverty. In the West we have constant reminders of how the lack of traceability yields food security threats and in Asia of how it leads to deforestation.[1] And where there is fear, there are hasty and chaotic attempts to address the problems.  We are all eager to create double or triple bottom line success stories, but as shrewd businesspeople, we need to slow it down and take a more pragmatic approach. The complexities involved in establishing secure and sustainable food supplies require patience and granular focus, with success measured in small increments. Once we get out of the mad scramble to solve the problems, we’ll begin to see the obstacles that can and must be cleared before we can reach impact at scale.

In Africa, agriculture employs half the continent’s population, but its contribution to GDP hovers at an average of 15%.[2]  Productivity is abysmal despite vast amounts of arable land.  Undernourishment persists across the continent. This is a frustrating scenario given the numerous studies that illustrate how improving the livelihoods of smallholder farmers strengthens the agrarian economy, thus reducing poverty and food security concerns.

With this backdrop, one can see the interest and urgency in creating a national or regional exchange as a cure-all for our commodity fears. Its success could bring farmers higher incomes and the transparency could help improve regional trade flows, decreasing the reliance on ocean-imported commodities.  In the brightest of outcomes, commodity derivative contracts will be formed and outside investors will begin to pour money into the market. Everybody wins.  But our direct experience with PanXchange has illustrated that the race to establish the pre-eminent commodity exchange solution is rife with presently intractable issues.

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Julie Lerner is the Founder and CEO of PanXchange, Inc., a web-based negotiation and trading platform for physical commodities. She has deep experience in regional and international agricultural and energy markets. Geographically, her area of expertise covers US, Europe, Latin America and East Africa. Ms. Lerner currently specializes in bringing liquidity and efficiencies to thin and/or nascent markets.