Posted on September, 19, 2018 at 10:49 am
Peter Leshan
After many years of government postponing and reneging on reforms in the grain sector, the chickens have finally come home to roost. Maize farmers in the country who have started harvesting are now finding themselves between a rock and a hard place with no market for their produce and also lack of storage.
National Cereals and Produce Board (NCPB), with dilapidated infrastructure, cannot buy thousands of tonnes of the grain because of lack of funding or store them to stem expected huge post-harvest losses.
The government is also yet to fully pay Sh3.5 billion to those who delivered their produce to the board during the December-March buying season. Due to years of neglect, most silos which were built in early 1980s and which are far apart to farmers disadvantage, are leaking and dump.
Dryers are obsolete and not functioning due to cannibalisation and disconnection of electricity by Kenya Power because of non-payment of bills running into millions of shillings. Over the years, NCPB infrastructure has not been expanded to match the increasing acreages under maize.
Stakeholders say directive by Agriculture Cabinet Secretary Mwangi Kiunjuri for farmers to access storage and dryers free of charge, is a futile public relations exercise since depots have limited space and non-functional dryers.
“The CS statement is just a public relations exercise. There are few dryers that are functional. Others stopped functioning shortly after they were installed,” says Erisha Kuluo, secretary, Narok Farmers Association.
Mau Narok and Kirindoni depots in the county, he said, were closed more than 20 years ago, adding: “Their dryers parts were cannibalised and their stores are now leaking”.
Apart from keeping maize for Strategic Food Reserves (SFR), subsided fertilisers and top dressing agents, NCPB management has also leased stores to millers and private entities.
They say the reported colouration of the grain can be traced back to relaxation of standard rules before they were allowed into the stores.
Some maize from Uganda which were stored in the silos did not meet the threshold for storage.
Industry players say, the board received the maize and those from other farmers – who were favoured during buying – without ensuring they met the standards for safe storage.
“Maize from Uganda and those from farmers who were paid millions of shillings at the expense of deserving ones had high moisture content. Most were broken and coloured,” says Kipkorir Menjo, a maize farmer and Kenya Farmers Association director for North Rift.
Most maize in the board’s stores including those which were imported from Mexico during the government’s subsidy offer last year, have also been attacked by weavils and rodents making a huge chunk of maize unsuitable for human consumption.
Aflatoxin levels in them, it is said, have reached levels not also suitable for human and animal consumption. Maize worth about Sh3.1 billion is said to be going to waste in the NCPB’s silos.
Due to poor handling and storage, a huge bulk were confirmed by the government chemist to have high-levels of the deadly aflatoxin. Instead of being condemned, they were either given for free or sold to farmers as livestock feeds.
Farmers and other players in the grain market think the government should keep off business of buying and selling maize. They want a regulatory body set up to deal with the issue of determining the number of bags to be imported in the event of shortfalls.
Enough stocks
Markets should be left to determine prices. The government should only ensure there are enough stocks at the SFS,” said a field manager with Eldoret Grain Millers Ltd who declined to be named as he is not authorised to speak on behalf of the company.
Eldoret Grain Millers Ltd has shares in Pembe Millers Ltd and Kitui Millers Ltd. He said maize in millers’ stores is enough to last for two years and says he wonders where this year’s produce will go to.“By January when every farmer will be rushing to sell their produce to raise school fees, prices of maize may go down to about Sh500 per 90 kg bag,” he added.
Had the government actualised the Warehouse Receipt System (WRS), a grain management and marketing strategy, which was launched in 2010, the current problems bedevilling the maize sector could have been a thing of the past. The initiative was aimed at strengthening the commodity supply chain and trading regime. Certified warehouses were to issue tradeable receipts or warrants for commodities.
NCPB with more than 110 sites and several other warehouses spread throughout the country with a combined storage capacity of over 1.8 million tonnes were to be certified to support the system.
Major players who were expected to participate in WRC would have been producers, millers, traders, collateral managers, warehouse operators and transporters. WRS was to play an important role in ensuring that the liberalised grain market in the country became more responsive.
It was also aimed at creating competitiveness in the international market through institutionalising structured trading and improving accessibility to credit.
Others were banking on warehouse receipt finance system for post-harvest credit, funds for agricultural inputs, thereby raising agricultural productivity and facilitating the sale of commodities when the prices were right.
The abandoned system was also to offer price risk management by providing more secure basis for forward transactions and for the development of commodity exchange trading. All those measures would have reduced NCPB’s dependence on the exchequer.
After the producers who were to be the depositors harvested their crops, they were to be transported to a certified warehouse where the grains were to be checked to ensure they met the stipulated quality standards. After passing quality tests and the quantity was within the minimum set level, it was to be received by the warehouse operator and farmers issued with warehouse receipts.
Depositors would then present the receipts to banks for short term financing which would have been about 80 per cent of the market value of the grains deposited.
“That would have enabled the farmers to meet their basic rights such as domestic needs and financing the next crop as they waited to sell their grains when prices were right,” said Jimnah Mbaru, a Nairobi-based stockbroker and a former NCPB chairman.
The warehouse receipts would have been the collateral, he says, adding that when market prices improved, farmers would have sold their grains and the buyer was to be instructed to pay direct to the bank.“Banks would have then recovered their money from proceeds and the warehouse operator also recovered storage or handling charges. The balance was to be given to farmers,” he said.
Grains deposited at NCPB stores would have been fully insured and in case of damage or loss, farmers would have been fully compensated, he added.
The advantage of WRC to farmers, millers, traders and other players would have included eliminating the need to use title deeds as collaterals for financing grain growers, enabling depositors to get access to cash against the receipts and enabling them also to sell their grains when prices are favourable.
Others would have been eliminating delayed payments to farmers, enabling millers to focus on milling while they procure through WRS and improving quality and grading. It would have also reduced post-harvest losses through professional storage, improving food security and enabling development and trading through Commodity Exchange.
Source: MediaMax Network