Bid Volume Only

By k.Mkandawire (4th Year Agribusiness Student at Bunda College of Agriculture)

Since its incorporation in 2004, Ace has developed an online trading system to make trading in agriculture transparent, accessible and secure. The buyer or seller agree with an ACE registered broker, any terms, volume, quality and price and the broker places the bid/offer on the trading system. When a bid/offer is on the system it is active. This means that anybody can accept it through a registered broker and a contract is automatically generated.

The BVO system allows a buyer to bid to buy a commodity with special terms and volume, but without a specific price. This system is unique in that it works like a real time reversed auction. Potential suppliers can offer to sell on the BVO system by placing their offers online or at the physical trading session hosted at ACE offices. The good about it is that suppliers compete on prices, as all other terms are pre-determined by the buyer and they can offer any volume. When BVO ends the buyer will award contracts to the offers with the lowest price until the desired volume is bought. The buyer is free to select any offers and also free not to select any, if the prices are perceived to be too high.

On Friday, 2 November 2012, ACE held such a BVO trading session at its head office in Kanengo, Lilongwe. The World Food Program (WFP) placed a bid to buy 272MT (Metric Tonnes) of White maize grain of fair average quality. Initially, the session opened at 1130hrs and closed at 1200hrs and competition was stiff as was evidenced by the session being extended 3 times. The session attracted offers from the likes of Mulli Brothers, Rabs Processors as well as Export Trading. Also present at the BVO session were smallholder farmers from Kafulu who offered to sell their warehouse receipts (WRS).

Speaking after the session, the head of procurement at WFP said that they will then go and meet their procurement committee to assess and scrutinize the offer. When one of the offers will be accepted, ACE will generate the contract(s) for the accepted offer(s) and forward the contract(s) to WFP and to the seller(s). When performance is done and the seller has met in full the obligations stipulated in the contact and all supporting documents have been received, ACE will invoice WFP. ACE will charge an exchange trading commission of 0.2% as it does on all BVOs. The commission will be deducted from the contract value before disbursing the funds. Any administrative cost incurred by ACE such as bank transfer fees and courier services will also be deducted from contract value upon settlement. When a date is set for another BVO session, ACE usually informs its clients through emails or phone calls.

BVO in Session