FAO Regional Workshop on Rice EAGC experience in Structured Grain Trade 13 th - 17 th April 2009

1. FAO Regional Workshop on Rice EAGC experience in Structured Grain Trade 13th - 17th April 2009 by Harriet Nabirye

2. 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.

3. 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.

4. 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.

5. EAGC Membership • involves all stakeholders along the grain chain and are classified as follows: • Active members-Individual companies participating in the core sector of grain trade- i.e producers, traders and processors. • Associate members-allied industries and service providers (banking, insurance, inspection and warehousing, transport). • Affiliate members-national associations representing producers ,traders and processors at the national level.

6. 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).

7. Structured Trading System (STS) 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

8. Structured Trading System (STS) Cont’d……. • Encouraging Grain Trade Risk Management (WRS).

9. 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.

10. 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.

11. 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.

12. 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

13. 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.

14. 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.

15. 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.

16. 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.

17. 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.

18. EAGC achievements so far • 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.

19. 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).

20. www.eagc.org Contact: Uganda Country Manager: hnabirye@eagc.org EAGC secretariat Tel: +254-20-4212000 grains@eagc.org

21. Thank You