The economics of warehouse receipt system: a case of smallholder cotton producers in Maswa district, Shinyanga-region
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Date
2011
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Publisher
Sokoine University of Agriculture
Abstract
Producers in most developing countries lack the means to mitigate price risk, and
this affect their income and ability to repay loans. Warehouse Receipt System
facilitate development of simple mechanism by which producers, lenders and traders
can secure a floor price by looking in a fixed future price. The general objective of
this study was to assess the performance of WRS by describing the WRS operating
in cotton sector, analyzing profitability of the WRS to cotton production, identifying
challenges and constraints facing its key players and identifying factors contributing
to the profitability differences among cotton farmers. Simple random sampling
techniques were employed in selecting farmers. Descriptive and quantitative
techniques were employed to meet the objectives of the study. Description of WRS
seems to be the same as other places operating the system and three main key
players were identified (farmers, warehouse operators and finance institutions). The
roles of each key player relied on the Tanzania warehouse receipt regulations. It has
been observed that, with presence of WRS, the profits to cotton farmers are able to
increase. Insufficient information systems, poor knowledge about the system,
unimproved infrastructure were among the challenges mentioned. It has also
revealed that household size and cotton field size contribute to the differences in
profit among cotton farmers. Basing on the results of this study, WRS should be
adopted in other crops because, apart from credit facilities provision, it assists
traders to pool financial resources, and form networks for consolidating cotton
marketing; also the system will help farmers to organize themselves into AMCOs for
the purpose of bulking and marketing cotton together.
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Keywords
Economics, Cotton producers, Maswa district, Shinyanga-region