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17 / /L~9 /I7 - R;,)E 17 / /L~9 /i7 - r;,)e Public Disclosure Authorized FILECOPY TANZANIA AGRICULTURALADJUSTHENT PROGRAM VOLUMEII EXPORTCROP MAURKETINGAND INPUTS Public Disclosure Authorized Supplementto Report No. P-5200-TA Agricultural Adjustment Program (Credit 2116-TA, Approved March 30, 1990) Public Disclosure Authorized Public Disclosure Authorized Southern Africa Department Agriculture Operations Division Africa Regional Office CURRENCYAND EQUIVALENT UNITS Currency Unit - TanaanSan Shilling (TSh) Dec. 1985 US$1 - TSh 17 June 1986 US$1 - TSh 40 June 1987 US$1 - TSh 63 June 1988 US$1 - TSh 96 June 1989 US$1 - TSh 145 Feb. 1990 US$1 - TSh 193 FISCALYEAR Government - July 1 - June 30 MAIN ACRONYMS USED IN THE TEXT AISCO Agricult.iraland IndustrialSupply Company BOT Bank of Tazxanis CRDB Cooperative and Rural Development Bank CSD Child Survival and Development Program DAFCO Tanzania Dairy Farming Company Dfl Dutch Guilder ZEC European Economic Community SIB European InvestmentBank ERP Economic Recovery Programme ESAP Economic and Social Action Programme FAO Food and Agriculture Organization - UN IC Industrial Company (owns and operates cotton ginneries) ICO International Coffee Organization IDA International Development Association IFAD International Fund for Agricultural Development ILO International Labor Organization IM4F International Monetary Fund IRTAC Industrial Rehabilitation and Trade Adjustment Credit (Cr. 1969-TA of November 1988) IUCN International Union for Conservation of Nature and Natural Resources LSTG Pounds Sterling MRC Multi Sector Rehabilitation Credit (Cr. 1741-TA of November 1986) NAFCO National Agriculture and Food Corporation NAPOCO Nationtl Poultry Company NARCO National Ranching Company NBC National Bank of Commerce NNC National Milling Corporation (the grain parastatal) OGL Open General License Facility PCS Primary Cooperative Society (the first-tier cooperative society, within the RCUs) PER Public ExpenditureReview PFP Policy Framework Paper PSAP Priority Social Action Programme RCU Regional (or subregional)Cooperative Union (the second tier cooperative society) SAP Structural Adjustment Facility SGR Strategic Grain Reserve SIDA Swedish InternationalDevelopment Authority * SPPF Special Project PreparationFacility TANSEED Tanzania Seed Corporation TCOM (Cashewnut) Tanzania Cashewnat Marketing Board TCMB (Coffee) Tanzania Coffee Marketing Board TCMB (Cottoni) Tanzania Cotton Marketing Board TFA Tanganyika Farmers Association TFC Tanzania Fertilizer Corporation UNDP Uufted Nations Development Program UNFPA United Nations Fund for Population Aitivitl.es UNICEF United Nations Children's Fund WORKING AP-ERS (in two volumes) PREFACE In order to preparethe AgricultualAdjustment Program and developthe neces- say co s for the Programamong the Government,IDA and the interesteddonors, seer missionswere caried out during 1988and 1989. These missionsinvolved severalconsultants and donor personnel,and workedclosely with the then Ministres of Agricultre and LivestockDevelopment, arid of Local Governments,Coopeatives and Marketing. Thesetwo Volumespresent the main workingpapers produced during that preparationperiod. Each paper reflectsthe situafionand findingsas of the date of their preparaton and, as such, each of them is somewhatdated. In the meanwhile,the Govemmentproceeded to implementits Agricultural AdjustmentProgam, and the sectorsituation has been significanttymodified. Manyof the recommendationsstmming from the workingpapers were implemented,while others were modifiedor posponed. It has beenconsidered usefil, however,to make these workingpapers available as they containmuch of the information,data and analyseson whichthe policy decisionshave teen adopted. Muchof the informationcontained in the papersis not otherwiseavWailable. No atempt at updatingthese papershas been made. They are presentedhere as they were when Wr contentswere used to substantiatedecision proposals or to recom- mendadditional sudies. Updatingthem wouldhave requiredrepeiion of mostof the missionscaried out te, requiringan enormousamount of time and money. Most of these paperswill be supersededby the completionof the Long-TermPespective Study the Governmentis preparing,and by the AgricultualSector Report which the Bankis preparng in order to supportthe Goverment's LTPSand to updatethe analyticalbase for its policy and lendinganalyses. VolumeOne includespapers on land resourcesfor rainfedproduction, economics of agriculturalproduction, and grain marketingin nual and urbanareas. VolumeTwo includespapers on the marketingof major exort crops (cotton,coffee and cashewauts) and on the supplyand distributionof agriculturalinputs. The report of the FAO/CP agricultal reviewmission, issued in March 1988,and its annxes are not included. TANZANIA AGRICULTURALADJUSTMENT PROGRAM Contents of the Working Papers Working Paper Title Date VOLUMEI LANDRESOURCES AND GRAIN MARKETING No. 1: Land Resource Potential for Rainfed Production 08/89 of Maize, Bunded Rice and Wheat No. 2: Economics of Agricultural Production 09/88 No. 3: Marketing of Basic Food Commodities 04/88 No. 4: Cereals Marketing Policy and Food Security 05/88 No. 5: Food Crops 07187 No. 6: Open Markets for Grain in Urban Areas 10/88 VOLUMEII EXPORTCROP MARKETINGAND INPUTS No. 7: Appraisal of the Cotton Marketing System 07/89 No. 8: Improving Cotton Marketing 10/88 No. 9: Policy and Action Program for Cotton Marketing 05/89 No. 10: Coffee Marketing Arrangements 03/89 No. 11: Improving Coffee Production and Marketing 08/89 No. 12: Cashew 4arketingand Processing 03/89 Mo. 13: Export Marketing of Tobacco 01/89 No. 14: Supply and Distributionof AgriculturalInputs 07/88 No. 15: Input Supply and Distribution 03/89 No. 16: A StrategicAssessment of the Fertilizer 05190 Industry in the SADCC Countries Workint Paper No. 7 TANZANIA AGRICULTURALADJUSThENT PROGRAM WORKINGPAPER APPRAISAL OF THE COTTCN MARKETINGSYSTEM Southern Africa Department Agriculture Operations Division Africa Regional Office Workins Paper No. 7 AGRICULTURALADJUSTMENT PROGRAM WoRKriG PAPER APPRAISAL OF THE COTTONHARKMETINGSYSTEM Table of Contents PaLe No. INTRODUCTION 1 I. THE TENDERSYSTEM 2 II. IMPLEMENTATIONOF SALES 4 III. THE DOMESTICMARKET 5 rv. QUALITYCON5ROL 8 V. PRODUCTIONAND LOGISTICAL PROBLEMS 11 VI. FUTUIR EYPORTMARKETING 13 Tenders .o 99999999090009000*** .......... *...o.. 13 Auctions ............... ............... *... 14 conclusions .. 15 VII. FUTUREDOMESTIC IBXAETING 18 Procurement ................... 18is......... Deliveries * 18 Quaityn ............................................. is Pricing 90009099000909 90999000 19 Credit Terms . ...... s****vv¢¢eX 20 VIII. PROPOSEDCHANGES IN THE STRUCTUREOF THE COTTONSECTOR 22 Retention of Ownership of Cotton Products Until Sold ................. 99090990009000 22 Quality Control .......................*.........** 23 Marketing .*............ *............e*.......... .. 23 Forwarding and Shipping o..*0.*9................... 23 Ix. REC TIONS 24 Export Marketing ..................-..--... 24. Domestic Marketing .......... 00990-0--...... 24 Research and Seed Breeding Program and Multiplication Scheme ...........****.** 24 Quality Control ..................***-*-*-*- .. 24 Lint Transportation ................. 0........ 26 X. ACKNOWLEDGEMENTS 27 Working Paper No. 7 Page 1 INTRODUCTION1/ It has recently been proposed that the Tanzania cotton Marketing Board should change the system by which cotton lint is sold from the current tender method to that of auctions.. Tanzania is no stranger to cotton lint auctions as this was the system employed by them until 1973 when it was changed ir favour of sales by tender. Although no official records are available as to the reasons for the change, it is presumed that the auction system was at that time found to be no longer satisfactory. Other cotton producing countries, including neighbouring Uganda, and Sudan who formerly sold their lint by auction also changed to alternative methods. ./ Thisreport was prepared by the British Cotton GrowingAssociation. Working Paper No. 7 Page 2 I. THE TENDERSYSTEM 1.1 Buyers must be registered with T.C.M.B. in order to participate in tenders. On application for registration,,. potential buyers must state the nature of their business and provide trade and banking references. 1.2 Depending upon the size of the crop, the progress of processing and movement of the cotton there are on average six tenders for cotton lint held each year. Tenders are based on forward sales of six months, although when spot cotton is available at the Dar es Salaam warehouse this is offered for nearby shipment. T.C.J.B. normally include a sellers' option of three consecutive months on shipment to allow for any delays that may occur. Sales are based on P.O.3. 1.3 The first tender for each forthcominq crop is normally held in March. This will be based on historical experience of the crop as to what quantities and qualities can be expected to be available for shipment from September onwards. The second tender will be announced usually around May/June once the development of the crop has been analysed and a more accurate estimate of the crop size can be assessed. Subsequent tenders are announced at reqular intervals throughout the year based on feed-back reports on the progress of quality, processing and logistics in conjunction with an analysis of world market trends. The quantities and qualities of cotton offered at each tender will vary, depending upon the aforementioned criteria. 1.4 Actual qualities offered for tender are based entirely on the one
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