sesame business network ethiopia mekelle, march 21 st 2015 risk management
TRANSCRIPT
• We have been looking at the production side, the financial sector and the marketing side.
• 2014 was a very bad year for farmers: low yields and much lower prices
• This triggers attention for the subject of ‘Risk management’
• ‘Risk management’ is also a good theme for bringing the subjects of the annual meeting together.
Introduction
Multiple risks in the sesame sector:• Weather and Production • Credit• Marketing
• Other risks
Multiple risks
• We would like to have your ideas ! • Three rounds : How can production, credit
and market risks be reduced or mitigated? • Please work in pairs. • Write down your ideas and suggestions on a
card : use key words, readable handwriting please !
• We will later on analyse the cards and report on the outcomes in workshop report, on website and in the next newsletter.
Risk management action plan
• Drought at beginning of the season, forcing replanting of sesame or replanting with sorghum
• Drought during season: affecting flowering and sesame seed production
Drought
Improved agricultural practices are more costly. Will this pay off (in good / bad years). That is big question and risk for farmers
What is the marginal rate of return of fertilizer use, row planting, drying on plastic sheets, .... ?
Economic risk of intensification
• What are practical options for reducing or mitigating risks at the production side ?• ..... ???? ......
What could/should be done?
Banks do not (sufficiently) know the farmers, and not (sufficiently) able to assess whether they are serious / capable of paying back their loans
Farmers do not know the banking language and do not know information and security to provide, what responsibilities they have to take
Credit
Loans may come to late; loans not available later during the growing season
Farmers may have to turn to informal money lenders and incur high credit costs
Farmers are susceptible to external conditions that may cause crop failure, hence problems to reimburse. This puts the portfolio of banks and MFI’s at risk.
Credit
• What are practical options for reducing or mitigating risks at the financial/credit side ?
What could be done?
Market – ECX price trend (ET Birr) Oct 2012 – Dec 2014
Price volatility in past years
Totally different trends in 2013 and 2014 - Increase Oct-
Dec 2013 - Decline Oct-
Dec 2014)
• Prices are unpredictable for farmers and for buyers, putting their farming, processing, storage and trading activities at risk of loss• Are there options for market trend
analysis, price stabilization ???
Serious risks
Sesame Business Network Ethiopia
Reporting on outcomeCapitalizing on your contributions
• Workshop report: please leave your email address at secretariat
• Website: www.sbnethiopia.org• Newsletter: [email protected]