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Saturday, October 17, 2015

What Does Africa and The NYSE Have to do with Each Other

What Does Africa and The NYSE Have to do with Each Other

Africa's Coffee, Cocoa, and Cotton rule the New York Stock Exchange Intercontinental Exchange Group soft commodities market. African influences are extensive in the softs markets and are of vital importance to the international soft commodity trading of the world.



Africas Influence On The New York Stock Exchange and China


Ethiopia is the world’s fifth largest coffee producer and Africa’s top producer.
Testing Ethiopian Unroasted coffee beans

A stock exchange is a facility where stockbrokers and traders can buy and sell securities, such as shares of stock and bonds and other financial instruments. The New York Stock Exchange (NYSE) is the world's largest stock exchange by market capitalization.

African influences are extensive in the soft markets especially in the case of cotton, cocoa, and coffee and are of vital importance to the international soft commodity trade on the Atlanta-based Intercontinental Exchange Group or ICE of the New York Stock Exchange, NYSE.

According to ICE, it became the center of global trading in soft commodities with its acquisition of the New York Board of Trade in 2007. Now known as ICE Futures U.S., the exchange offers futures and options on futures on soft commodities including coffee, cocoa, sugar, cotton, and frozen concentrated orange juice. 

What is a soft commodity? The definition of a soft commodity is a resource that is grown rather than mined such as coffee, cocoa, sugar, maize or corn, cotton, and tea. 


Africa's main producers of cocoa beans are  Ghana, Nigeria, and Cote d'Ivoire.
Africa's main producers of cocoa beans are 
Ghana, Nigeria, and Cote d'Ivoire.

Unroasted coffee is Africa’s leading soft commodities value export, cocoa beans are second and cotton lint is the third. Soft commodities play a major part in the futures market. What are futures? Futures are contracts that require traders to buy or sell assets at a set price at a set date in the future allowing farmers and other food producers to lock in the prices they would get for crops even before harvest time.

Ethiopia is the world’s fifth-largest coffee producer and Africa’s top producer. Coffee is Ethiopia's principal source of income and the world's demand for quality coffee is increasing steadily. More than 15 million people grow the crop for a living, hundreds of thousands of middlemen are involved in the collection of the crop from farmers and supply to the export and domestic market. 

A sizable amount of foreign exchange, accounting up to 30% of the total yearly export income, is derived from coffee. The work of roasting, packaging, retailing and other assorted workings in the coffee value chain are done by companies outside of the African continent. 


Cotton accounts for US $3.3 billion, the majority of the Benin's revenue.
Raw Benin Africa cotton

Africa does not benefit from the processing and manufacturing portion of the coffee bean, only the agricultural. Africa produces well over 65% of the world’s cocoa beans. Many African countries now grow cocoa trees, Sierra Leone, Cote d'Ivoire, Ghana, Togo, Nigeria, Cameroon, Equatorial Guinea, Gabon, and Congo, but the main producers are Ghana, Nigeria, and Cote d'Ivoire. 

Cotton accounts for US $3.3 billion, the majority of Benin's revenue. The economy of Benin is dependent on subsistence agriculture, cotton production, and regional trade. 

The top export is cotton around 40% of $8.3 billion Gross Domestic Product (GDP) or $3.3 billion. Africa's three C’s Coffee, Cocoa, and Cotton rule the NYSE-ICE futures soft commodities market.


China as a foreign investor in Africa

China is the largest developing country foreign investor in Africa. Significant Chinese investment and development finance have been channeled into infrastructure. Trade with China is growing much faster than that with the United States and the European Union. 

The relationship started in the early 1980s, as part of concerted diplomatic efforts promoting Chinese economic cooperation with Africa. The largest share directed toward the resource sector, notably in South Africa, Angola, Ethiopia, Mali, Nigeria, and Uganda.

There are 16 major exchanges in Africa, 30 in total.

1. Ghana Stock Exchange
2. Lusaka Stock Exchange
3. Malawi Stock Exchange
4. Johannesburg Stock Exchange
5. Bond Exchange of South Africa
6. Stock Exchange of Mauritius
7. Zimbabwe Stock Exchange
8. Namibia Stock Exchange
9. Botswana Stock Exchange
10. Cairo and Alexandria Stock Exchange
11. Abidjan Stock Exchange
12. Casablanca Stock Exchange
13. Nigeria Stock Exchange
14. Dar es Salaam Stock Exchange
15. Uganda Securities Exchange
16. Nairobi Stock Exchange

China is only one of several major emerging economies with an interest in Africa, the others being Brazil, India, The Republic of Korea, the Russian Federation, and Turkey.

Africa received nearly half of the cumulative $54 billion provided by China in global foreign aid through 2012 significantly more than any other region. Chinese development assistance is frequently packaged into agreements that mix grants and investment, and concessional and non-concessional loans.


Investments in infrastructure and mining are likely to slow, given the recent decreases in global commodity prices, Chinese investment should continue to add to the domestic demand for goods and services in Africa.


Did you know
Africa’s Top 10 most value exported soft commodities according to the Food and Agriculture Organization of the United Nations 2011 are in order cocoa beans, unroasted coffee, cotton lint, rubber natural dry, unmanufactured tobacco, oranges, tea, refined sugar, maize, and unshelled cashew nuts. 


Africa's three C’s Coffee, Cocoa, and Cotton rule the NYSE-ICE futures soft commodities market.


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