AS wheat trading debuts on the Zimbabwe Mercantile Exchange (ZMX), stakeholders have called upon the five banks involved in the trading platform to offer a basket of payment options to warehouse receipt holders.
Stockfeed Manufacturers Association of Zimbabwe (SMA) executive administrator Dr Reneth Mano asked why wheat warehouse receipts were not discounted. He was speaking at the buyers’ breakfast meeting organised by ZMX in Harare recently.
“ZMX banking partners ought to have the cash to offer farmers a basket of payment options to choose from when they deliver their grain to designated depots that issue negotiable warehouse receipts.
“When the wheat farmer makes a delivery to the warehouse depot, a negotiable warehouse receipt is issued. The farmer (or owner of grain) should be able take the generated warehouse receipt to any of the five ZMX partner banks and borrow say up to 60 percent of the minimum expected selling value of the wheat tonnage delivered to the warehouse depot,” said Dr Mano.
The bank must take the warehouse receipt as collateral security with the farmer maintaining ownership of the grain. The farmer should also be able to get some money against the delivered grain even though it would not have been sold yet, commented Dr Mano.
The farmer who holds the warehouse receipt, in search of better selling price, might decide to put the grain for sale on the ZMX electronic warehouse receipt system and commodities trading online auction platform for a period of 30, 60 or 90 days.
The Government has set the floor price for ordinary and premium wheat grades at US$620 and US$682 per tonne respectively.
However, with some of the farmers who delivered their wheat to GMB not yet paid, the dire need for cash to use for this summer season’s various activities might push them to look for alternative buyers of the warehouse receipt.
“A wheat warehouse receipt holder may secure a buyer offering US$520 per tonne cash and might opt to trade his grain to clear debts and procure inputs for the current growing season. Such a trade does not need the Government to use money from Treasury to pay the farmer for the wheat. The only fraction that Treasury may have to pay is the subsidy of US$100 per tonne, the difference between US$620 per tonne producer price for ordinary wheat the minimum price set by Government and US$520 that the farmer would have secured from ZMX trading platform,” added Dr Mano.
Dr Mano went on to say that Government would save a lot of money in the region of US$30 million for the 300 000 tonnes of wheat that GMB expects to buy. The banks commodity trading desk could, alternatively, offer the wheat farmer a deal in which he gets a discounted price of US$520 per tonne cash on delivery.
He went on to say some farmers might be happy with the cash on delivery terms in which case the ownership of the wheat delivered and the warehouse receipt generated becomes the property of the bank.
Grain Millers Association of Zimbabwe chairman Mr Tafadzwa Musarara said their members were not confident with wheat being traded on ZMX platform due to several sensitivities.
“We also don’t believe that ZMX has the wherewithal and competence to mediate on these transactions,” said Mr Musarara. – Herald