Tag Archives: Agribusiness

G8 Shift Away From Food Aid Towards Agriculture Investment

Today’s biggest news appears to be the shift in G8 food security policy reported by the Financial Times. It seems that the “L’Aquilla Food Security Initiative” at the forthcoming G8 summit will take forward an international policy move away from food aid and towards support for agriculture. It is expected that later this week the G8 (with the US and Japan providing the bulk of the funding) will announce more than $12bn for long-term agricultural development, particularly in Africa.

The background to the story includes the impacts on food security of the 2007 food crisis, the 2008 petrol price hikes and the ongoing international financial crisis.

The world’s first reaction to the 2007 food crisis, which saw record prices for crops such as wheat and rice triggering food riots from Haiti to Senegal, was to increase food aid. The UN’s World Food Programme doubled its budget to more than $5bn. The thinking since then has shifted, with Japan and the US leading the way in talking about helping poor countries, particularly in Africa, to feed themselves.

Mr Nwanze, a Nigerian national, says, “The financial crisis is worsening food security in many developing countries,” he says. “Wholesale food prices had been falling but prices remain very high in developing countries.” He commments on the policy shift by saying,  “Too much of the first [food aid] could flood African domestic agricultural commodities markets, starving local agriculture. Too little and the farmers who are supposed to produce the local food could perish before their first crop.”

Revised approach to fighting hunger. Photo: EPA, Telegraph

I think that Mr Nwanze’s statement sums up the need for food price monitoring and market information systems in Africa. I hope that the revised international approach to fighting hunger will reduce the emphasis on response (often too little too late) and will focus on monitoring food stocks, aleviation of chronic food insufficiency and prevention of shocks.

I think that affordability and therefore access to food is a bigger problem than its availability. When food security is conceptualised as a long-term, local issue, it is significant to monitor the prices of agriculture inputs (food, fertilizers, seeds etc.) in food producing regions and the prices of agriculture outputs at local, as well as national and international commodity markets. When farmers are provided with information about the prices of the commodities produced by them, they can use that information in making their seeding, planting and harvesting decisions. Conversely, the provision of information at markets and commodity exchanges about the stock availability of farming produce and the direction of its flow, can significantly improve the resilience of the food supply chain and avoid bottlenecks.

via FT.com / In depth – Poor nations look for help to feed themselves.

via G8 countries shift from food aid to investing in agriculture – Telegraph.

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Warehouse Receipt Systems

Here is a very informative educational documentary on Warehouse Receipt Systems produced by the Technical Centre for Agricultural and Rural Cooperation ACO-EU (CTA), Agence Français de Développementé (AFD) and the Natural Resources Institute (NRI).

The film documents a study visit to Tanzania and South Africa. Even though the film provides plenty of useful information, its authors make sure to note:

“The examples presented in these two countries are typified by particular experiments and contexts and cannot simply be transposed to other cases. Nonetheless there are a great number of lessons to be learnt and which could provide guidancefor certain aspects of orientation and initiatives in your respective countries.”

I personally think that the documentary illustrates theoretical issues which are encountered the world over, and are not specific to any particular context. The film raises questions regarding trust, confidence, contractual completeness, regulation, product quality and standardisation. Even though in this documentary the issues emerge with regards to warehouse receipt systems, they are intrinsic characteristics of any market negotiations (and eventual transactions) taking place without the double coincidence of time and place. The film focuses on futures markets i.e. transactions without coinsidence in time. Conversely, market negotiations carried out via mobile phones, or other ICTs exemplify transactions without coinsidene in place.


Warehouse receipt systems were developed in the 1990s as a response to farmers’ income instability due to price fluctuations resulting from liberalisation. Since prices tend to be low during harvest periods and to subsequently rise, warehouse reeipt systems provide a solution by storing commodities for the suration of the low price season. Price volatility and lack of quality standards are attributed to market liberalisation in the agricultural sector.

Warehouse receipt systems operationalise the food supply chain and involve the following stakehoders:

  • farmers (individuals or cooperatives)
  • warehouse operators
  • financial institutions
  • exporters, traders

Tanzania

The warehouse receipt system was introduced in Tanzania in 2005 with the pilot crops of coffee and cotton. It enables farmers to receive loans and assure the quality of their produce. The system allows coffee producers (individuals or cooperatives) to store their coffee in a silo. Upon the receipt of the coffee the producers are issued with 2 certificates: certificate of title for them to keep and certificate of pledge to provide to third parties. These are normally cooperative or commercial banks participating in the system. The certificates of deposit allow farmers to induce confidence in the financial institutions. They also enable the banks to reach a new set of customers for financial services.

The warehouses also ensure the transparency of the commodity marketing system. Commodities are classified according to quality and offered for sale at regional and sub-regional markets. For example, coffee is graded and offered for sale at auctions administered by a public organisation.

Producers in other sectors, such as the Chawampu rice growers cooperative, have followed suit. Representatives of the cooperative introduce a model whereby they are able to offer 70% of market value of deposited quantities of rice. Subsequently, after selling the crop and substracting the administrative costs the cooperative, they provide a second payment to the members of the cooperative. Farmers use any additional income in order to buy seeds, fertilizer and to develop off-season activities.

The warehouse receipt systems functions well due to the high price differentials between the post-harvest season and the hungry season. The main challenges to the warehouse receipt system remain:

  • providing adequate infrastructure
  • ensuring warehouse security
  • reinforcing producers’ organisations
  • increasing the number of quality control specialists
  • reducing operating costs

South Africa

South Africa presents an advanced example based on the warehouse weceipt system because it has a functioning futures market in agricultural commodities. The SAFEX was established in the 1990s during an intense period of market liberalisation.

The advantages of South Africa include its good financial infrastructure for the settlement of deals and the quality of  its physical infrastructure enabling the trading, warehousing and transportation of the commodities. Critical is the legal enforcability of contractual rights and of legal receipt rights. Thereby, people are able to take the necessary steps and to manage their post-harvest risk well in advance.

SAGIS acts as an information intermediary for the South African commodity markets. It collects and distributes local consumption and up-to-date market information. The agricultural marketing giant SENWES provides mobile phone access to hourly prices of grain via SMS. Even though it is not typical of Africa in favouring large scale farmers, the South African warehouse receipt experience provides a useful benchmark for implementations elsewhere.

Tajik Agro-Processing Company Wins Online2Export Website Competition

Few Tajik enterprises have a website, especially in the agro-processing sector: lack of resources is the most commonly named explanation, followed by low awareness of the benefits of a professional web presence. As ITC is promoting the development of e-business in the Tajik agro-business sector, it was decided to support the development of three websites for companies, to serve as role models and showcase best practice.

This activity was undertaken in partnership with the Chamber of Commerce and Industry of the Republic of Tajikistan (TPP). Three web-design agencies were contracted to implement this activity: ANKO Web Design, Caftar and Promotion. Tajikistan has a small base of companies in this area, but it has been growing in the last 12 months.

The three websites were developed at the beginning of 2009. The creative process required a close partnership between the beneficiary SMEs and the agencies, which needed feedback on design and architecture, as well as text and pictures on the content side. The sites were developed in Russian only, as the CIS is the main destination market for Tajik agro-processed goods. Search engine optimization was to be undertaken accordingly on rambler.ru, yandex.ru and google.ru, the leading engines in this region. To allow for easy updates, the sites were built on the basis of a CMS, a web content management system. As a result, updates do not require the involvement of IT experts.

Once finalized, the websites were submitted to ITC’s Online2Export group of international experts. They assessed the sites and voted for the best one through an online survey tool. Elita was designated as the best website, based on its usability, content and search engine optimization. Pulod Amirbekov, General Manager of Promotion, welcomed the designation and hoped that the competition result would get other Tajik companies to opt for a website – using local expertise.

via ITC Enterprise Competitiveness Newsletter.