FAO Regional Workshop on Rice

EAGC experience in Structured Grain Trade

13th - 17th April 2009by

Harriet Nabirye

EAGC

• The Eastern Africa Grain Council (EAGC)

- non profit organization- membership is by organization and members play a crucial role in its formation.

- registered in Kenya in 2006 as a company limited by guarantees and without share capital.

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• Why EAGC? - Problem:

Lack of structured trading system after liberalization.

• General Objective:

To promote and establish a structured grain trading system in the Eastern and Southern African Region.

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Mission Statement

• to bring order to the regional grain trade, practicing and promoting approaches to trade that help farmers, suppliers, processors, traders and consumers transform their businesses and livelihoods.

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EAGC Membership

• involves all stakeholders along the grain chain and are classified as follows:

a) Active members-Individual companies participating in the core sector of grain trade- i.e producers, traders and processors.

b) Associate members-allied industries and service providers (banking, insurance, inspection and warehousing, transport).

c) Affiliate members-national associations representing producers ,traders and processors at the national level.

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What does EAGC Offer? • Provides timely and accurate regional grain market

information.• Links buyers to sellers.• Provides training e.g. use & honoring of contracts,

issues of post-harvest handling, standards, arbitration, risk management tools (Warehouse Receipt System) and also exposes members to other available training & learning opportunities.

• Liaises with government regulatory authorities on grain trade policies.

• Provides quick dispute settlement through arbitration.• Promotes the warehouse receipt system.• Collaborates with regional trading blocks (COMESA,

EAC). 6

STS is a system in which grain is traded in an organized way by:

• Organizing farmers to aggregate volumes through

(i) training on issues of post-harvest handling and encouraging use of proper storage facilities.

(ii) providing market information

• Ensuring that grades and standards are harmonized and known

• Ensuring that rules of trade exist and contracts are used and honored

Structured Trading System (STS)

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Structured Trading System (STS) Cont’d…….

•Encouraging Grain Trade Risk Management (WRS).

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Warehouse Receipt System (WRS)

A Warehouse Receipt is a title document stating a precise quantity and quality of known commodity, stored in a known warehouse.

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Warehouse Receipt System (WRS) Players

• Producers/Farmers

They bulk their produce in certified warehouses.• Traders , processors, Government and Food aid agencies.

They buy the warehouse receipts from the depositors.• Banks

They give loans against the warehouse receipts.• Insurance Companies

They insure the warehouses and stored commodity.• Warehouse operators

They manage a certified warehouse and ensures that commodity is properly stored by signing an agreement with EAGC.

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Why Establish a Warehouse Receipt Program?

• Selling grains at low prices

During harvest season, market prices are low due to high supply. WRS-controls supply.

• Lack of access to agricultural credit

Banks are reluctant in providing loans on agricultural related activities due to uncertainties. WRS provides away of getting around that by using a warehouse receipt as collateral.

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Why establish a Warehouse Receipt System…. Cont’d

• Poor storage facilities

Farmers who don’t have good stores sell immediately after harvest at low prices. If they keep for long, they incur spoilage losses.

• Access to larger more formal markets

EAGC can link depositors to potential buyers like the Un World Food Programme (WFP), etc

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Why establish a Warehouse Receipt System…. Cont’d

• Guaranteed quality

All grade 1 specifications are always tested before grain is accepted in the warehouse. Grain is fumigated at least once a month.

• Links to market information

Farmers who use the system are well informed on movements in the markets so they can wait to sell at best time.

• Insurance

A certified warehouse must have a full comprehensive insurance cover. In case of grain loss through fire or theft, depositors are compensated.

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The WRS Process• A warehouse is identified, inspected and certified.• Farmers aggregate maize volumes then arrange for

transport to the warehouse.• Maize is tested for quality, if accepted for storage, a

contract between depositor and warehouse keeper is signed.

• A depositors gets a warehouse receipt once their grain has been deposited.

• Depositors can take original warehouse receipts to bank if they need loans.

• Depositors gets a buyer and decides to sell maize when prices have gone up.

• Depositors pay back the loan and warehouse charges.

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The WRS Process….cont’d• Original receipt is issued by the bank, the depositor

and buyer signs a sale contract.

• If no financing was done the depositors sign a simple sale contract with the buyer.

• Transfer form is signed to transfer warehouse receipt to the buyer.

• The warehouse can now release maize to the buyer.

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Market Information Services (MIS)

EAGC manages a Market Information Service from which the following information can be obtained:

• wholesale prices for staple food commodities (maize, beans, rice, wheat, sorghum and millet) USD/MT(daily, weekly, monthly).

• Production figures (MT).• Cross border trade data (MT).• Information on purchase inquiries & sale offers.• Trade policy updates–export bans, price settings.

• Countries -Eastern & Southern Africa - Kenya, Uganda, Tanzania, Rwanda, Zambia, Malawi.

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MIS- Plans for expansion

• Include other countries– Malawi, Zambia, and Ethiopia- this will in turn lead

to addition of more crops which are not covered in the current range.

• Emphasize Market Information in other member countries

• Increase border coverage-Rwanda / Uganda border for beans, -Uganda / Sudan for maize-Uganda /Kenya (Malaba) for maize, beans(border monitors)• Increase sensitization of the Warehouse receipt

system among all member countries.

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•Established a functional secretariat, developed by-laws & regulations, Operations Manual and a 5yr Strategic Business Plan.

•Developed rules of trade and standard grain contracts complete with the rules of arbitration and appeal.

•Established an arbitration process, with qualified arbitrators drawn from the region (Uganda, Kenya, Tanzania).

•In Kenya a pilot Grain Warehouse Receipt System (WRS) was launched. All WRS protocols developed.

EAGC achievements so far

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EAGC achievements so far….cont’d• Small-scale farmers have been linked to markets

including the food-aid agencies and processors such as, UNGA Ltd, Pembe, Mombasa Maize Millers (in Kenya).

• The Council’s membership grew to 58 corporate organisations recruited from the Eastern Africa Region.

• EAGC has identified and recruited a country representative for Uganda (Mar 09).

• A Structured Trading Systems Manager has been identified and recruited (April 09).

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www.eagc.orgContact:

Uganda Country Manager: hnabirye@eagc.org

EAGC secretariatTel: +254-20-4212000

grains@eagc.org

Thank You