Farmers in Kenya Saved from Post-Harvest Losses, Low Prices by New Warehouse Receipt System
This post is written by the Alliance for a Green Revolution in Africa (AGRA) team.
By storing 10 metric tons of maize in a government-run warehouse and selling it in six months when the prices had improved, members of the Mwihoko Farmers Self Help Group in Kenya’s Nakuru increased their income from $2,100 to $2,410, an 11% increase.
The Warehouse Receipt System (WRS) was launched in July 2020 by Kenya’s Ministry of Agriculture Livestock, Fisheries and Cooperatives (MoALFC) as a tool for reducing post-harvest loss and price exploitation by middlemen.
The WRS was activated after a successful pilot in 2017 by the East African Grain Council, supported by the Alliance for a Green Revolution in Africa (AGRA), USAID, the Bill and Melinda Gates Foundation, the Rockefeller Foundation and the United Kingdom Foreign, Commonwealth and Development Office (FCDO).
Under the WRS, owners of commodities — producers or dealers — deposit produce in any of the five certified warehouses belonging to the National Cereals and Produce Board. At the warehouse, the produce is tested, cleaned, graded and then stored, with the owners receiving a receipt as proof of ownership.
“The WRS reduces the pressure on farmers to sell their produce immediately after harvest when prices are usually low. The system empowers farmers to make decisions, such as when to sell by giving them the option not to sell under distress at harvest when prices are low,” said David Ombalo, principal of agriculture at the MoALFC.
The receipt can also be used as collateral to access credit from participating financial institutions or traded in commodity markets.
“The system collateralizes the warehouse receipt which, as a document of title, can be used to get credit…something which cannot be achieved if the produce was at farmers’ homes because there is no guarantee that it will be kept safely,” Ombalo said.
During the pilot, nearly 13,000 smallholder farmers trained on post-harvest management transacted about KSh 100mn (US$1 million) worth of grain in the WRS, where 19,000 metric tons of maize was sold.
Such results inspired the Kenya Parliament to pass the WRS Act 2019, providing a legal and regulatory framework for its development, and establishment of the Warehouse Receipt Council (WRC). The MoALFC is also currently evaluating six more warehouses owned by cooperative societies across the country, according to Samuel Ogola, the acting CEO of the WRC.
Support for the agriculture ministry helped prepare the regulations and other institutional frameworks needed to make it operational in Kenya, and further supported the engagement with the parliament.
“This [WRS] took over eight years to be made, like many laws. AGRA was able to do study tours to South Africa, through the existing grain bulk handlers, where members of parliament were able to see in practice how it works. Indeed, when they came back, the law was enacted,” said AGRA’s policy officer, Rachel Shibalira.
“The WRS has proven important in encouraging the meaningful participation of women and youth in agriculture,” added Shibalira.
“The WRS is a tool that will empower the smallholder farmers, and to cut it even closer, empower women and the youth. They [women and youth] can work in groups to aggregate their produce and present that to the warehouse, where they obtain a receipt that is now collateral enabling them to access finance,” she said.
As the WRS advances, it is encouraging the aggregation of produce by small-scale farmers, enabling them access to large traders, processors and governments, from whom they get better prices. In coming days, the WRS will also be important in promoting the participation of farmers in the national commodity exchange.
“The warehouses, when linked to the commodity exchange, will participate in the competitive discovery of prices. A commodity exchange merges buyers and sellers, and the receipts owned by depositors can be taken to the exchange for buyers to bid on,” Ombalo said.
In such ways, the WRS is helping alleviate the problems of poverty and food insecurity in Kenya, by reducing post-harvest losses, which represent 35% of the food produced in the country, according to Ombalo. Maize, in particular, has been constantly wasted, even as it remains an important staple food for Kenya.
“If 45 million is the number of bags we produce, then 10% alone is already 4.5 million bags…sometimes the loss is equivalent to what we import,” Ombalo said.
Ombalo added that sustaining the implementation of the WRS will lead to a transformation in farming and the trade of agricultural commodities.
The WRS is one of several government investments that have been successfully developed and deployed in Kenya with AGRA’s support. Others include the Agricultural Sector Transformation and Growth Strategy (ASTGS), the Input Subsidy Programme and potato packaging standardization frameworks.