According to the report from IME international affairs and PR, Ali Panahi Planning and R&D manger of IME highlighted in an interview on delivery of standard commodities as one of the major functions of the commodity exchange and told that the instrument ensures such standards throughout storage facilities and delivery warehouses operating under supervision of the exchange. The issue gains importance in physical trading and acts as the underlying asset in derivatives contracts for delivery at maturity.
Warehousing: facilitating delivery and procurement in the national economy
He went on to say that, warehousing is of great significance in the national economy since it organizes the flow of wholesale commodity delivery and procurement and has been among the administrations priorities at some junctions. It has been referred to and reiterated in the section 11 of article 1 of the article of incorporation of Iran Mercantile Exchange so it is one of the major projects of the year 1392 (2013) in line with strategic documents of IME.
Warehouse Listing Instructions in the course of ratification
Elsewhere in his remarks, Panahi referred to the requirements on warehouses and delivery of standard commodity as one of the necessities to implement article 33 of the law for raising productivity in the agricultural sector and natural resources.
R&D Manager of IME underscored that on the basis of the mentioned law in addition to implementation of the law for ensured purchase of agricultural products within yearly budgets and credit lines, the ensured price policy shall be enforced. Anyhow, agricultural producers may offer their products in IME market and in case the exchange prices fall below the ensured purchase price announced by the government, the price deferential shall be paid by the government to the producers. He added that the ministry of the agriculture has been required by the law to prepare an inventory of the products which are qualified for this plan and to submit it to the exchange on a yearly basis dependent on the annual production and market conditions.
Asked about the practical measures taken in this regard Panahi replied: "to begin with, we drafted the warehouse listing instructions based on the technical and legal frameworks before us which is luckily on the verge of enactment.
One of the other important actions is drafting the technical requirements for listing of warehouses which is in the final stages.
He went on to mention that, one of the other required measures in this regard was connectivity infrastructure in this area for which both warehouse warrant issuing system and warehouse connectivity platform have been developed and are ready to operate for in and outflow of commodity to and from the warehouse.
The qualitative and quantitative specifications of warehoused commodities can be inspected, examined and verified so there is no recourse but having such an infrastructure.
Reduction in transaction expenses by putting warehousing into operation
Panahi emphasized the role of warehousing and warrants in facilitating the participation of the farmers in IME transactions and at the same time a boost to efficient implementation of construction projects. The substantial objective of implementation of warehousing and warrant systems is reducing transaction costs in national economy.
When asked if there are warehouses qualified to implement the project he said: yes there are a number of storages. We have visited public and private warehouses equipped for storing metals and also agricultural products and have held sessions with the owners, however due to termination of the harvest season of many agricultural products, final measures to list the warehouses are taken with priority on the warehouses owned by the legal entities and organizations and to this end, we have designated a warehouse belonged to Central Union of the Rural Cooperatives in Golestan province, an oil seed warehouse owned by Oil Seed Planting Development Company which is affiliated to the ministry of Agriculture and another warehouse owned by the Central Union of Agricultural and Rural Cooperatives and another warehouse operated by Corn Planting Development Company. Coordination has made at different decision-making levels for starting the operation.
Warehouses, Brokers Agents
The expansion of the exchange operations to provinces and geographical regions are among the priorities of IME, if the listed warehouses meet the required standards, they could be designated as branch offices of the brokerage firms of IME, meaning each one of the broker firms may introduce and deploy representatives and marketing agents in the approved warehouses and render brokerage services to the farmers and producers as well as consumers.