Transcript World Bank Cashew Case Study

USAID AgCLIR Roundtable: The Enabling
Environment for Agribusiness in Tanzania
Case Study on Cashews – World Bank
Presented by Mwombeki Baregu
Tanzania cashew production compared
Cashew2:nutCashew
production
tons) 19612007;
Tanzania,
Vietnam,
Cote d’Ivorie
Guinnea-Bissau
d’Ivoire,
in Cote
Tons)
(‘000
production
nut(‘000
Figure
Tanzania,
1000 and Vietnam: 1961 - 2007.
900
800
700
600
500
Vietnam
Tanzania
400
Cote d’Ivoire
300
200
100
0
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
Cashew market participants
•
•
•
•
•
360,000 producers (mostly small scale)
0 traders just primary societies
5 - 8 processors (20%-30% of production)
58 exporters for raw cashew
2 export markets for raw cashew (India and
Vietnam)
Producer profile: many smallholders
Table 1: Cashew farmers, by size of cashew farm holding
Area under cultivation (acres)
Number of
cashew farmers
area = 0 (mostly intercropping)
243,034
0 < area <=1
1< area<=2
2<area<=3
3<area<=4
4<area<=5
5<area<=10
Area>10
Total number of farmers
Average cashew holding
47,353
26,203
12,523
7,496
4,573
10,776
4,158
Share of Cashew
farmers (%)
68%
13%
7%
4%
2%
1%
3%
1%
356,116
100
2.9 (excluding zero holdings)
Production and history
160,000
140,000
120,000
Single marketing
channel introduced,
farmers represented
by primary societies
Tonnes
100,000
Global Price Drops
Coops return
Villagezation,
coops disbanded
Liberalization;
traders enter
market
80,000
60,000
Warehouse receipt
system
40,000
20,000
-
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
Implications from historical trend
• Coops work
– If they represent farmer interests
– If they have not been captured
• Markets work
– Competition helps guarantee farmer interests
• So what works best?
– Currently there is single marketing channel under
cooperatives, lets see how this has performed…
Developments in cashew marketing:
The Warehouse Receipt System
Background:
Elements as packaged :
• Adopted in 2007
1.
• Is a return to single marketing
channel by cooperatives
practiced prior to liberalization
Only cooperatives can buy
cashews from farmers
2.
Warehouses
Warehouses as storage centers
Warehouses as auction centers
• The return is in part a reaction to:
– Tensions between buyers and
sellers
– The liquidity power enjoyed by
buyers
– Price disputes
Single marketing channel (the
cooperatives)
3.
The auction
Closed bidding system is used
(not auction)
Farmers not enjoying some of highest
prices for their cashews
Increasing marketing margins
Issues associated to single marketing
channel
• Inefficiencies
– Farmers have no control over cooperative costs
– Cooperative fees account for over 30% of marketing
expenses
• Lack of transparency
– Auction prices remain unknown
– Cooperative books and tendering process is unaudited
• Contingent liabilities
Single marketing channel:
“Kangomba”
• By law farm gate exchange can
occur only through the
primary society, which acts as
facilitator for the exchange.
• When a farmer sells cashew
illegally to traders it is called
“kangomba”
• Kangomba is usually at
discount to the indicative price
and is criticized due to the way
that cashew is sold (by volume
not weight).
• Kangomba however
remains pervasive:
– Transaction bottlenecks at
primary society
– Barter trade for other
goods and services
– Convenience
– Liquidity preference (get
full payment at once)
Single marketing channel:
The case of Masasi Farmers Association
•
•
Village association
– 6 villages,
– 900 members
– Founded in 2007
– Apex company
established in 2008.
Goal is to increase
member incomes
– go into input supply
– marketing cashews
– increasing knowledge
•
In 2008 wanted to rent processing capacity at a
processor in order to export processed kernels
•
The processing factory however was in Dar es Salaam,
thus requiring MFA to bring raw cashews to Dar es
Salaam for processing
•
MFA was not able to receive PDN to transport raw
cashews out of their district ( District Executive)
•
MFA had to sell its raw cashew to cooperatives
•
In 2009 MFA established a factory in Masasi
•
PDNs are still required to transport raw cashew within
district
•
PDNs were not allowed to be distributed until primary
societies were ready to purchase cashews
Cashew on the news
• Prime Minister proposes review of warehouse receipt system
– The Guardian, 24th November 2009
– “The Prime Minister Mizengo Pinda, has proposed that the warehouse
receipt system currently being used by cashew nut farmers be
reviewed because the operating costs are too high”
• PM vows to end use of `kangomba` measure – The Guardian,
25th November 2009
– Why was it that in the past cooperative unions were constructing
roads, paying for school children, and now these things are no longer
being done?” wondered the PM.
– He said the current cooperative unions were self-centred instead of
being concerned with the farmers' interests.
– “We must sit down and correct these systems. I view these
cooperatives as centres for embezzlement,” he said.
First best solution
• Provide farmer choice in marketing channel
– Farmers can integrate upwards, sell to markets of
choice, negotiate with buyers (local and
international)
• Offer warehouse receipt credit to private
traders not just coops
Options to improve functioning of
cashew sector
Cashew marketing prior and after WRS
Pre-WRS
WRS