Njung'e wrote:VituVingiSana wrote:[quote=Njung'e]@Hamaina,
Well, what's wrong with that?
Weather - Countries with favorable weather for specific crops is what those countries produce those crops. Brazil and coffee. Kenya and tea. Canada and wheat.
Consumption per capita - That's not a bad thing. It's a personal choice. I try to limit my consumption of sugar for health reasons regardless of the price [I don't consume more when prices are lower] or production per capita.
Maybe i was not clear enough. I meant to say that the UG sugar belt has erratic weather unlike the Kenyan one and therefore, their annual sugar production is very unpredictable.One year they have plenty,the next,they are importing. Sugar intake per capita is more a component of affordability by households than a preference. That's why average intake in US is higher than in Kenya and lowest in poorer countries such as Mozambique. I hope i am clearer now.
Agricultural commodities' pricing is very volatile because of the weather. I have seen the lows, highs, lows, highs of tea prices since I started investing on the NSE.
Therefore, we need a policy (enforced by BOTH Kenya & Uganda) that only Ugandan sugar can be exported to Kenya when there is a surplus of Ugandan sugar. We do not want Ugandan sugar to be exported to Kenya while the Ugandans import sugar from Brazil.
Bigger Picture: Kenya needs to get rid of its 3-4 gov't owned/controlled sugar mills. Period. They need to be sold. Or shut down. I don't care. There are private (presumably profitable) mills fighting for cane.
I had an extensive discussion with the CEO of a tea firm. He said that they changed the system of payment to outgrowers and this has been a great boon to both the Tea Firm and the outgrowers.
Perhaps what the private [meaning multinationals] tea firms are doing is a partial solution for the sugar millers.
Old System/KTDA:
Pay farmers a token amount (after 2-4 weeks) per kilo of leaf delivered.
Then pay a 'interim bonus' 8-10 weeks later.
Then pay a 'final bonus' at the end of the 'season' [tea grows year round but there are periods of low & high production].
Complex calculations or explanations to farmers about auctions, exchange rates or deductions.
Farmers were perpetually broke & pissed off. They thought they were being conned.
They would squander the bonuses on alcohol and whores.
They would sell leaf to brokers (who paid daily or weekly) not the factory/processor.
New System/Private:
Pay farmers a fair price for (green) leaf delivered. It's based on the quality & quantity of leaf. Paid weekly.
No bonus. No accrual accounting. Also competition for leaf by the various factories.
Farmers get their money every week so they can't blow it all away at once.
No need for complex calculations or explanations to farmers about auctions, exchange rates or deductions.
The tea firm takes the risk on the tea [price variations] but it can adjust the price for leaf on a weekly basis based on market trends.
Farmers can sell to any factory they want to but prefer those who pay 'fast'.
Brokers are cut out unless they pay cash at the gate.
Family harmony since the wives also know what is delivered, the price paid and the expected proceeds! Plus with technology, payments are made directly to the bank or M-Pesa.
Bottomline:
An increase in quality and quantity of the leaf delivered since farmers/outgrowers immediately see the connection between proceeds vis-a-vis the quality and quantity.
Reduced costs of 'accounting' as well as reduction in corruption by staff i.e. 'lost' records, etc. [I think technology has helped]
They upgraded their (manufacturing) facilities to cope with the additional leaf they expect when the rains come.
Cashflow management is much easier since there's no need to estimate how much cash is needed for the bonuses.
I wonder if the private sugar millers [Butali, Kibos] already have something similar.
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett