The Agricultural Product Derivatives market in Eastern Africa is experiencing a significant growth in recent years.
Customer preferences: Investors and financial institutions in Eastern Africa are increasingly turning to agricultural product derivatives as a way to diversify their portfolios and hedge against market volatility. The appeal of these derivatives lies in their potential for high returns and the opportunity to speculate on price movements without owning the physical commodity.
Trends in the market: In Kenya, there is a growing interest in maize and coffee derivatives as these are key agricultural commodities in the country. The derivatives market for these products is expanding as investors seek to capitalize on price fluctuations driven by factors such as weather conditions and global demand. In Ethiopia, teff derivatives are gaining traction due to the increasing popularity of this ancient grain in international markets. The derivatives allow investors to participate in the teff market without directly dealing with the challenges of storage and transportation associated with physical teff trading.
Local special circumstances: One of the key drivers of the growth in agricultural product derivatives in Eastern Africa is the region's vulnerability to climate change. Erratic weather patterns and natural disasters can have a significant impact on agricultural production, leading to price volatility in the market. As a result, investors are turning to derivatives as a risk management tool to protect their investments from these uncertainties.
Underlying macroeconomic factors: The agricultural sector plays a crucial role in the economies of many Eastern African countries, contributing significantly to GDP and employment. As governments in the region work towards modernizing and increasing productivity in the agricultural industry, the demand for agricultural product derivatives is expected to continue growing. Additionally, the increasing integration of Eastern African economies into the global market is creating opportunities for investors to participate in the international trade of agricultural commodities through derivatives.
Data coverage:
Figures are based on commodity derivatives, their notional value, the number of contracts traded, the open interest (outstanding contracts at the end of a year), and the average value of a contract.Modeling approach / Market size:
Market sizes are determined by a Bottom-Up approach, based on a specific rationale for each market segment. As a basis for evaluating markets, we use market research & analysis, and data of World Bank, as well as the World Federation of Exchanges. Furthermore, we use relevant key market indicators and data from country-specific associations and national data bureaus such as GDP, wealth per capita, and the online banking penetration rate. This data helps us to estimate the market size for each country individually.Forecasts:
In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the particular market. In this market, we use the HOLT-damped Trend method to forecast future development. The main drivers are GDP per capita an the online banking penetration rate.Additional Notes:
The market is updated twice per year in case market dynamics change.
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