Post on 13-Jan-2016
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USAID AgCLIR Roundtable: The Enabling Environment for Agribusiness in Tanzania
Case Study on Cashews – World BankPresented by Mwombeki Baregu
Tanzania cashew production compared
Figure 2: Cashew nut production (‘000 Tons) in Cote d’Ivoire, Guinnea-Bissau, Tanzania, and Vietnam: 1961 - 2007.
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1961 1966 1971 1976 1981 1986 1991 1996 2001 2006
Tanzania Vietnam Cote d’Ivoire
Cashew nut production (‘000 tons) 1961- 2007; Tanzania, Vietnam, Cote d’Ivorie
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 Share of Cashew
farmers (%) area = 0 (mostly intercropping) 243,034 68%
0 < area <=1 47,353 13%
1< area<=2 26,203 7%
2<area<=3 12,523 4%
3<area<=4 7,496 2%
4<area<=5 4,573 1%
5<area<=10 10,776 3% Area>10 4,158 1% Total number of farmers 356,116 100 Average cashew holding 2.9 (excluding zero holdings)
Production and history
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20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005
Tonn
es
Warehouse receipt system
Single marketing channel introduced, farmers represented by primary societies
Global Price Drops
Villagezation, coops disbanded
Coops return
Liberalization; traders enter market
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:
• Adopted in 2007
• Is a return to single marketing channel by cooperatives practiced prior to liberalization
• The return is in part a reaction to:– Tensions between buyers and
sellers– The liquidity power enjoyed by
buyers– Price disputes
Elements as packaged :
1. Single marketing channel (the cooperatives)
Only cooperatives can buy cashews from farmers
2. WarehousesWarehouses as storage centers
Warehouses as auction centers
3. The auctionClosed 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