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Smallholder farmers to reap big as warehouse receipt system kicks off

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The National Cereals and Produce Board, Nakuru depot. FILE PHOTO | NMG

Summary

  • The government has embarked on a campaign in the counties to sensitise the farmers, the devolved units and other stakeholders on the need to embrace the system, which is expected to revolutionalise farming activities.
  • The system is expected to solve the challenges smallholder farmers face related to inefficiencies brought about by a lack of a transparent and structured market.

When Jacinta Auma harvested about one tonne of rice she was an excited farmer and was looking forward to positive returns after toiling on the Kano plains in Kisumu, which is well known for rice production.

But just as she was delivering the produce to the National Irrigation Authority, a middleman intercepted her and offered to pay instant cash of Sh40,000 instead of waiting for ages to be paid about Sh50,000 by the State corporation.

John Odindo, another rice farmer in Ahero borrowed about Sh600,000 from Agricultural Finance Corporation to boost his rice production hoping to clear the loan after harvest. However, he is a worried farmer as he is unable to sell his 20 bags of rice due to a lack of good market prices and storage facilities as his makeshift storehouse is prone to attacks by rodents, which will destroy his rice.

At Mwisho wa Lami Trading centre in Mau Narok, Nakuru, Mercy Njeri is having a heated argument with two middlemen over the price of her 15 bags of potatoes, which they want to buy at Sh900 per 50kg bag.

As the argument heats up Ms Njeri succumbs to pressure and sells her produce to the middlemen who are buying the commodity in extended bags.

The middlemen later repackage the bags in 50 kilogrammes before they transport them to Nairobi and other markets.

John Njogu of Molo has been visiting the Pyrethrum Processing Company of Kenya at Nakuru’s industrial area hoping to be paid his dues after delivering dry flowers at the financially troubled company in vain and is now contemplating uprooting the lucrative cash crop.

“I’m missing the good old days when I was paid my dues without visiting the factory to inquire about my payments. I’m now spending money to chase my dues, which I’m not sure when I will be paid. I’m now thinking of uprooting the crop from my half-acre plot and plant potatoes,” he says.

This is what many smallholder farmers have been undergoing after toiling in their fields hoping to make a killing from their sweat.

Their tribulations are replicated across the country in all key agriculture sectors including dairy, cotton and horticulture as their tribulations increase by the day.

However, this may be a thing of the past as the government has stepped up activities to fast-track the implementation of the Warehouse Receipt System (WRS), which was unveiled in July last year.

The government has embarked on a campaign in the counties to sensitise the farmers, the devolved units and other stakeholders on the need to embrace the system, which is expected to revolutionalise farming activities.

The system is expected to solve the challenges smallholder farmers face related to inefficiencies brought about by a lack of a transparent and structured market.

Value chain

The WRS is a process where producers or dealers deposit their commodities in certified warehouses and are issued with a warehouse receipt as proof of ownership.

The system is touted as a key intervention to improve commodity storage, reduce post-harvest losses, curb value chain inefficiencies, increase earnings for farmers, traders and service providers in the agricultural value chain.

The system also confers a wide range of benefits to the farmers that include an assured market for their produce at best prices, reduced post-harvest losses.

The produce is cleaned and fumigated to remove impurities and pests and is graded.

Therefore, farmers sell the products according to grades. With warehouse receipts, farmers can access inputs and loans on the strength of the deposits at the warehouse while millers can do value addition as they have guaranteed raw materials.

The system has been rolled out in Nakuru and is expected to attract investments in the warehousing sector.

Besides Nakuru, the system has been successfully launched in Trans-Nzoia, Uasin Gishu, Meru, Embu, Nyeri, Makueni and Machakos among other counties.

Maize farmers in Tuiyotich in Mauche Ward, Njoro sub-county, were the first small-scale farmers to adopt the electronic system in trading agricultural commodities in Kenya when they delivered 5,000 kilogrammes grade two maize to the National Cereals and Produce Board (NCPB) depot in Nakuru last month.

The maize was subjected to quality standards moisture content verification, aflatoxin testing, grading and storage before they were issued with a document confirming the ownership of their produce.

“This the best system and we hope to reap from the good prices besides being assured of the safety of our produce. We have been exploited by middlemen for many years,” says Joseph Koech who is also the farmers’ leader.

“Days of selling our produce at a throwaway price to middlemen who invade our farm gates are long gone.”

Apart from maize other produce that qualifies to be stored in a warehouse include rice, processed fish, beef, macadamia, cashew nuts, coconuts, powdered milk, cotton, sisal, pyrethrum, potatoes, coffee, tea, rice, beans, green grams and wheat.

At least 150 warehouse operators that include cooperatives, counties and NCPB have applied for licences.

The government through NCPB is leasing space for seven million bags of cereals to the private sector, farmers and traders at competitive rates. The NCPB’s total storage capacity for strategic food reserve is about 22 million bags.

Acting Warehouse Receipt System Council chief executive Samwel Ogola says the system is geared towards the creation of an Agricultural Commodities Exchange.

He exuded confidence that the Warehouse Receipt System would solve many challenges in the sector.

Mr Ogola says the national government has formed the Kenya National Multi-Commodity Exchange (Comex) to fast-track the system.

“Comex is in the process of setting up the trading floor, which should be up and running by the end of the year. Nairobi Security Exchange is a board member of Comex and would help in technology and knowledge transfer. Comex is not solely for agricultural produce. It is a multi-commodity exchange.

“The services will also be rolled out across the counties. This will help farmers monitor the prices of various commodities and eliminate exploitation by brokers. Farmers’ bargaining power will be enhanced,” says Mr Ogola.

He says the WRS is a transformative programme developed by the Agriculture ministry under the Agriculture Sector Transformation and Growth Strategy, which looked at the value chain, challenges farmers face and production.

“Between 20-30 percent of agricultural produce is lost because of poor storage. Farmers count losses even before they take their harvest to the market.

“There are also issues of value chain inefficiencies, which have allowed the mushrooming of middlemen who are not adding value and are just another pest, they thrive on farmers’ desperation to sell their produce,” said Mr Ogola.

The CEO says the agricultural sector receives little support from the financial institutions adding “the critical agriculture sector is only receiving four percent of the total lending from the banks and other institutions such as savings and credit cooperative societies

“The sector creates more than 60 percent of the job opportunities and is a major contributor of foreign exchange and forms more than 25 percent of the gross domestic product.”

Farming obligations

Mr Ogola said the system would attract the banks to offer farmers loans as the risks involved would be reduced.

At least seven banks have indicated their intention to finance farmers to meet their farming obligations.

Nakuru County Agriculture executive Immaculate Njuthe Maina said the WRS would streamline trading in farm commodities as farmers would store their produce in a registered and certified store, saving them from post-harvest losses.

“With the Warehouse Receipt System farmers will no longer struggle to store their produce in a leaking store infested by rodents as registered certified stores will enable the farmers to store their produce in a safe condition free of rodents,” says Dr Maina.

She said the system is a game-changer as farmers will form groups to deliver their produce, reducing the exploitation by the brokers.

“Farmers will no longer be in a hurry to sell their produce to unscrupulous middlemen who have been reaping where they did not sow,” says Dr Maina.

She discloses that having a central depot would also benefit the millers who will no longer be required to transverse the country looking for maize and other cereals as they will be acquired to go to a central point and buy their commodities, saving transport costs and other overhead costs.

Dr Maina said the system would promote the commodity value chain from the farm to utilisation as many actors would be licensed to have certified depots which will assure millers and others stakeholders have access to clean produce.