Guinea Bissau warned to avoid repeating cashew policy mistakes

As more than 100,000 tonnes of cashews begin to ripen on trees around Guinea-Bissau, agricultural economists have warned the government against making the same policy decisions as in 2006 that left many farmers unable to sell their produce, triggering hunger.

Analysts say the government sought to please farmers before elections in 2006 by raising the price per kilogramme of unprocessed cashews from the standard 250 CFA (about 50 US cents) to 350 CFA. But international traders, mostly Indians who form a cartel, refused to pay the higher price. Unable to sell their cashews, farmers could not buy rice, the country's staple food. Eventually the price of cashews crashed with traders currently buying cashews for around 50 CFA (10 cents) a kilogramme.

"The government should allow market forces to function and stop setting the price at which farmers should sell their cashews," said Marco Giovannoni, the Food and Agriculture Organisation's (FAO) West African regional advisor on food security. He took part in a mission to Guinea-Bissau at the end of February with an agricultural expert from the Committee for Drought Control in the Sahel (CILSS) to evaluate the country's food situation.

Analysts say the issue will likely become a problem around mid-year. For now people can live off the rice they are growing, but from July to October people will depend on imported rice while waiting to harvest the next season's rice crop. The same Asian traders who export cashews import Asian rice. They sell it for the equivalent of 50 cents a kilogramme, the same price for which they used to buy cashews. But now farmers have to give 5kg of cashews for 1kg of rice.

Agriculture minister Sola N'Quilim Na Bitchita said on March 12 that the government would again set a price for cashews. "It is the government's job to inform farmers about the value of their produce on the international market," he said.

For Giovannoni, this would be a mistake, particularly if the government bows to local pressure to raise the price back up to 250 CFA. "How can the price suddenly jump from 50 CFA to 250 CFA?" he said. "This would be a huge disincentive to the Indian traders, who are not in a hurry to return to Guinea-Bissau anyway."

The traders have not returned since leaving last year. "The government had created so many obstacles for us," Norbet Djidonou, a local representative for the Singapore-based conglomerate Olam, the largest cashew trading company operating in Guinea-Bissau. "I don't know if we will return or buy elsewhere." Olam shut down in the middle of last year's season when the government decided that it had to pay an extra US$2.4 million in taxes and confiscated 6,000kg of the cashews it had already bought. Olam and other international traders are also hobbled by a recent law that prohibits them from buying directly from the farmers. Many of the local businessmen they must go through are at the same time senior government officials - a practice that presents a serious conflict of interest, experts say.

The FAO/CILSS mission report called on the government to make several policy changes such as reducing the taxes and various tariffs it imposes on cashew exporters and keeping the high cost of operating out of the Bissau port in line with the costs of other ports in the region. With cashews accounting for 85 percent of Guinea-Bissau's total exports and Vietnam rapidly boosting its cashew production, Giovannoni said the government needs to do all it can to avoid its only export crop from collapsing.

source : IRIN