Tanzania: Cashew Market Opens in Keeping With Trend

IT is five years since a new market system for selling and buying of cashew-nuts was implemented in Mtwara Region. Since then the local price has been rising. This trend was again reflected at this seasons' first auction four Saturdays ago.

With regards to this and other related issues Staff Writer, IMAN MANI, took the opportunity, while there recently, to talk with the region's Cashew Marketing Board's (CBT), Director of Marketing and Management Information Services, Mohamed Hanga. Following are excerpts of the conversation....

How long have you been holding your current position?

I've been here for three years. I started in July 2008.

Do you agree that the production of cashew-nuts from Mtwara has drastically fallen despite the price being very high and still rising on the international market?

In the cashew-nut business we don't have outward projections because production depends very much on weather and not price. However, there are times when price can stimulate farmers to grow much but since I've been here it's a time when the Warehouse Receipt System" (WRS) had already started the previous year. Therefore, I can say that I've seen changes since my coming here.

Immediately before this time, 2008, we had some other type of marketing system. There was that Free Market System (FMS) and before this there was the State Monopoly Economy (SME), which was before liberalisation and privatisation. These things went with policy and economic changes in the world.

For the last season, 2010-2011, we had a bumper harvest and the price was very high. It was a historical price because we reached the highest price of 2060/- per kilograms in the market. Even though the Founded Price of 800/- was high. This price is got after doing a feasibility analysis and to know the coasts the farmer has incurred to produce one kilogram of cashew-nut.

Last season the Founded Price was almost 600/-. This is how much it coasts to produce one kilogram of standard grade cashew-nut. From that Founded Price, already the farmer had 200/- as profit before getting onto the market. At the market we add another overhead cost or market expenses, which ranged from 240/- to 260/-. Now add all of this together and you get 1040/- to 1060/- when the cashew is at the warehouse.

From there we calculate Benchmark Price, which was 1500/- as the highest price and 1300/- as the lowest per kilogram. So there also the farmer could have got about 260/- or 440/- bonus, which will be a payment apart from the Founded Price. Good enough, we had more than that because the lowest price was 1503/- and the highest was 2060/- per kilogram. The average take-home money for a farmer was about 1700/-.

Why do you expect a bumper harvest this year?

Because the rain was good and farmers now have got good education towards maintaining their farms. Having good prices for the last two years has given them some assurance that they will get good money for their crop. Because of the price stability and market reliability now, farmers can sacrifice their effort because now they know that they will be paid well.

what part does the Board play in this process?

The first thing is to determine the Market Price. We do Market Intelligence for nine months just to find out what will be the demand and the Market Price every year. We are not the final say but take everything to the stake-holders meeting. Here we invite farmers, district commissioners and councillors, regional commissioners plus the Members of Parliament and the other custodians for agriculture.

Apart from this we have already done Profitability Analysis to know what the costs are the farmer can incur to produce one kilogram of cashew-nut, so we deal with Unit Cost. This is part of our job. Then we go to the stake-holders meeting with our papers and discuss, plus give advice that this is business and the risks element must be recognised.

This year we went with 950/- per kilogram at that meeting and after discussions we reached 1200/- . We got information that people are buying cashew in the village at that price. When we set it at 1000/- or below this they will get the chance to buy more. Let's put it at 1200/- so this can be the Founded Price, then we go to the market with a Benchmark Price and get more.

When did you sit with the stake-holders this year?

We always do this before starting the season, which this year started on September 20. The first auction, which was about 800 tonnes, was on Saturday 15 of last month.

Do you agree that the facilities for processing cashew-nuts, in the region are much less than the quantity available for this purpose?

I don't agree with this statement because we have got those old factories, which if they are going to process at their capacity would finish all that is being harvested. It's almost a minimum of 70,000 tonnes of cashews that could be processed in these factories.

But they're not doing this right now?

Yes, they're not doing that right now.

Then why is this and who used to run them before, when they were all functioning?

They were state owned before the privatisation policy came in. They had stopped processing ten years before privatisation because by then farmers were selling cashew-nuts to the Cashew-nut Authority of Tanzania before coming to the Tanzania Cashew Marketing Board. After this came the CBT. By then production of cashew-nuts went down. There was a severe drought in the 1970's and then farmers were shifted from their farms to Ujama Villages.

Then cashew farms were abandoned and farmers lost hope so started other businesses. Now once this happened, those 12 factories that were under the Government's control missed raw materials. I can also add on that, there was some miss-management of those factories, which also contributed. People were given money to go and buy cashews but instead of buying those of the highest quality they bought those of the lowest. This is simply because the one selling the cashew was their uncle or their aunt.

What is being done now to re-establish these processing plants?

We've got plans. First of all we've had the problem to understand who would be the processor. Some people thought farmers themselves would be processors. But we disagreed with them because these are two different port-folios. A farmer is a farmer and this processing is an entrepreneurial venture. We also needed to know who would be financing the whole activity and what would be the technology; there are manual and mechanised factories. The market also has to be identified.

Finding a market was simple because we could use the domestic one. Now for this to be, it would have to be promoted in size and we would have to create a culture here of eating cashew-nuts ourselves, plus sell them at various local tourists' centres and such outlets. Those are our plans and main objectives of the CBT. Now coming back to finance; then we said no. The Government is very much attached to small and medium enterprise and not for

These bigger ones have got skilled and financial capabilities, so we have to deal with small and medium enterprises. We decided that the these, which are in the form of the primary co-operative societies or farmers' associations, can form groups to process and not to farm. They would get the raw materials by keeping about 20 per cent from their harvest for processing. The money they make from this would not go back to the farm as a whole.

The farmers could take part of this money to hold shares in that company, so that after three or four seasons the farmers could have powers to own the factory. Now even if the farmer doesn't get involved with the processing, their children could. Now this isn't a one time or one night dream. We need to build capacity and to make these people enjoy the love to process.

Source: http://allafrica.com/stories/201111060052.html