10,000 farmers sign storage deal to cut out middlemen

More than 10,000 grain farmers have joined the warehouse receipting system in a bid to cut out middlemen who profit unfairly by buying produce at rock-bottom prices during the harvest season and selling at exorbitant prices in deficit areas.

The East Africa Grain Council (EAGC) said thousands of farmers have embraced its storage system since 2008 when it was first introduced.

The farmers, EAGC said, have benefited from higher prices for their produce than they used to before the warehousing system when they would sell their harvest cheaply or at a loss for lack of proper storage facilities.

“We have seen a continuous growth since 2008, farmers have enjoyed good prices as well as credit services and this has been a driving force towards the picking up of this project,” EAGC chief executive Gerald Masila told the Business Daily.

In 2012, according to the EAGC, farmers sold their produce at the Sh3,500 for a 90-kilogramme bag of maize which they would have sold for Sh2,200 at the time of depositing their harvest in the warehouses.

The concept behind the warehouse system, said Mr Masila, is to give farmers access to affordable loans to invest in the next season’s farming activities without necessarily selling their crop at a throw-away price to middlemen.

“Most farmers rely on proceeds from their produce to reinvest in farming, as such, they end up selling their crop cheaply to middlemen,” he said.

The farmers currently have outstanding loans of nearly Sh40 million which are backed by the crop deposited as collateral in the warehouses.

EAGC, which is currently the regulator of the warehouse receipting system, has partnered with a number of banks that offer loans to farmers. These include Equity, Chase, Unaitas Sacco and Financial Services Associations managed by K-REP Fedha Services.

Farmers are issued with a warehouse receipt from any of their 13 warehouses across the country which they can use to get upfront money in form of loan of up to 65 per cent with the grain under storage acting as collateral.

The National Cereals and Produce Board also runs a WRS started in 2010. The board, which offers four categories of services under the system, however says it is yet to gain momentum.

“Under our system, we offer financial, storage, quality maintenance and holding services. However, our financial aspect is yet to pick up,” said communication manager Evans Wasike.

At the moment, farmers who store their maize under the NCPB warehouse system are unable to access loans from financial institutions because the grain handler only issues them with a goods receipt note as opposed to warehouse receipt, which is the only document accepted by banks as collateral for loans.

Currently, NCPB is not receiving maize under the programme.