Millet trade finance presentation final 1 october


Published on

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Millet trade finance presentation final 1 october

  1. 1. USAID LEAD Project Facilitating Smallholder Farmers’ Access to International Markets 4 October 2010
  2. 2. <ul><li>USAID LEAD Project is a $35 million / 5 year project that targets 600,000 households and is structured to improve livelihoods of smallholder farmers in rural sectors. </li></ul><ul><li>LEAD is a VC structured project, with five key targeted VCs </li></ul><ul><li>Besides working in agricultural VCs, LEAD also encompasses x-cutting components, including a Financial Services component </li></ul><ul><li>LEAD aims to 1) ensure food security and 2) incorporate smallholder farmers into highest value markets. </li></ul><ul><li>Constraints to penetrating higher value markets include low quality standards, lack of finance, insufficient identified buyers, and/or slowness of payment by commercial buyers. </li></ul><ul><li>LEAD partners with other stakeholders to facilitate smallholder farmers’ access to higher value markets. </li></ul>
  3. 3. 8a Payment of warehouse Fees 6a Caveat place on WR by Equity Bank 8c Caveat removed on WR by Equity Bank 7 Full Payments for WR received 8b Net payments direct to PO accounts 9 Transfer of WR to UNGA 6b Advance on WR 10 Presentation of UNGA WR 11 Release of Millet to UNGA 1b Issues Floor Price for Millet <ul><li>2 LEAD Farmer Groups Mobilization </li></ul><ul><li>Mobilization and sensitization </li></ul><ul><li>Production support </li></ul><ul><li>Quality Assurance </li></ul><ul><li>Millet aggregation and delivery </li></ul><ul><li>Training on Fund Management </li></ul><ul><li>4 WFP Warehouse – Gulu (UCE licensed) </li></ul><ul><li>Cleaning and drying </li></ul><ul><li>Issuance of electronic Warehouse Receipts </li></ul><ul><li>Storage and Collateral Management </li></ul>Equity Bank-Uganda UNGA Ltd, Kenya 5a Issuance of Copy of Warehouse receipts and warehousing invoice 3 Delivery of Millet STRUCTURED EXPORT TRADE FINANCE FACILITY – SEQUENCE OF EVENTS Title Document/WR Transfer Money Payments 5b Issuance of WR and WH invoices 1a UNGA and Bank sign agreement on terms of Unga’s purchase of the millet Physical Millet Delivery
  4. 4. <ul><li>Financing Mechanism </li></ul><ul><li>Need reliable partners : Buyer, Seller, Bank, Licensed </li></ul><ul><li>Warehouse </li></ul><ul><li>Basic Steps to fix costs/income : </li></ul><ul><li>- Buyer and Seller agree quantities, price, quality </li></ul><ul><li>standards, delivery schedule </li></ul><ul><li>- Buyer, Seller, and Bank agree financing/payment terms </li></ul><ul><li>- Determine costs of warehousing (off loading, cleaning, </li></ul><ul><li>drying, bagging, issuance of warehouse receipts, </li></ul><ul><li>storage charge, on loading) </li></ul>
  5. 5. <ul><li>Financing Mechanism </li></ul><ul><li>Document Transaction Flow: </li></ul><ul><li>Memorandum of Understanding between Buyer, Seller, </li></ul><ul><li>Bank, USAID LEAD – defines role of each entity </li></ul><ul><li>Letter of support from World Food Program re </li></ul><ul><li>warehousing </li></ul><ul><li>USAID LEAD – set of procedures established for </li></ul><ul><li>farmers/Producer Organizations (growers) supported by </li></ul><ul><li>LEAD </li></ul>
  6. 6. <ul><li>Financing Mechanism </li></ul><ul><li>Main Elements : </li></ul><ul><li>Unga sets guaranteed floor price, buys at higher of floor </li></ul><ul><li>price or market price at time of purchase </li></ul><ul><li>Equity Bank advances 60% of floor price to POs at point </li></ul><ul><li>when warehouse issues warehouse receipt assigned to </li></ul><ul><li>Equity Bank – no additional collateral required </li></ul><ul><li>Farmers free to sell to Unga or a third party at all times </li></ul><ul><li>Unga pays for millet at time of purchase </li></ul><ul><li>Equity Bank deducts advance amount, its fees and </li></ul><ul><li>interest, and warehouse fees from Unga payment, and </li></ul><ul><li>pays balance to POs </li></ul><ul><li>POs distribute advance and net payments pro rata to their </li></ul><ul><li>members </li></ul>
  7. 7. <ul><li>Millet Production Economics </li></ul><ul><li>Current Market Price = 840UGX/Kg = USD$0.37/Kg </li></ul><ul><li>Unga Floor Price Offer = 485UGX/Kg = USD$0.22/Kg </li></ul><ul><li>Traditional Production </li></ul><ul><ul><li>Yield Range 350 – 600 Kg/Ac, Avg. = 500 Kg/Ac </li></ul></ul><ul><ul><li>UCOP about 500 UGX/Kg = USD$0.22/Kg </li></ul></ul><ul><ul><li>Farm Gate Gross Margin = 170,000 UGX/Ac = USD$75.55/Ac </li></ul></ul><ul><li>Production using Modern Agronomic Practices </li></ul><ul><ul><li>Yield Range 900 – 1,600 Kg/Ac, Avg. = 1,000 Kg/Ac </li></ul></ul><ul><ul><li>UCOP about 430 UGX/Kg = USD$0.19/Kg </li></ul></ul><ul><ul><li>Farm Gate Gross Margin = 410,000 UGX/Ac = USD$182.22/Ac </li></ul></ul>
  8. 8. <ul><li>Immediate Actions by USAID LEAD </li></ul><ul><li>Sensitizing Farmers in Acholi-Longo Sub-Regions </li></ul><ul><li>Radio Announcements in Local Languages </li></ul><ul><li>Outreach in 11 Districts through 11 USAID LEAD Field Officers and 132 Field Facilitators working with Producer Organizations encompassing 31,000 Farmers </li></ul><ul><li>Outreach through four Grantees of USAID LEAD and their extension staffs to 56,000 Farmers </li></ul><ul><li>Coordination with the WFP warehouse in Gulu, UCE, Unga Millers and Equity Bank to make sure the physical handling aspects and warehouse receipt system can function properly </li></ul>
  9. 9. <ul><li>Actions “To Do” by USAID LEAD for 2011 Seasons </li></ul><ul><li>Sensitizing Farmers in Teso Sub-Region, the real “home” of millet production in Uganda </li></ul><ul><li>Radio Announcements in Local Languages </li></ul><ul><li>Outreach in 7 Districts through 7 USAID LEAD Field Officers and 70 Field Facilitators working with Producer Organizations encompassing 17,000 Farmers </li></ul><ul><li>Outreach through 5 Grantees of USAID LEAD and their extension staffs to 39,000 Farmers </li></ul><ul><li>Preparing to use the WFP warehouses in Soroti and Tororo based on lessons learned in Gulu </li></ul><ul><li>Reaching out to other buyers, especially in South Sudan </li></ul>
  10. 10. <ul><li>Contact details: </li></ul><ul><li>USAID LEAD Project </li></ul><ul><li>Plot 58 Lumumbe Avenue, Nakasero </li></ul><ul><li>PO Box 1709, Kampala, Uganda </li></ul><ul><li>Telephone: +256-(0)312-216700 </li></ul><ul><li>Susan Corning, Chief of Party – [email_address] </li></ul><ul><li>Paul Forrest, Agriculture Unit Director – [email_address] </li></ul><ul><li>John Fitzgerald, Financial Services Director: - [email_address] </li></ul>