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Report layout The report starts with a short review of international experience with warehouse receipts and follows with a discussion of collateral management and other warehousing systems that have developed spontaneously in Africa, particularly around ports. The remainder of the report focuses on new departures going beyond these activities, starting with sections on each of the six targeted countries’ experience. The next section builds on this to identify a series of different ‘Approaches’ to the development of WRS and discusses their pros and cons, while the last section contains conclusions and recommendations. Annexes 2 to 5 provide more detailed information on four of the countries (Zambia, Malawi, Madagascar and Tanzania), Annex 6 examines the role of local and regional procurement (LRP) of food aid commodities in developing WRS and other ‘modern market institutions’, and Annex 7 provides answers to questions about warehouse receipts, including items in the terms of reference that have not been answered elsewhere. 10
CHAPTER 2: REVIEW OF INTERNATIONAL EXPERIENCE United States While warehouse receipts have been used since Mesopotamian civilisation, it is the opening up the American Mid-West that most stimulated the widespread use of this instrument in the modern world. The clearing and planting of the prairies, and the development of steam navigation and railways, stimulated a massive flow of grain from this region to the East Coast and eventually to Europe, and the invention of the telegraph speeded communications to an even greater degree. Chicago was at the centre of all this, and between 1830 and 1850 changed from a fur trading village to a commodity-trading metropolis. Entrepreneurs built steam-powered ‘elevators’, multi-storey buildings to receive farmers’ and other suppliers’ grain, and store it in bulk, prior to sale and onward shipment, and issued tradable warehouse receipts against the stock. The Chicago Board of Trade (CBOT) emerged as a commodity trading floor, and grading systems soon had to be established to reward better grain quality. From the late1860s, the State of Illinois was legislating to regulate elevators, notably over grades, the publication of statistics and to prevent them issuing receipts for stock they did not hold (source: Cronon, 1992). Futures trading started as a means of assuring East Coast buyers a price in advance of the arrival of the physical grain, and soon emerged as the dominant activity on CBOT. It attracted financiers and speculators and greatly oiled the wheels of the marketing chain. However it was periodically the object of speculative manipulation, and this threatened the credibility of the system and increasingly drew regulatory attention. Companies and entrepreneurs progressively built grain elevators throughout the breadth of the grain producing States, and became farmers’ normal market outlet. In the late 19 th century cooperatives started investing in their own elevators, strengthening farmers negotiating power vis-à-vis large-scale corporate operators. The CBOT became the barometer which elevators used to price grain purchases, using a range of different contract types, including spot, cash forward, delayed price and minimum price contracts, with their positions often hedged on CBOT. The whole system, covering agricultural warehousing, grades and standards and commodity exchanges, was brought under a Federal regulatory regime during the second decade of the 20 th Century. An important factor motivating this change was difficult in trading across the borders of States whose standards varied from one state to another; hence a voluntary system was introduced whereby warehouse could choose whether or not to be registered at Federal level. Moreover farmers storing in elevators were not protected from unregistered operators, there being no comprehensive system of registration, licensing or regulation. Lastly, there was a severe shortage of credit since farmers had received their land entitlement yet did not have the funds to develop their farmers. The combination of the US Warehousing Act of 1916 and related State Acts have created a regulatory regime which is to all intents and purposes mandatory, as elevators find they must get licensed by the Federal authorities or by State governments. There are consequently thousands of locations where farmers may deposit agricultural commodities in return for a 11
Page 1 and 2: Review of Warehouse Receipt System
Page 3 and 4: CHAPTER 5: ALTERNATIVE APPROACHES F
Page 5 and 6: GLOSSARY OF ABBREVIATIONS Collatera
Page 7 and 8: SUMMARY Introduction The report is
Page 9 and 10: Category 3: Farmer-focused approach
Page 11 and 12: involvement in EAGC, its regional f
Page 13 and 14: Purpose and activities CHAPTER 1: I
Page 15: and ungraded, due to a chicken-and-
Page 19 and 20: oversight system is funded by user
Page 21 and 22: Where implementation has failed or
Page 23 and 24: to the silo operator; or investors.
Page 25 and 26: CHAPTER 3: COLLATERAL MANAGEMENT AN
Page 27 and 28: CHAPTER 4: EASTERN & SOUTHERN AFRIC
Page 29 and 30: Malawi The main food crop is maize,
Page 31 and 32: Although the CECAM network has rece
Page 33 and 34: companies), who hold the processed
Page 35 and 36: curing companies), and the requirem
Page 37 and 38: Kenya is in some ways suited to fol
Page 39 and 40: to see it through its current initi
Page 41 and 42: decade 25 . The WRS Regulations of
Page 43 and 44: these are purely private initiative
Page 45 and 46: officials never accepted moving the
Page 47 and 48: eceipts, unreceipted third party st
Page 49 and 50: The networked MF system has certain
Page 51 and 52: TABLE 1: ALTERNATIVE APPROACHES FOR
Page 53 and 54: 3c. Technological improvements in r
Page 55 and 56: It is even more important to streng
Page 57 and 58: distrust of the unknown and interes
Page 59 and 60: FIGURE 2: CAUSE AND EFFECT IN THE D
Page 61 and 62: Of particular, but not exclusive, r
Page 63 and 64: BIBLIOGRAPHY Beaurre d’Augères,
Page 65 and 66: ANNEX 1: LIST OF PEOPLE INTERVIEWED
Page 67 and 68:
South Africa - half-day meeting at
Page 69 and 70:
ANNEX 2: ZAMBIA CASE STUDY Backgrou
Page 71 and 72:
with other parties. USAID provided
Page 73 and 74:
trading in the same, along South Af
Page 75 and 76:
ANNEX 3: MALAWI CASE STUDY Backgrou
Page 77 and 78:
uyers. The mere availability of mor
Page 79 and 80:
operators who can offer a ‘one-st
Page 81 and 82:
With this in mind the author has pu
Page 83:
The CECAM (Caisses d'Epargne et de
Page 86 and 87:
TABLE 4.1: RATE OF PEPAYMENT BY CEC
Page 88 and 89:
duration of the loan; (b) by a tech
Page 90 and 91:
committee and carries out a classic
Page 92 and 93:
ANNEX 5: TANZANIA CASE STUDY Note:
Page 94 and 95:
While the Warehouse Licensing Board
Page 96 and 97:
which farmers in different district
Page 98 and 99:
TABLE 5.3: MAIZE & PADDY STORED, BY
Page 100 and 101:
Expenses directly related to storag
Page 102 and 103:
TABLE 5.5: FINANCIAL ANALYSIS OF ST
Page 104 and 105:
WFP’s involvement with ‘new mar
Page 106 and 107:
Work by David Tschirley (2009), of
Page 108 and 109:
ANNEX 7: QUESTIONS AND ANSWERS 1. W
Page 110 and 111:
and arbitrary basis, in order to me
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