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NASFAM Field Officer Training - Warehouse Receipt System

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by

Val Morua

on 27 July 2016

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Transcript of NASFAM Field Officer Training - Warehouse Receipt System

All stages from deposit to collection
The Life of a Warehouse Receipt
Deposit
Finance
Three:
Contract
Five:
Payment
Six:
One:
Ten:
A commodity is deposited in a registered and certified facility
Two:
Issuance
The storage operator issues a warehouse receipt, thereby guaranteeing quantity and quality
The depositor requests financing from a preferred bank and receives the loan immediately
Four:
Monitoring and Sale
The depositor monitors market prices and decides to put the receipt for sale on ACE when prices are attractive
A buyer accepts the offer and ACE generates a contract
The buyer deposits the funds into the ACE settlement account
Seven:
Settlement
ACE settles the finance, storage and all other charges and transfers ownership of the receipt to the buyer
Eight:
Balance
ACE transfers the balance to the seller, i.e. the depositor
Nine:
Collection or Renewal
The new owner can either collect the commodity or request new financing from a bank backed up by his new warehouse receipt
The End or the Beginning
The receipt is canceled in the system if the commodity is collected. It becomes a past receipt.
If not, the sequence starts again.
Why store under the ACE Warehouse Receipt System
Better Markets
Quality and Quantity Guarantee
Certified Storage Operators
Access to Finance
Benefits
High post-harvest losses are an expensive problem.

Professional storage operators are experts in crop management.

They can guarantee quality and quantity.

While safely in storage, depositors can avoid problems like theft.
Quantity and quality are specified on the warehouse receipt.

Higher graded commodities are worth more and can access better markets, such as export ones.
A warehouse receipt can afford the depositor to wait until prices increase, instead of selling right after harvest when prices are at their lowest.
Better Prices
Risks/Challenges
Prices tend to increase after harvest and throughout the lean season.
Ultimately, however, prices depend on supply and demand as such prices may crash. Government interventions may also have an effect.

ACE can not guarantee a market, it is only there to assist on market information. Decision to sell has to come from the farmer.

Price speculation is risky. Depositors need to monitor the market closely to avoid making a loss on their receipts.
Any depositor can use his ACE warehouse receipts as collateral to get a loan from the bank.
Loan has an interest of around 42% just like any bank loan.
A loan can help a depositor meet his needs until he decides to sell his commodity.
The depositor keeps ownership of the commodity until it is
sold--transferred or collected.

Quality and quantity guarantees are attractive to important buyers who might be willing to pay a premium: the export market, the World Food Program, the National Food Reserve Agency, forward contract buyers, etc.
Storage Charges
Increasing
Rural Outreach
Distribution of Value Added
The benefits of the warehouse receipt system outweigh its costs
Commodity Swap System
2013
All 2012 Receipts
Kulima Gold Depots are deposit points--not certified storage sites.

Deposit commodity at Kulima Gold Depots and immediately obtain a warehouse receipt guaranteeing quantity and quality in a certified storage site in Lilongwe--effectively swapping.

Rab Processors trucks will move the commodity to certified storage
later.
Win-win scenario
Access to Inputs and Transport
A depositor can access seed, fertilizer and transport on the back of his warehouse receipt, allowing him to plan ahead and plant in good time, even if his receipt has not been sold.
Settle costs upon sale of receipt
Warehouse Receipt System
Certified Storage Facilities
Numerous
Advantages

What is a warehouse receipt?
It is a document that provides proof of ownership of a commodity that is stored in an ACE-certified warehouse.

A warehouse receipt shows the depositor's personal information, the warehouse's details and commodity specifications--tonnage, moisture level, variety, grade.

They are negotiable, which is to say they allow transfer of ownership of that commodity without having to physically deliver it.
Kulima Gold Deposit Points
What happens at the warehouse?
These details are carefully recorded and included in the warehouse receipt.
Sampling, grading, handling, re-bagging, stacking, documenting
The lack of suitable storage structures that would avoid high post-harvest losses is one of the reasons why smallholder farmers sell their produce immediately after harvest, when prices are at their lowest.
Trade agents need to advise farmers on better storage techniques and access to better markets.
Post harvest losses account for huge losses to farmers due to poor storage techniques.
Traditional storage practices in Malawi cannot guarantee protection against major pests.
ACE wants to improve the way agricultural marketing happens in Malawi and the region.

ACE wants to empower to commodity owner to make sound post-harvest and marketing decisions by providing him with a range of post-harvest options.
The warehouse receipt system is one of those options.
ACE and the Warehouse Receipt System
Questions?
Zikomo!
Where do you fit in?
Access to the warehouse receipt system is one of the services brokers, trade agents and NASFAM field officers can facilitate; it is one of the ways in which we can link farmers to markets.
Depositors tend to see substantial price increases if they store under the warehouse receipt system and sell later in the marketing season.
Warehouse receipts are a tool to facilitate aggregation and collective marketing.
Together should be in a position to market the commodity that is in storage for numerous depositors at once.
In a way, it is guaranteed commodity that will need to be traded.
For example,
Think 50 depositors hold warehouse receipts stored in a rural warehouse in Balaka
These depositors might not know it, but they have effectively aggregated 150 MT of soya
Finding a buyer for large volumes is easier than marketing a few bags.

Prices are better is volumes are higher.

Transportation costs are more easily met with higher volumes.
Buying overpriced commodity using bridging finance and putting it on warehouse receipt.

High supply of commodity on the market due to:
Government distribution
Illegal importations
More vendors/traders/farmers holding on to commodity waiting for better prices.

Low prices on the market.

Challenges last season
Farmers need to sell together!
This season NASFAM is developing aggregation centers closer to the village level to promote bulking and collective marketing.
How can we link these aggregation centers to the warehouse receipt system?
Farmers should be given three options:
Farmers can choose sell locally in the rural areas, say sell to NASCOMEX;
Farmers can choose to be linked to a market in the city through the ACE trading platform;
Farmers can bring their commodities to aggregation points where it will be transported to certified storage sites. There, they can get a warehouse receipt, store safely until they choose to sell and use that warehouse receipt to obtain a back loan.
Group Activity
Please form groups of 5
Full transcript