Food shortages are reported in different parts of Uganda year in year out. But the government has always insisted that Uganda is not food insecure, arguing that while some regions have food shortages due to drought and other reasons, many other regions in the country have surplus food. As a solution to this anomaly, the government plans to improve food storage facilities across the country in order to have a proper record of what type and amounts of food produce is available in what area, and ensure supply of food to less food secure areas at a particular time. This will be possible through establishment of warehouses that will also help farmers keep and better market their produce.  Gerald Businge talks to Alex Rwego, the Manager of the Uganda Commodities Exchange, the government body responsible to make this happen.

Qn. Tell us about the role of the Uganda Commodities Exchange

Alex Rwego, the Manager of Uganda Commodities Exchange

The Uganda Commodities Exchange (UCE) is a Private sector mandated body that runs warehouse receipting in this country.  UCE came into force in 2006 though an Act of Parliament mandating UCE to establish or license warehouses, ensure care and maintenance of those warehouses.  There are public warehouses, which are established by the government to handle accepted crops and private warehouses which deal in storing of a particular crop.

What is warehouse receipting?

It is a system where people deposit commodities of a specific grade to a licensed warehouse and are issued a document of title which is referred to as a warehouse receipt. Currently we are working with four warehouses, located in Jinja, Masindi, Kasese and Mbarara. We are hoping to add another nine warehouses in 2010.

How do ware house receipts benefit a farmer?

All current warehouses and those we are to establish are based upcountry closer to farmers so they can use the warehouses to store their produce.

Apart from storing their produce, how specifically do warehouses help farmers earn from their farming?

One of the biggest problems small scale farmers in Uganda face is post harvest handling. They have no capacity to properly store their produce.  The warehouse receipt system gives them an opportunity to store their commodities in professionally run and secure facilities. Secondly, it gives farmers the opportunity to access markets they would never have accessed.

Currently, the majority of small scale farmers in this country will even sell their commodities while the commodity is still in the garden. And they do that so that they cannot have any losses at that time. The warehouse receipt system has given farmers an opportunity to store and supply to big buyers. For example only farmers who keep their commodities in the warehouses can benefit under the Purchase for Progress of the World Food Programme. In Uganda WFP is the leading buyer of quality oriented grades. In addition to adding value to their commodity by storing it under a particular grade, it gives farmers an opportunity to supply a relief agency like WFP.

But it takes long from the time farmers deposit goods in the warehouse to when they actually sell. How do the receipts you issue help farmers meet their urgent needs?

The warehouse receipts we issue are documents of title showing the quantity and quality deposited by a particular farmer of farmer group in the warehouse. We have been talking to banks over the past four years to finance warehouse receipts. I’m happy to note that beginning January 2010, three Banks have committed themselves to finance ware house receipts. This means that the small scale farmer who could not secure finance will be able to use the commodities they have produced as collateral to receive finance. We have signed a memorandum of understanding with Housing Finance Bank, Stanbic Bank and Centenary Bank. Stabic Bank has already launched its agriculture loan facility to be based on warehouse receipts as security. So farmers will be able to receive finance so long as they have deposited in the warehouse as little as 3metric tones, which is the minimum target of the warehouse receipt system.

Are small scale farmers able to benefit from this warehouse receipt system or they have to be under groups?

Most of the farmers registered are under groups since in this country we do not have that many big farmers who can make the minimum of 3netric tones to deposit in the warehouse.  It has to be economically viable to transport that commodity from one place to the warehouse.

Why is the warehouse receipt system import in agriculture trade?

If you look at the agriculture marketing chain, you have got the farmer on one side and the trader on the other. In the middle you have a set of many middlemen each one taking a certain risk along the chain. Most of these middlemen are dishonest especially in terms of weighing, which makes farmers dishonest as well through tricks like adding bad produce or stones. The warehouse house receipt system ensures there is a transparent way of marketing agricultural goods. The system is transparent. The farmer brings in their produce to the warehouse, it is properly weighed on calibrated scales which we make sure the warehouse keeper services regularly. The farmer’s commodity is them cleaned at a fee, it is dried using mechanical means, it is re-graded, it is re-packaged, it is fumigated and then stored securely. That means the farmer has added value to his or her commodity and at the end of the day get a better price.

For example the last time I was in Masindi warehouse, farmers who were selling directly to the traders- that is selling unclean, ungraded maize, were getting at 450 Uganda shillings per Kilogram of maize. Farmers who decided to use the warehouse receipt system receipted 790 Uganda shillings from WFP

How long do farmers have to wait keeping their commodity in the warehouse before selling and receiving money?

With agriculture commodities, when the harvest season has just started, that…

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