Julius Sigei

2 September 2010

Nairobi — A major marketing innovation set to increase farmers' earnings and boost agricultural production has come into force.

The warehouse receipting system was launched on Thursday on a pilot basis by the National Cereals and Produce Board Chairman, Jimnah Mbaru in Narok, and is set to roll out eventually in the country's 110 warehouses, which have a combined capacity of 1.8 million metric tonnes.

Under the system, farmers deliver grain to a warehouse and are issued with a receipt they can use as collateral to borrow money from the bank, while they also wait for the prices to go up before selling their produce.

"This innovation will cushion farmers from the vagaries of demand and supply. It will also solve the perennial problem of delay in payment," said Mr Mbaru.

And in a move that is modelled on the stock exchange market, the package also includes a commodity exchange platform from where interested traders will buy and sell the receipts.

"Even the government will now be required to buy the strategic grain reserve from the commodity exchange platform, which will function like the Nairobi Stock Exchange," said Mr Mbaru, adding that the depositors' grain stored with the NCPB is fully sponsored and in case of damage or loss, will be fully compensated.

Other benefits include affordable maintenance and storage services, as well as linking farmers to buyers of grain such as millers and traders.

"The minimum number of bags that will be accepted at the warehouses is 110, but small-scale farmers are encouraged to pool together in a system known as aggregation. Already, Usaid has started training aggregators," said Mr Mbaru.

The charges are Sh75 per 90kg bag in the first month and Sh15 in the subsequent month for up to six months, during which time market prices of the commodities will have become favourable.

"The fee will cover grading, cleaning, weighing, bagging, fumigation, handling and other miscellaneous services," said the board's managing director Prof Gideon Misoi.

He called on the private sector to come on board and support the initiative.

In his 2010/2011 budget, Finance minister Uhuru Kenyatta set aside Sh750 million for upgrading stores and other NCPB facilities.

Already 13 warehouses in various locations in the country have been prepared and certified by the Eastern Africa Grain Council.

They are Narok, Nakuru, Nairobi, Kitale, Moi's Bridge, Eldoret, Bungoma, Kisumu, Kilgoris, Meru, Shimanzi and Chamgamwe.

The move was immediately welcomed by farmers with Cereal Growers Association Chairman Timothy Busienei and his predecessor Hugo Wood saying it would substantially increase their earnings.

"This initiative will solve our marketing woes. We encourage our farmers to come on board in big numbers as they can access money even long before they sell their produce," said Busienei.