September 8, 2017
As the Uganda Improved Legume Seed Pilot finalizes the second season of the first sales period, AgResults is looking forward to seeing how seed companies respond to one of its newest incentive structures: the cold storage option.
The cold storage option of the Uganda Improved Legume Seed Pilot is one of two incentives AgResults is offering to motivate seed companies to produce and sell legume seed to smallholder farmers. This option allows seed companies to store and carry over unsold seed from one season to the next instead of disposing of it as grain. AgResults provides seed companies with the option to rent out a portion of a cold storage container, instead of having to rent the entire container – the industry standard. This will allow seed companies to utilize only the space needed and distribute the cost of a large storage container across multiple seed companies.
In the initial design of the Uganda Improved Legume Seed Pilot did not contain an option for cold storage since it did not appear to be a challenge for seed companies. The original goal was to incentivize seed companies to stretch, which is why AgResults designed a volume guarantee. When the volume guarantee became an unviable option, AgResults met with seed companies to discuss their needs in the face of changing market realities. An overwhelming proportion of the companies said that if they increased seed production they would still be forced to sell unsold legume seed as grain because they do not have the ability to store the legume seed properly.
“While seed companies have yet to utilize this option since it was only recently launched," explained Parasto Hamed, the AgResults Uganda Legume Seed Pilot Field Coordinator, "they seem excited. They have all stated that it is a great option for their businesses.”
AgResults role in the cold storage option is to act as a facilitator, another positive aspect of the incentive. Seed companies will have direct agreements with the cold storage provider and provide them with the final amount of space they will need. From there, AgResults only pays for the unused storage space. By acting only as the facilitator, AgResults hopes that seed companies create lasting business relationships and to continue with this arrangement long after the program ends.
An unforeseen, yet added benefit that AgResults has witnessed is that the carry over seed can be financed and used as collateral when pursuing financing. The cold storage option was launched as part of the new incentive structure of the Uganda Improved Legume Seed Pilot in December 2016. In addition to the cold storage option, AgResults launched an annualized incentive structure which provides participating seed companies with monetary incentives up to a maximum 20% of the increase in legume seed sales relative to the prior year.