Feasibility Studies on Future Exchange of Agricultural Commodities in Kosovo

The agriculture sector in Kosovo is a sector that has great potential to contribute to the economic development of Kosovo. Being a developing country, with a high trade imbalance, Kosovo’s focus is to increase country’s export and try to meet 100% of the local demand with local products. The aim of this paper is to investigate the possibility of creating a regulatory office in Kosovo that would initiate the agriculture commodities futures exchange. The main purpose is to study the possibility of Kosovo to develop such market based on its economic indicators and market features. Three main categories of agricultural commodities are going to be discussed throughout the paper: cereals, fruits, and vegetables, with a special focus on the development of futures contract for potatoes. Kosovo fulfills 60% of local demand for potatoes, and it also exports them to regional countries. Kosovo has export experience already in the case of potatoes, so the initiation of futures contracts would be less difficult. The biggest advantage for Kosovo is that it will be the first country that offers potato futures contracts, since there is no such contract currently traded in the world futures exchange. The paper follows qualitative research method, focusing primarily in literature review. Since it is the first time for Kosovo to develop such market, other developing countries that have already developed such market or are in the process of development were studied and then compared with Kosovo possibility to do so. Furthermore, Kosovo’s macroeconomic indicators are presented in order to have a better understanding of Kosovo’s market conditions to develop futures contracts. Based on the analysis and data collection, it is concluded that Kosovo has potential to develop agricultural futures contracts. In order for the futures exchange to be successful, special focus should be given to the settlement of regulation and organization, and continuous support of Kosovo government and financial institutions. Kosovo needs to start this process in order not to lack behind other countries and to use potential economic benefits that futures contracts bring, such as: increase in exports, liquidity, price discovery, price risk management, and better reputation for Kosovo products in the international market