Brokers derail cashew nut sector’s recovery plan

In mid-2009, the ministry of Agriculture banned the export of raw cashew nuts as part of efforts to revive the ailing sector.

But nearly three years down the line, industry players say proper structures to ensure farmers benefit from the ban are yet to be put in place.

In addition to frustrations over declining production, farmers continue to complain about brokers, popularly known as middlemen, whose exploitative tendencies the ban was ostensibly meant to check in the first place.

“The farmer does not benefit from the crop due to the absence of a clear marketing structure,” said Mr John Lenga, a farmer in Ganze, Kilifi County.

“The real beneficiaries are the middlemen who dictate both farm gate prices and the prices they sell to processors and exporters.

“The farm gate price can be as low as Sh15 a kilo, yet they sell the same at over Sh50 which is pure exploitation. This is what is killing the sector.”

The chairman of the Cashew Nut Growers Association, Mr Safari Mumba, says that in the 1980s, Kenya was one of the top producers of the crop in Africa, producing 80,000 tonnes per year.

He attributes decline in production over the years to neglect by the government.

According to a report by the Cashew Nut Revival Task Force of 2009, the annual average production was 9,819 tons. Msambweni district had the highest production with 2,529 tons followed by Malindi with 1,953.8 tons.

The production figures have further plummeted over the past three years, from 14,000 tonnes in 2007 — shortly before the ban — to a record low of 8,000 tonnes last year, due to poor farm gate prices.

To eradicate exploitation by middlemen, minimum farm gate prices were set at Sh35 a kilo in 2010 and increased to Sh45 last year.

But the Coast provincial director of agriculture, Mrs Phoebe Odhiambo, says some farmers are not aware of this and are still selling their produce at Sh35 a kilo.

Farmers in Ganze, Kwale and Msambweni sell their produce for as low as Sh30 a kilo.

Industry players attribute the lack of a proper link between farmers and the principal processors to the re-emergence of the middlemen.

“The ban was ill-intentioned and has created a monopoly of a few processors with the farmer now suffering from exploitation,” says Mr Samuel Vargasse, chairman of the Kenya Cashew Nuts Processors and Exporters Association.

Mr Vargasse, who says he intends to set up a processing plant in Mombasa at a cost of Sh150 million, would like to see the market liberalised so that farmers can benefit from competitive prices.

The current situation, he says, only benefits a few processors in the name of protecting local production.

However, Mr Charles Muigai, a consultant with the Nut Processors Association of Kenya (NutPAK), attributes the decline in production to other factors, including poor crop husbandry and diseases.

The association draws membership from local processors among them Kenya Nut Company Limited, Equatorial Nuts Processors Limited, Sawa Africa EPZ Limited and Wonder Nuts (Kenya) Limited.

The processors had planned to buy cashew nuts using the warehouse receipt system, which enables farmers to keep their produce until better prices are realised, in a bid to guarantee farmers a market for their produce.

But Mr Muigai says they found the system challenging due to the presence of brokers and failure by farmers to organise themselves into strong cooperative societies.

“When a broker offers ready cash the farmer has no choice but to take the money, and processors have also been forced to use brokers to obtain the nuts,” he said.

In areas such as Mpeketoni in Lamu, members of the Lake Kenyatta Cooperative Society earn up to Sh55 a kilo, according to ministry officials.

Mr Mumba says cooperative societies and farmers’ groups that were formed when the cashew nut sector was vibrant have all collapsed.

There is also the challenge of lack of financing for farmers due to sector uncertainties. About 10 years ago, K-Rep bank tried to fund farmers, but when they defaulted on payment, the bank withdrew its support, he said.

Source: http://www.nation.co.ke/business/news/Brokers+derail+cashew+nut+sector+s+recovery+plan++/-/1006/1372956/-/8q468hz/-/