Warehouse receipt systems: Security and better prices for grain farmers

What is a co-operative according to your understanding?

A co-operative is a group of farmers who do things together to promote their farming businesses and their well-being. The co-operative that I belong to is called Gwiritse and consists of eight business centres, which are also made of clubs. For example, Mgoola business centre is made up of three clubs and Mphonje business centre is made up of four clubs. Business centres have frequent meetings and all eight business centres meet before co-operative meetings on the 15th and 30th day of every month.

LIVENESS ELIYA: Members register at a business centre before becoming members of a co-operative. This is where they are certified as full members and qualify to receive all the benefits of the co-operative.

When soy farmers want to receive soybean seeds on loan, we register at business centres. When we want to repay a loan that we got from a business centre, or when we want to store our soybean harvest or any other crop at a warehouse, we deliver the harvests of all the business centre members to the business centre. Later, the co-operative picks up the crops to examine them and then store them at the warehouse.

After the crop arrives at the co-operative, the storage operator tests the moisture content of the grains and the quality—whether they are rotten, broken or unbroken, and the grade of the grains. If these qualities are good, then the grains are kept at the warehouse.

You mentioned loans for soybean seeds. Where does the loan come from?

Farmers, including us women, have difficulty purchasing new, unrecycled soy seeds that give a good harvest.

But the co-operative buys enough soy seed to distribute to its members as a loan. That way, all members plant good seed and get a high yield. Farmers pay back the seed in kind based on the market price of the crop. We calculate how much seed the farmer received and how much that farmer is required to pay back in cash. And then we calculate how many kilograms of seed the farmer is required to pay back, based on prevailing market prices.

Can a woman farmer grow soybean on her own without involving her husband or other men?

Yes, we do. Any woman can grow soybean without any problem. The good thing is that soybean can be grown with or without fertilizer. We do not apply fertilizer and we harvest at least 750 kgs an acre compared to 1,200 kgs for those who add fertilizer.

Soybean is very easy compared to tobacco farming. It has been a women’s crop until recently when men noticed that soy prices are increasing.

I understand that you harvested 15 50-kilograms bags each. How did you sell the bags?

I brought eight bags of the 15 to the warehouse where we sold them as a group in July to Sun Seed Oil Company at K425 per kilogram (52 cents). I made about 205 US dollars (K168,000). But fellow farmers who waited a little longer and sold one month later in August sold at K500 per kilo (60 cents). The buyer came to collect the soybeans at the warehouse.

What is the balance of female members and male members in the co-operative?

There are 187 female members and 164 male members.

Why are there so many female members in the co-operative?

There are many women because men have only started to join in large numbers recently.

In this area, men have been oppressing us women with tobacco farming. Men and women grew tobacco together, but men did all the selling and spent all the proceeds on their own needs.

As a result, many women joined the co-operative that promotes soybean and other crops that are seen as women’s crops in this district. It is only recently that men have discovered that soybean is more profitable than tobacco and have started joining the co-operative and growing soybean in large quantities.

Even if the income from selling soybean is only 50 dollars, that goes a lot further in reducing household poverty than $1,000 dollars from tobacco. Spending money on men’s needs is sometimes not good for the whole family—the money is sometimes spent on womanizing.

With the growing interest from your husbands in soybean, how many acres are you going to grow this year?

This year, my husband has secured more land for me to grow soybean. It will be one-and-a-half hectares of land.

I understand that other women will double their soybean land this year. But did men not grab your income from soybean farming?

No, they did not grab it. When we showed our husbands the income from soybean sales, they were impressed and have secured more land for us. The money helped our families a lot. The men acknowledge that and hence have allocated more land for our soybean farming.

How did Gwiritse co-operative start?

It started as a farmers’ association in 2012. In 2014, we received funding to build a warehouse. We were also trained to transform ourselves into a co-operative. We became a co-operative and sold shares to members so that we could generate capital to run the co-operative. The Agricultural Commodity Exchange or ACE ran the warehouse for us and trained us how to run it. They handed over everything to Gwiritse co-operative members in 2018. The co-operative now manages the warehouse.

ACE also trained one of the farmers how to fumigate crops in the warehouse. So, now the co-operative manages crop quality in the warehouse.

How does being a member of co-operative help you as a woman farmer?

Being a member of the co-operative means that when you harvest crops, you can keep them at the warehouse. You get a receipt which you can use as collateral to get a loan against your crops. The restriction is that you are only allowed to get a loan worth 70% of the value of your crop.

You could even choose to buy crops from farmers who are not members but are selling their crops cheaply. And you could bring those crops and store them at the warehouse. In that way, when market prices rise, you can sell more than you harvested and make more profit. So using the warehouse receipt to get a loan helps you do business and increase your profit.

What fees do you pay per ton for keeping crops at the warehouse?

Non-members pay K3 per ton per day or K1,000 per year in rent for keeping crops at the warehouse. Members pay only K2 per day.

When you sold your soybean at K425 per kilogram, how much did you receive per kilogram after deductions for warehouse storage and the services of ACE?

When we sold at K425 per kilogram, we received about K420 per kilogram after deductions. Deductions were not more than K5 per kilogram. We had only kept the crop in the warehouse for three months from May to July before we sold it, but those that waited four months until August sold at K500.

Would you recommend that other farmers use the warehouse receipt system?

Yes, do not be afraid to keep your goods at the warehouse like ours. There are so many other advantages, including safekeeping. At home, there are so many losses compared to keeping crops at the warehouse.

We try to avoid selling our crops when we keep them at home, but it happens little by little anyway. But it does not happen in the warehouse. The warehouse is also professionally fumigated and insured against losses or damage from fire. The insurance company will cover that loss, which doesn’t happen at home. The warehouse also serves as a crop bank where you can withdraw crops when there is a great need. On top of that, we sell at higher prices than the prices that venders offer. The prevailing price offered in this area was about K350, compared to the K425 we received. Non-factual

With me now is Adrian Semba who works at the Agricultural Commodity Exchange or ACE as a field coordinator, overseeing all field activities in 15 districts.

What does ACE do, Mr. Semba?

ACE provides various services. We help buyers and farmers find each other and we connect buyers and sellers to the market. We also provide market information to farmers through radio and newspapers and sending messages straight to farmers’ mobile phones to help them find a good market. We facilitate auctions of various agricultural products and to a large extent we facilitate the operation of the warehouse receipt system.

I am very much interested in the receipt system. How does it work?

The receipt system is a platform for trading market commodities. It involves various players, including a storage operator who has a certified warehouse which stores produce, and depositors, most often farmers, who bring their commodities to the warehouse. ACE facilitates the exchange of commodities on the market, and financial institutions offer services such as loans.

When a depositor takes a commodity to a warehouse, the storage operator inspects the commodity to verify if it is on the list of acceptable commodities. We do not keep tomatoes, for example, in these warehouses, only grains. We keep maize, legumes such as soybean, different types of beans, as well sunflowers, rice, etc.

The storage operator checks the quality, the moisture content, and other characteristics because once the grains are accepted, they are in the hands of the operator. So, when the depositor wants the grains back or wants to sell them, they should have the same quality as when they were received by the warehouse.

The depositor receives a receipt which states that they are the owners of the commodity. They can use this receipt as a surety to get financing from banks. The financer is the bank that agrees to support the system. At the moment this is MyBucks Bank. Last year it was another bank, and banks have changed over the years.

How does a farmer withdraw a crop or sell a crop that is in the warehouse receipt system?

That process is called drawdown. One can store the grain for food and get it back later. The operator calculates the storage charges and the depositor pays it and gets the grain.

When a farmer stores his product at the warehouse, the ACE regularly gives the farmer a list of prices at which buyers are buying, often on a weekly basis. After the farmer chooses a price, he or she signs a contract with ACE that contains instructions to sell a certain volume or weight of the commodity at that price. ACE acts as an agent for the depositor. The buyer pays through the ACE account to make sure that all of ACE’s charges are deducted, including charges related to any loan that the depositor received.

Our main goal is to help farmers store their grains and wait for a better price. But farmers can also choose to withdraw the crop completely and use it at home. In this case, the famer settles all the required fees and takes the commodity home.

What problems is the warehouse system designed to solve?

Storage and handling losses. Farmers were experiencing post-harvest losses when they kept crops for a long time, and the warehouse system reduces this high level of post-harvest loss.

But people keep goods in warehouses because they want to sell them later and know that they’ll get higher prices if they keep their crops in a safe place.

ACE also helps with marketing. Insurance and assurance are also included in the warehouse system—farmers are insured if there is a fire, for example.

We also connect them to markets that pay better prices and give them loans while they wait for a better price. These are some of the reasons why the warehouse receipt system started.

Because buyers have to spend less on transporting goods that are all in one place and in large quantities, they are willing to pay higher prices. As more farmers contribute crops, the total quantity of soybeans, for example, becomes large. That way, a buyer does not waste time hunting for commodities. The buyer can get a large volume in one place within a short period of time—and hence offers a higher price.

I understand that not all warehouses can be part of the warehouse system. How does a warehouse qualify to be part of the system? What are the requirements that it must satisfy?

Warehouses must have certain kinds of equipment. We aim for good quality so they must have a moisture meter, standardized and regulated measuring scales, and pallets as basic requirements. Also, insurance must be covered.

To evaluate the quality of the crop, we have quality assessment tools. Our system is legitimate and that is why banks join the system as financers.

Warehouse systems require a warehouse manager who is paid to manage the warehouse. ACE has some warehouses that use the receipt system which are owned by farmers, while some by owned by operators who are not farmers, and some are owned by ACE. Also, projects sub-contract ACE to train their staff, for example, their warehouse managers.

Gwiritse co-op uses a receipt system, but they manage the warehouse themselves. ACE only helps them make good price decisions and decisions about charges that farmers must pay. This ensures that the co-operative does not overcharge its members and makes some profit after paying salaried warehouse staff. The cooperative’s money passes through ACE, but the fees that ACE deducts from individual farmers are given back to the co-operative, as they are with other warehouse owners, so that the co-operative can run the warehouse to the standards that are required.

With these remarks from Mr. Adrian Semba, we have come to the end of today’s program. Remember that in unity there is power to bargain. When many people sell their goods together in large quantities, they receive a higher price.

Remember too that, when you have a receipt that shows that you are storing goods at a warehouse, you can get a loan from a bank as you are waiting for market prices to increase.

Having learnt about this initiative, what are you going to do? Send your views to telephone number ______.

You were with me, your host, _______. Until next week same day and same time, I say that nothing comes from nothing, or it shall be called a miracle. Try it, it will work for you.