Warehouse Receipts and Food Security

Food in the Local MarketThe role of financial services in improving the food security of the rural poor has been explored by experts in the microenterprise and value chain fields. Financial services can help to improve the income of poor rural households and can enable them to smooth their food consumption throughout the year [6]. In addition, improvement of the overall agricultural market—specifically through reduction in price variability and more efficient marketing—can enhance the livelihoods of the rural poor and improve food security [7].

A warehouse receipts system can affect the food security of multiple players along the agricultural value chain through improved access and increased availability of food for rural farmers, traders and communities. These benefits are not restricted to participants actively involved in the warehouse receipts system but can also be realized by other members of the community.

Specifically, overall food security for rural farmers participating in warehouse receipts can improve in the following ways:

  1. The provision of immediate credit to rural farmers after harvest—through either formal or informal institutions—can improve farmers’ immediate access to food. The credit can be used to directly purchase food or to pay off immediate debts so that remaining income can be used for the purchase of food for the household.
  2. Through delayed sales as well as the elimination of middle-men, rural farmers can often obtain better prices for their agricultural product, resulting in increased income for the household [7]. Improved income can help rural farmers more easily access nutritious food for their household.
  3. Many warehouse receipts systems offer a “buy back” option where rural farmers can buy back their produce for home consumption during lean seasons. This type of activity can potentially improve access to food for rural households. Presently, KKFF does allow buy back of produce by farmers after all outstanding debts are settled.
  4. Reduction in post-harvest losses through secure storage at warehouses can improve food availability for both rural farmers as well as the larger community through increased amounts of product on the market. Supply regulation of agricultural products on the market also ensures a more consistent availability of food for rural communities.

Although subsistence farmers are often not in a position to sell much of their harvest, they too can benefit from an effective warehouse receipts system. Such a system can help smooth market prices thanks to a consistent supply of food on the market. By eliminating the flood of agricultural produce that traditionally ends up on the market following a harvest season, seasonal price variability can be reduced. This has the potential to reduce food insecurity even for rural farmers not specifically involved in warehouse receipts [7].

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