Commodity market mooted for farmers

Coffee farmers have welcomed newly published crops regulations which require coffee buyers to to pay for commodity within five days after a sale has been concluded. [Kibata Kihu, Standard]

Kenya has finalised plans to establish its first commodities exchange market, after Parliament passed the Warehouse Receipt System (WRS) Act, 2019.

The new law will enable farmers sell their commodities without the need to move them. What will be transferred instead, is a warehouse receipt, providing proof of ownership of commodities stored in a warehouse.     

The new law is aimed at eliminating and reducing post-harvest losses as well as middlemen along the supply line chains. 

This will be good news for thousands of maize farmers who have been forced to sell their produce at throw-away prices after harvest when prices have slumped.

The warehouse can allow them to sell the goods at a later time, when prices have picked up, thus avoiding the price risk. Those who contract the services of the warehouse will pay a fee for storage and care, which is expected to significantly lower post-harvest losses.

With a WRS, farmers will be able to deposit storable goods - mostly grains or coffee - in exchange for a warehouse receipt. According to the Act, the “WRS,” will entail depositing commodities in a licensed warehouse, the issuance of a receipt which will bear the quantity and quality of the deposited commodity.

The receipt system will also elaborate how the ownership of the document can be transferred, as well as the regulation of warehouses and actors associated in the processes.

The legislation also establishes the Warehouse Receipt Council that will facilitate the establishment, maintenance and development of the WRS for agricultural commodities produced in the country.

“It will oversee the functioning of the WRS to ensure the efficiency, effectiveness and integrity of the system,” reads part of the Act.

This law comes barely a month after the Government came up with regulations that will see coffee exchange, brokers regulated by Capital Markets Authority (CMA).  

In the new regulations, some of the sector players are set to be regulated by the CMA, which has potential to bring an end to the rogue nature with which a segment of the industry operated.

The Crops (Coffee) (General) Regulations, 2019 published July 1, will now require the coffee exchange to be licensed and regulated by CMA.

There are reports that Kenya is scouting for local and foreign investors to raise Sh2 billion for an agricultural produce exchange.