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WARC Model V.1

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Eyra Dzakuma

on 22 April 2013

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Transcript of WARC Model V.1

Farmers produce rice mainly at a subsistence level
Highly vulnerable to food security shocks
In the absence of a central farmers' market, growers informally sell any surplus produce within the community. Input Financing Options:
WARC spends money to provide inputs (seed, fertilizer, etc.) directly to farmers
WARC partners with international financial institutions and/or local MFIs who extend loans to farmers; farmers then use the money to purchase inputs Farmer Training WARC will train farmers in SRI management practices
Training will cover land preparation, seedling preparation, transplanting, irrigation, weeding, and soil amendment techniques
Initial training will span 5 days and farmers will receive training in groups of 15-20
Training will continue throughout the growing season Farmers Output - Farmers sell yield to WARC WARC harvests the yield from farmers using their own harvesting equipment
Based on initial contract - farmers provide the necessary production amount to WARC for market price Farmers will be eligible to participate in the outgrower program on the basis of:
willingness to adopt SRI practices
willingness to allocate percentage of landholding to SRI
successful completion of SRI training
willingness to take out loans to finance inputs
Farmers to sign contract with WARC directly; presence of Paramount Chief at signing desirable (imparts legitimacy). Proposed Outgrower Model for WARC Farmers apply SRI practices to grow rice on at least 3 ha of their plots
SRI practices result in commercially viable yields (2.2 tn/ha to break even)
Lead farmers assist outgrowers in maintenance of the crop throughout growing season *WARC is the (informal) facilitator of all of these functions WARC's comparative advantage is monitoring implementation of SRI techniques, as well as the farmers in general, throughout the production cycle
Monitoring ensures the adoption of SRI techniques (programs lacking adequate monitoring led to SRI uptake rates of less than 40% )
Farmers will receive additional one-off training is provided to facilitate technology transfer as needed Monitoring Planting the Crop Processing, Storage and
Distribution Established: 2011

Mission: WARC aims to optimally develop Sierra Leone's agro-ecological resources and existing agricultural knowledge base with a view to producing rice in an environmentally and economically sustainable manner, maximizing value for both shareholders and farming communities.

Vision: WARC seeks to occupy a competitive position in the national rice market by delivering high-quality, nutritious and affordable rice to Sierra Leonean consumers. Pursuant to national development goals, WARC will create sustainable livelihood opportunities for local farming communities. Sierra Leone
Current Population: 5.9 million (2011)
Estimated population in 2050: 14.3 million
Rice is the preferred staple food (104 kg per capita/annum)
Unmet demand for high-quality locally produced rice; currently 30-40% import-dependency. Suppliers include China, India, Pakistan, Thailand, Egypt and Vietnam
Agriculture accounts for 46% of GDP and employs 75% of population
Government focused on boosting agriculture: launched National Sustainable Agriculture Development Plan for 2010-2030 (NSADP)
- Commodity Commercialization Sub-Programme WARC seeks to penetrate the Sierra Leonean domestic rice market by developing an outgrower model that will help local smallholders shift from subsistence farming to profitable rice cultivation Key Starting Blocks Risk Management In the event of a significant flood, drought, or disease:
WARC giving inputs: won't require payment of inputs or will offer interest free deferral of payment (6 months)
Alternative financing scenario: as a responsible business, WARC will repay a percentage of the loan SRI Training for WARC Staff WARC will reach out to local and regional entities with experience in SRI to train WARC employees; adopt training of trainers (ToT) approach (one employee will be trained in Benin, and he will train other employees)
Cornell University: world's premier repository of SRI research -- currently partnering with WARC to adapt SRI management practices to local agro-ecological conditions.
5-10 WARC employees will be trained in best practices to train farmers, do monitoring during production process and provide technical assistance
Rigorous training of growers critical to the success of outgrower model: desired high yields depend on them Informal Market Current Reality for Smallholder Farmers Inputs
(farmers working on
their own land)
seeds (Nerica, Pa Kiamp)
plows, harrows
harvesters, threshers
irrigation equipment
(in medium term) Training and Technical Support
training of WARC employees on SRI and best practices
continuous training (before/during production process) of the farmers on SRI and best practices
technical assistance to farmers before/during production process by WARC employees Farmer Access to Markets WARC Introduces Outgrower Model All post-production processes will be conducted by WARC Contracts Defining terms of payment and prices at outset will mitigate the risk of farmer side selling.
3 options:
Fixed prices - clear commitments for the company to purchase rice (subject to quality standards) at guaranteed prices
Market prices - purchase price is determined through reference to (fluctuating) market prices
Split prices - the company pays an agreed upon base price at the time of purchase and makes a final payment once it on-sells or processes the product. The Situation: Costs and Returns of the Model
Cost of seeds and fertilizers for 1 hectare of farmers land 2,860$ (to be paid back to WARC after harvest)
Cash paid for training, $1,000
Cash paid for fuel used in machines during harvest, milling, packaging and transportation for 100 hectares of farmers land, $11,710
Cash paid for milling, packing and distribution, $6,000
Cash paid to farmers after harvest, $6,070
WARC's cost per farmer, $255
Return on outgrower model investment 37% Key Challenges Providing farmers with inputs
Appropriately training the WARC staff on passing on SRI knowledge
Utilization of SRI techniques by farmers
Defining more unique comparative advantage
Weed infestation (SRI could exacerbate this due to wide spacing)
No prevention against floods
No irrigation equipment Current Advantages First mover advantage - first domestically branded rice in Sierra Leone
SRI knowledge of WARC employees
Close proximity to community members
Monitoring of farmers throughout the entire production process - no precedent of this with SRI initiatives in SL
WARC harvesting the yield itself reduces the risk of farmer non repayment
Cost of labor is low (2-3$/day)
No levy for tapping water resources
Government incentives for inward FDI (0% corporate income tax, 0% duty on imported inputs) Agriculture in Sierra Leone Rainfed agriculture - minimal irrigation infrastructure
Fewer than 5% of households have access to fertilizers, insecticides, herbicides and basic machinery
Rice self-sufficiency is core component of agricultural development policy
Government has set target of rice self-sufficiency by 2013, requiring an increase of the average rice yield to 2 tn/ha
Only 11% of potential arable land is currently under cultivation
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