Buzzing Signal or UVB-76 " ??? What is it ???

"buzzing Signal or UVB-76 " ? Interestingly found many radio listeners like to listen this monotonic buzzing signal. Some of them keep on eye to break the code and others just for fun or relaxation even(??). However, nobody knows exactly what is it and what for .This monotone signal consists of a buzzing sound that lasts 1.2 seconds, pausing for 1–1.3 seconds, and repeating 21–34 times per minute. This has slightly changed since its start(1970's ). Some regular listeners have recorded few commands and small conversations. This can be listen on 4625kHZ (AM). This link will show the recording in Wikimedia.

https://upload.wikimedia.org/wikiped…/commons/2/…/UVB-76.ogg

This is a widely spoken topic and many people have researched on this.See the description on the following sites

http://www.dailymail.co.uk/…/The-mystery-Russian-buzzing-si…

https://en.wikipedia.org/wiki/UVB-76

These two audio clips of the monotonic buzzer were recorded by me on 2018/2/17 at 14:33 and one hour after (15:33). The buzzer is poorly audible ( Need to use headphones) .Reason may be that AM Modulation is poor in contrast to FM and it comes from a long distance .Generally, AM frequency modulation uses to transmit to long distances (mainly not for commercial purposes ) . This Russian radio station in St.Petersbrug transmits signals as shown in the above sites and carry the same tone within 24 hours.

Human Elephant Conflict - A talk on current context in Sri Lanka ( Sinhalese language)

On Air at Rajarata FM. " Thirasara Mandapaya" Speaking about HEC- Human Elephant Conflict

Socio economic approaches to strengthen the fisheries sector against the impact of climate change

Climate change is considered as a global threat. Moreover, the mitigation actions are becoming a challenge due to many global geopolitical reasons. On this backdrop, climate change impacts are expected to increase in the coming years, alarming some industries like fisheries, causing socio economic issues. This global threat is not a nightmare. Therefore, Sri Lankan policies should be enforced to ensure the wellbeing of fishermen.

Fisheries Sector and Sri Lankan economy

The fisheries sector is of importance to the Sri Lankan economy. According to Fisheries Statistics of 2016 Sri Lanka has 190,960 marine fishing households and 48,900 land fishing households. Fisheries sector has contributed to 1.4 % of GDP in 2015. Marine fisheries have the largest share of 1.3% and Inland fisheries 0.1% (Fisheries Statistics,2016).In addition to these monetary aspects, nutritional aspects like providing proteins and nourishing the nation prove the importance of the industry. Fisheries industry has been identified as a vulnerable sector to climate change in the National Adaptation Plan for Climate Change Impacts in Sri Lanka 2016-2025 (NAPCC, 2016).Similarly, agriculture and farmers are also subjected to the same climate change impacts. However, some protection mechanisms like crop insurance, crop loss compensations, and irrigation etc., have already been introduced to the agriculture sector. Hence, it is important that the fisheries sector too is sufficiently supported. This article has attempted to point out possible impacts on fisheries sector due to climate change and some research findings in the other sectors in order to show the importance of linking scientific methods and social science methods as a practice in Sri Lankan context.

Evidences of Climate change impacts on coastal areas and fisheries

Food and Agriculture Organization of the United Nations (FAO) has shown that marine fisheries production peaked in the 1980’s and is expected to decline due to climate change impacts (FAO, 2007a). To support this statement, as an example The Mean Sea Level (MSL) has increased by 0.19 meters (globally) during the last century and it is expected to rise rapidly in this century (IPCC, 2014).

The greenhouse effect has increased the temperature in the ocean. Studies have shown the impacts on the global fisheries due to conditions like rising temperature and changing biogeochemistry. This could affect the reduction of fish harvest and income losses to the big companies as well households. (Brander,2007; Cheunet al., 2010).Growth and reproduction of fish can be affected by changes occurring in the ocean.(Pörtner, 2007) As an examplefishes in warmer waters are expected to have a smaller maximum body size and smaller size at first maturity. (Pauly,2007). Similarly, many marine species have moved towards the poles and into deeper waters underocean warming places like in the Northeast Atlantic(Perry et al., 2005).These factors are directly important to the productivity of fisheries and may cause high costs in the industry and income losses etc., in the future.

Sea level rise issue in Sri Lanka and existing national scientific actions

Sri Lanka is vulnerable to the impacts of sea level rise because the Asian region usually experiences marginally higher sea level rise than global level. However, the exact sea level rise has not yet been specifically studied in the Sri Lankan context(NAPCC, 2016).Fisheries industry is susceptible to such impacts and it could affect the country’s economy (Senarathneet al., 2009). This has an impact on livelihoods and food security in the country as well.

Existing NAPCC 2016-2025 has included the coastal and marine sector action plan, highlighting adaptation needs. One such adaptation need is coastal zone management to face the impacts of sea level rise. This requires basic studies on the impacts in order to establish a monitoring system that strengthens the coastal protection and management in the vulnerable areas. Another identified adaptation need is enhancing the resilience of coastal systems against extreme events. Introduction of scientific support on intensive fishing methods, technology, sustainable use of fishing sites and proper fishing gear has been done in order to strengthen the fishermen to increase fishing productivity.

Importance of socio economic approaches against experiencing climate change and expected sea level rise impacts

There is a close link between the biophysical components of marine ecosystems and the socio-economics of fisheries. Global ocean–atmosphere changes could effect on multiple levels of organization of marine ecosystems and human society. It may cause many impacts on the economics of fisheries, creating larger global issues like global food security, energy supply and food prices. (Sumailet al., 2011)

As shown in one of research articles, actions solely based on science, especially which are practiced in less developed parts of the world would not solve the problems in marine ecosystems and coastal management (Rice et al., 2011). Thus, adaptation of similar practices to Sri Lankan context will not address or totally incompatible with required actions for future food security needs.This highlights the importance of incorporating the socioeconomic aspects in addition to the natural science approaches, especially to build the resilience or awareness and adaptation against the risks in national level plans. It helps to meet the food security goals and the socio economic wellbeing of fishermen.

Socio economic approaches: how it works.

Reducing the vulnerability to climate change via planned adaptation is such an approach. To assist in this, understanding of current response mechanisms to climate variability, recognition of the opportunities that climate change could bring to the sector and risks like loss of livelihoodare important. Therefore, multi sectorial adaptive strategies which include adaptation and recognition of fisheries potential are important. (Badjecket al.,2010).

Approaches to Identify the different sensitivity levels of fishermen, most vulnerable groups, within the fisheries sector, demographic characters of people who are more vulnerable etc.(Cinner,2012) are important. These kinds of approaches have revealed that the vulnerability of fisheries and fishing communities depend on their exposure and sensitivity to change, and on the ability of individuals or systems to anticipate and adapt. This adaptive capacity depends on the culture or marginalization and on reactive or anticipatory actions by individuals or public institutions. Similarly, the level of vulnerability varies between demographic groups within society. Generally, the poorer and less empowered individuals are more vulnerable to climate impacts, and the vulnerability of fisheries is likely to be higher where they already suffer from overexploitation or overcapacity. (Cochrane et al., 2009)

Options to increase resilience and adaptability through improved fisheries and aquaculture management include the adoption of standard practices of adaptive and precautionary management. Aquaculture insurance is one of the options for frequent severe weather events. Strategies for reducing vulnerabilities of fishing and fish farming communities have to address measures including investment and capacity building on improved forecasting; early warning systems; safer harbours and landings; and safety at sea. More generally, adaptation strategies should promote disaster risk management, including disaster preparedness, and integrated coastal area management. (Daw et al., 2009)

The socio economic index approaches have been introduced to lead sustainable farming and livestock systems. These indicators can be modified and used to monitor the fisheries sector performance as well to scale up the adaptation activities of Sri Lankan fishermen. Researchers have identified social stability, economic stability and environmental stabilityas the essential components of such indicators. The input management, natural resources management, wellbeing of farm community and overall sustainability are measured by these indicators. These could also be adapted to the fisheries sector.

Further, some studies have shown that although the communities have adapted to climate change throughout history, projected climate change includes multiple additional risks to fishery dependent communities that might limit the effectiveness of past adaptive strategies. Therefore, some adaptation strategies will require to be context and location specific and to consider impacts both short-term (e.g. increased frequency of severe events) and long-term (e.g.reduced productivity of aquatic ecosystems). Adaptation of communities will clearly require and benefit from stronger capacity building, through creation ofawareness on climate change impacts on fisheries and aquaculture, promotion of general education and targeted initiatives in and outside the sector. (Daw et al.,2009 )

How the link should perform

A practice is required consisting of multi sectorial methods. In this regard, the socio economic knowledge should be coupled with scientific actions. The link needs to be built in many prominent areas. One such area is scientific weather forecasting and dissemination. There is a dire necessity tofill this communicating gap in scientific climate information systems.People should be given accurate details via proper channels which have easy access and reliability etc. This increases the adaptation capacity of the fishermen.

The concept of sustainable fishery should be practiced with available farm assets with technology. In the same time, the socio economic wellbeing should be improved with introduction of livelihood improvement activities like differentiation of incomes, entrepreneurship development etc. In this regard, micro credit facilities, investment opportunities, gender based economic activities like processing maldive fish and infrastructure development are essential. Some of these things have already started in Sri Lanka. However, building awareness and resilience via suitable adaptation is needed to improve. In this regard, location specific characters should be identified in both scientific and socio economic parameters. The culture and historical background are important in such mobilizations.

Education and extension are major components of the socio economic approach. The fishermen need to be aware about the scientific methods and advance management practices to withstand the losses and damages. This link could help them to be more updated.

Fishermen need to introduce good management practices to prevent the possible quality and quantity losses. At the same time, knowledge in financial management and business is important. The youth need to be provided training and more opportunities to get the technology and available practices to catch export markets. In this regard, as a socio economic approach, the fishing community based organizations need to be provided training sessions on packaging, quality assurance, value addition etc.

Community mapping can be done based on the vulnerability levels by considering both geological and socio economic characteristics. The proposed socio economic indicators are important in this regard. This could help to identify the needy people and establish small villages with different production levels.

Conclusion

The socio economic approach and scientific approach should link to avoid the potential climate change impacts on fisheries sector and people. This will help them to withstand the possible income losses due to production loss, high cost and loss of original livelihoods.

References

Badjeck, M.C., Allison, E.H., Halls, A.S. and Dulvy, N.K., 2010. Impacts of climate variability and change on fishery-based livelihoods. Marine policy, 34(3), pp.375-383.

Brander, K.M., 2007. Global fish production and climate change. Proceedings of the National Academy of Sciences, 104(50), pp.19709-19714.

Cheung, W.W., Lam, V.W., Sarmiento, J.L., Kearney, K., Watson, R.E.G., Zeller, D. and Pauly, D., 2010. Large‐scale redistribution of maximum fisheries catch potential in the global ocean under climate change. Global Change Biology, 16(1), pp.24-35.

Cinner, J.E., McClanahan, T.R., Graham, N.A.J., Daw, T.M., Maina, J., Stead, S.M., Wamukota, A., Brown, K. and Bodin, Ö., 2012. Vulnerability of coastal communities to key impacts of climate change on coral reef fisheries. Global Environmental Change, 22(1), pp.12-20.

Cochrane, K., De Young, C., Soto, D. and Bahri, T., 2009. Climate change implications for fisheries and aquaculture. FAO Fisheries and aquaculture technical paper, 530, p.212.

Daw, T., Adger, W.N., Brown, K. and Badjeck, M.C., 2009. Climate change and capture fisheries: potential impacts, adaptation and mitigation. Climate change implications for fisheries and aquaculture: overview of current scientific knowledge. FAO Fisheries and Aquaculture Technical Paper, 530, pp.107-150.

NAPCC, Ministry of Mahaweli Development and Environment (2015) National Adaptation

Plan for Climate Change impacts in Sri Lanka 2016-2025, pp. 3

http://www.climatechange.lk/NAP/NationalAdaptationPlan_RevisedFinal.26.10.2015.pdf

Pauly, D. and Kinne, O., 2010. Gasping fish and panting squids: oxygen, temperature and the growth of water-breathing animals (Vol. 22). Oldendorf, Germany: International Ecology Institute.

Perry, A.L., Low, P.J., Ellis, J.R. and Reynolds, J.D., 2005. Climate change and distribution shifts in marine fishes. science, 308(5730), pp.1912-1915.

Pörtner, H.O. and Knust, R., 2007. Climate change affects marine fishes through the oxygen limitation of thermal tolerance. science, 315(5808), pp.95-97

Rice, J.C. and Garcia, S.M., 2011. Fisheries, food security, climate change, and biodiversity: characteristics of the sector and perspectives on emerging issues. ICES Journal of Marine Science: Journal du Conseil, 68(6), pp.1343-1353.

Senarathne,A.,N.Perera and K.Wickramasinghe (2009).Mainstraining Climate Change for Sustainable Development in Sri Lanka; Towards a National Agenda for Action .Research Studiies;working paper series No.14.institute of Policy Studies of Sri Lanaka, Colombo,Sri Lanka

Sumaila, U.R., Cheung, W.W., Lam, V.W., Pauly, D. and Herrick, S., 2011. Climate change impacts on the biophysics and economics of world fisheries. Nature climate change, 1(9), pp.449-456.

Unseen Negatives of Human Elephant conflict: Daily News paper article of Kapila Premarathne

Unseen Negatives of Human Elephant conflict: Article published in Daily News paper by  Kapila Premarathne

Unseen conflict of seeing Human Elephant Conflict (HEC)

F

armers and elephants are being struggled each other to protect their territory from a couple of decades in Sri Lanka. The struggle is being taken a vast attention on the local News columns frequently due to property damages, crop raiding and injuries. Further, death incidents of both elephants and humans reported frequently showing the severity of the struggle. People’s voice is being raised from decades in search of measures and sustainable solutions. These ongoing arguments emphasize the necessity of a dialogue on mitigation of Human Elephant Conflict (HEC).

Respective government agencies have concerned the issue in to a great extent. However, the implemented mechanisms like electric fencing have not addressed the issue completely. This failure has created many negative impacts on both elephants and humans by today. According to the statistics of the Department of Wildlife Conservation (DWC), a huge losses and damages have been reported annually due to this struggle.

Year	Elephant Death count	Human death count	Property damage incidents	Human Injuries
2008	224	71	684	63
2009	228	50	827	40
2010	227	81	1997	83
2011	255	60	1225	55
2012	250	79	3183	60

Source: Performance Reports : Department of Wildlife Conservation

The department of wild life showed a huge amount of public money has been using for the compensation for the damages annually. This is the known and frequently spoken picture of the study in most of the cases.

However the unseen picture tells something differently yet critically, in this concern, many things can be critically concentrated. If we focus on them, the existing monetary compensation schemes (what we generally speak) may help victims to build their livelihoods in to a certain smaller extent. However, the unseen and uncompensated cost components will lead them to a problematic situation in many ways. In this concern, Cost components like incurred labour and incurred time for the crops and plantations, house buildings would not be considered in the existing compensations. For instant, a significant damage to a mature coconut cultivation that caused by elephants ,which  gives nuts may not be compensated without considering the labour, effort and the incurred lifespan of the farmer. Moreover, the actions that are made on protection of crop lands, adaptation measures and risk mitigating practices on personal desires may not be accounted and will be remained as unseen costs. These unseen costs would be rest upon the shoulders of the individual farmers.

On this backdrop, Monitory compensations purely based on the market values and estimations are smaller than the actual damages. The existing monetary compensation schemes help farmers to build the resilience inadequately and somewhat slowly. A severe shock may take many years to recover with this small compensations and supports. Thus the compensations must be given to cover at least some portion of unseen costs by considering the ideas of victims. Stake holder discussions and farmer centric strategies are needed to be implemented to identify the appropriate compensations. For instance, similar issues have been researched in African countries and have identified the importance of unseen cost components.

Nevertheless, the restoring process after a shock may require some other supports like house building materials, farm equipments, proper coordination, awareness and management. These non monetary supports are also critical even though, the highly liquidize money is mostly preferred by farmers and   frequently offered as a compensation.  

 Development of lands and investments are also risky choices as a result of the perusing conflicts with elephants in areas where struggle exists. Further, it has reduced the land values and created poor markets for real estates. Migration or selling their property in search of new safe habitats has been limited by the conflict itself. Thus, they have trapped in a frame which is uncommon and unseen in generally elsewhere in the Island. All these matters are needed to be uncovered by opening a proper dialogue on behalf of the victims.

The frequent encounters and expectations of such situations could affect badly on the mind sets and reduce the mental freedom what we experience normally in our lives. This fear and unpleasant situations may cause to the disappointment and limited the expectations of farmers. This also has been researched in African countries where similar issues exist .it has been observed that the affected people have poor mental freedom in particular studies.

 Moreover, Farmers’ farm investment decisions have been affected by this phenomenon badly and has resulted poor income opportunities from their factors of production comparing to other farmers who share similar characters. For instance, their decision making criteria has an additional risk component due to elephant encounters in contrast to other farmers. This may result limited selection of crops and combinations. This opportunity cost of selection   would add poor financial returns in comparison to other farmers. Nevertheless, their daily routings have to be planned by considering the unexpected elephant encounters. Therefore,   actions like carrying children to schools in the morning and carrying after school, taking a patient to a hospital in the night times have to perform in a more careful manner with mandatory supervision. These actions may require additional efforts, labour and time than to other rural people elsewhere in the Island. Therefore, in the economic perspective, they have a high cost and time consideration for their day today actions.

When considering the elephants as a resource to a particular area, two parties can be identified clearly that benefited differently at the same time. In contrast, one party is positively benefited because of the presence of elephants. Those are tourist hotel owners and shop owners, especially near the park areas. Due to the highest tourist attraction, those parties are enjoying financial benefits and better-off due to the elephants. On the other hand, farmers are worse-off due to the same group of elephants because of crop raiding and property damages. They experience threats and struggle to live while sacrificing their leisure and happy against elephant threats .This emphasizes the necessity of a proper monetary compensation to the people who take the negative externality of the resource. However, this hidden cost component is not addressed or no measure has taken into concern effectively to distribute the benefits equally yet. Thus it is good to use a proper benefit transfer method such as an additional hotel fee or fund to take care the victims in the corresponding areas. In this regard, the awareness of the all the stakeholders and their mutual understanding is important. Farmers don’t engage or benefited usually from tourism. Thus, opening chances for selling their harvests to hotels or arranging special markets will distribute some benefits to the farmers.  Promoting non agricultural income activities via small industries like handicraft making etc, focusing on tourism may divert their income sources. Such activities   may contribute to change their attitudes towards the elephants in a good direction and reduce   cruelty towards them.

When considering the elephants, they are the opposite side of the same coin. They seek food and drinks when they face a scarcity in the jungle. Especially, it is observed   frequent crop raidings and encounters during the drier seasons. This emphasizes the importance of consideration of the ongoing climate change turbulences when planning elephant conservation mechanisms and farmer adaptation mechanisms. These adaptation mechanisms may require precise weather forecasts or climate information products (CIP). Thus, these actions may have aggregated costs to the society as an example for the research and development of such farmer specific weather information dissemination systems. Nevertheless, individual costs also may result due to certain adaptation practices like irrigation and cultivate crops which have less elephant attraction etc. to avoid perusing risks.

Importantly, some farmer practices also have been observed which causes losses to the farmers themselves, as an example, many farmers have cultivated up to the margin of the protected lands without considering the importance of established buffer zones. Nevertheless, elephants’ favoured crops have been cultivated very close to the electric fence which provides a certain inspiration for the elephants to trespass the fence boundary. These kinds of cultivations are highly vulnerable to damages and losses. Therefore, it can be mentioned clearly that some farmer actions too have contributed to create conflict situations.

Some available protection mechanisms require more public participation (effort) and attention for their successive use. As an example bio fencing process may require more public attention. This Palmyra bio fences are efficient in controlling the elephant trespass the park border. However, certain   actions like uprooting the young Palmyra trees for sending cattle to feed in the jungle prevent the fututure successive role of the fence. In this regard, the cattle owners usually uproot them at seedling stage ignoring its importance. This wastes public money which used in the establishment of the bio fence system and again calls for public money for compensations.

 Some plant species have law elephant attention and inherent dislike .in this regard, fruit plants like lemon and  medicinal plants like Malabar nut (Adhathodavasica) (Sinhalese Pawatta/ Adathoda)  can be cultivated to discourage elephant trespass. These plants help to earn a small income while repealing elephants. These actions need more effort and farmer dedication   because the successes of these things are more farmers depended. These additional actions usually remain as unseen component behind the big picture.

This information was found by a research that conducted in Udawalwe National Park area in 2016. Even though, the research has been carried out in Udawala area, this information and context have a validation to many areas in Sri Lanka where this struggle exists. Moreover, the particular findings fitted with the similar research findings which have undergone especially in the African region also.

Finally, as possible remedial measures, socio economic approaches are important to link with the scientific actions like electric fencing etc. The integration can lead the society towards the seeking sustainable solution. For instance, proper compensation mechanisms that included hidden costs are required as highlighted to build the resilience of those who were affected already. The climate and weather related information gap must be filled with suitable research actions to forecast possible threats early. Social welfare and equal deviance of the benefits from the elephants must ensure among the all the beneficiaries via proper price mechanisms and externality charges. Farmer adaptations to avoid elephant threats by cultivating suitable low attraction crops and possible practices should be promoted to help them. Participatory management approaches like already existing “Gaja mithuro” programme must be promoted along with suitable extension works.    

By Kapila chinthaka

Lecture in Department of Agricultural systems, Faculty of Agriculture, Rajarata University of Sri Lanka

Warehouse receipts; Commodity finance approach to solve marketing and financial issues of farmers

Inadequate market prices and price fluctuations are observed in Sri Lankan market for storable agricultural products frequently. Specially, low market prices are observed during harvest seasons. In this connection, paddy, onion are prominent.  Poorly organized market channels are frequently criticized by farmers.  Famers have no opportunity to store their products and sell them later at higher prices due to poor storage facilities and short term financial requirements.   Most of the farm products like paddy, spices, onion, cereals are storable products for a significant time. But farmers have to sell them at lower prices after harvest. Moreover, farmers face hardships to find financial sources to purchase inputs for their cultivations. Financial intuitions require collateral and securities for borrowings. Farmers have no such securities. As a result of this, farmers have limited working capital.   The storage facilities and financial opportunities for the short term cash requirements can be provided by introducing commodity finance approach. This approach is being practised successfully in many other countries. This is named as warehouse receipt finance as well.

How commodity finance system works

The commodity finance method has been practiced with many commodities including agricultural products around the world. In this concern, grain warehouse receipts were first used in Mesopotamia in 2400 BC. A warehouse receipt is the document that issued by warehouse operator by the depositor’s name as evidence to the storage of the specified commodity by indicating the quantity and quality and location of the particular warehouse.  This provides the confidence for the depositors   that their commodities will be stored with guaranteed quality and quantity. The depositor of the commodity may be a producer, farmer group, trader, exporter, processor or any individual or corporate body.  These warehouse receipts are negotiable financial instruments. They can be traded, sold, exchanged, and used as collateral to support for short term financing requirements of the farmers.

The warehouse    keeps the stores of commodity in a way of safe custody.  Implying that warehouse is legally liable to value lost through theft, pest, moisture or damage by fire and other catastrophes. However, in case of liquidation of the warehouse operator, warehouse operator’s creditors will not be able to seek right to the commodities stored since, legal title remains with the depositor or holder of the receipt. The   warehouse operator is eligible to cost for covering storage costs.  If the depositor requires financing, financing can be obtained as an advance loan from a bank using the warehoused crop as collateral by presenting the receipts. The depositor (borrower) is required that payment for the commodity is channelled through the financing bank. The bank in turn deducts the loan advanced and interests or other charges before crediting the account of the depositor the balance. The depositor has to pay storage and where applicable collateral management fees for the storage.

Why commodity finance system is needed and its benefits

Agricultural production and trade is dealt with low margins and high uncertainties. In this regard, finding credit for agricultural inputs is an issue for many Sri Lankan farmers. This risky nature keeps financiers and investors away from farmers. Physical collateral like land and machinery is rarely used in agriculture finance due to the liquidity issues. This method would be beneficial for rural small and medium agricultural enterprises which are often have poor working capital due to lack of sufficient loan collateral. Efficient warehouse receipt finance allows farmers to avoid direct sales soon after harvest at low prices. Commodities are stored by reducing costs and increasing liquidity in the supply chain against price volatilities. Farmers are provided incentives to invest in crop production. That will be a good solution to enrich the local food supply chains. Moreover, the warehouse receipt finance can increase the export earnings from agricultural products. For instance spice supply chains can be strengthened by this method. Spice collectors and producers can store bulks and sell them at higher prices later. Farmer income can be improved. On the other hand, the financial institutions are also benefited by this warehouse receipts. For instant, the financial institutions which provide short term financial requirements by accepting warehouse receipts as collateral are able to reach a higher level of liquidity because stored commodities have clear market prices and gain the right access to claim the collateral before other creditors. The banks will receive a higher level of protection of the collateral enforced both by the good management practices of the licensed warehouse and the supervision of the regulatory agency. Further, commodity finance will help to smooth the domestic prices by providing an instrument to farmers to spread sales throughout the crop year. Forward markets will enhance the price discovery for the stored markets. This kind of finance mechanism can help to reduce the role of government in agricultural commercialization and pricing in the long term.
Warehouses in other countries
This commodity finance scheme has been introduced to farmers in different countries in Africa and Asia. For instance; Tanzania, Kenya, Zambia, India, Indonesia and Philippines etc. The commodity finance has usefully practised for cereals like paddy and corn in particular countries.  A research that has undergone in Zambia, has pointed out that rural borrowers were not attractive to financial institutes, because institutions perceived farmers as high risk borrowers due to poor income and less core lateral.  The particular issue has been successfully addressed by using warehouse receipt financing in Zambia.    This system is highly promoted in African continent. For instance;   Mali, Senegal and Guinea has studied to establish a system that benefited by three countries.  Particular study has found that stakeholder trust is the major factor for the success of warehouse receipt finance.   There for the conclusion was, trust must be supported by an appropriate legal environment.  United States Department of Agriculture (USDA) has facilitated post-harvest Inventory financing with the government guarantees to overcome farmers’ cash-flow constraints as collateral for standard nine-month loan programs and to facilitate marketing   crops. Further as inventory documentation for government owned grain that stored in privately owned warehouses and as a   collateral for crops held in commercial storage ( Ex ; Grain milling companies)

Warehouse receipt finance system in Serbia has implemented because, government subsidies and banking loans have failed to provide sufficient funds to farmers.  In Indonesia, this system was established by government   to overcome the low commodity prices during the harvesting time.   However, it has emphasized that coordination   among the government, other stakeholders are as important to smooth run. Central Asian and Eastern Europe countries have   introduced   the commodity finance system especially after the collapse of the Soviet Union. Countries like Bulgaria, Kazakhstan, Hungary, Slovakia and Lithuania have advanced warehouse receipt financing systems with proper legal frameworks. Nevertheless, warehouse receipts issued by public warehouses play a significant role in commodity-based financing in these countries.  Countries like   Poland, the Russian Federation, Turkey, Ukraine, Romania, Moldova, Serbia and Croatia have moderately developed warehouse receipt financing systems. Most of these countries have adopted   primary legislation to support the warehouse receipt finance systems. In conclusion, many countries have promoted this commodity finance with suitable crops and regulations.

Conditions require for a commodity finance system

The importance of agreement and commitment between government institutions and market participants has been highlighted by studies on the success of commodity finance schemes. Further, the studies have emphasized the political will and understanding of the benefits that the system could bring to its participants are as significantly important factors for the smooth run of the system. Moreover, commodity finance system should develop to cover all aspects including inspection, supervision and performance guarantees. That is extremely important to prevent system failures. In this connection, the creation of ‘Government regulatory Agency’ which is responsible for the licensing, regulatory and inspection procedures of the public warehouses is the most common and accepted system for control of the commodity finance system. For instance; these facts have been emphasized by the Department of Banking Operations and Development (India) when warehouse receipt finance system was implemented in India (2006-07).

Since, private sector participation is important in practice commodity finance, Government should establish a licensing and inspection procedure to maintain standards in both financial assets and physical assets and the quality of the stored products. However, inspection of warehouses, inspection of financial institutions and quality determination, grading and independent verification of stored commodities also can be performed under government licensed local or international companies.

The legal enforcement has been emphasized by many research studies on this system. These legal requirements are basically to ensure the creditability and reduce the risk to the financial institutions. For the success of warehouse receipt finance, the rights, liabilities and duties of each party to a warehouse receipt must be clearly defined. It has found that, the financial institutions, traders and warehouse managers have concerned highly the legal aspects. This emphasizes the requirement of new laws like in other other countries. These laws are required to ensure, the acceptance of warehouse receipts as financial instrument that can be exchanged and traded. In this regard, Warehouse receipts must be freely transferable by delivery and approval; the owner of a warehouse receipt must be first in line to receive the stored goods or their agent on liquidation or non-payment of the warehouse receipt; specified time period that to accept the commodity to storage; The reliability of the warehouse receipt system must be assured by suitable insurance scheme which accepted by the other financial institutions.

Some commodity characteristics and market characteristics required to create sufficient incentives for market participants to use warehouse receipt finance. In this concern, the quality of a commodity as collateral is determined by: storability; the prevailing quality certification methods and grades; market transparency; price volatility; liquidation costs; costs of finance and government policies like importation and price control.

Limitation and challenges

Future price predictions are important in commodity finance. Price risk arises due to the variation in general market price level as reflected in the futures market. Basis price is a function of several factors including storage cost, transportation costs, handling costs and processing margin, quality and local supply and demand. In this concern, areas of surplus commodity will have a lower basis level than areas with a deficit. Moreover, similarly a higher quality or grade cash commodity will have higher basis level than a lesser grade or quality of the same trade. Government price policies and importations also have a severe impact on the success of WHRF finance system. Imports to control the domestic prices would have an impact to the system to set prices that cover the storage cost and profit from stored products. In warehouse receipt finance, the bank holds the credit risk from the borrower to the warehouse that issuing the warehouse receipt. The financial strength of the warehouse operator is crucial for the proper functioning of a warehouse receipt system. Possible frauds and fake ware house receipt are also needed to be concerned since such cases have been reported. For instance; in late 2008, several Hungarian banks found that they had provided finance to warehouse receipts that they thought were issued by public warehouses, but that had really issued by private warehouses .From the policy perspective, such experiences indicate the need of a legal and regulatory framework, including establishing a licensing system for public warehouses to avoid misuses or issuing fake warehouse receipts. Further this indicates the importance of raising the banks’ awareness and trust building activities of stakeholders as necessary conditions.

By Kapila Premarathne, Lecturer, Department of Agricultural Systems, Faculty of Agriculture, Rajarata University of Sri Lanka