Q: What sort of time and resources would farmer business groups invest/donate? What type of agreement would occur for this?
A: Another good question. Bare with me when I explain this. Simply put, the farmers put no additional time and resources in making this happen. Paying back the initial investment will be fully covered by the premium price that can be obtained from selling potatoes off-season.
In practice this will translate to the following scenario: Farmers will be paid for the potatoes they put in the storage. This will be a set price depending on a daily rate (countrywide standard) minus handling and transport costs (which will be determined by the FBG). Per kg this will be 5 to 7 BDT/kg upon arrival (same as on the market). After half a year, the potatoes get sold for 15 to 20 BDT/kg. One third of this price has already gone to the farmers, another third will be used to payback to investment needed to build the storage. The remaining third goes to the farmers in the form of dividend after subtracting operational and maintenance costs. This can be more if the potatoes are sold for a higher price (prices can up to 25 BDT/kg).
Over the course of five to ten years (worst case or best case scenario) the initial invest to build the storage will be fully paid of. Making the farmers the financial owners. Managerial ownership and financial control stays with the FBA. This secures the right decisions will be made to turn the storage in a commercially viable business. This model is relatively straightforward for cooperatives (commonly used in agricultural and dairy coops). It is good to know that in this model, being actual shareholders, the farmers are considered equal business partners.
At the very worst, farmers will receive an income equal to their current earnings, while becoming a storage co-owner. Being quite cautious with our projections, and taking into account revenue from storing other crops, we expect the income will easily be 50% higher. Obviously, this only goes for the first few years, after that farmers have paid off their share they will be able to double their income.
To get back to your worries about collective ownership. We have built-in a couple safety measures to make sure the farmer will only benefit from the collective storage. First, our approach will be very transparent, farmers will be able to monitor their produce and at what price it is being sold, all price-setting and related decision-making will be done before harvest and storage. Second, we will never allow farmers to store all of their produce with us. In case the storage does not turn out to be a success, farmers should be able to fall back on their original sales channels. We do not want create a monopoly and dependency within our own system. Third, to prevent the collectivity to become an inflexible and bureaucratic organization and an administrative mumbo-jumbo, farmers will only become financial shareholders. The storage will be run like a business by the FBA. Just like any other business, it will need sufficient profit to meet its loan obligations, capitalize the company, and pay premium prices to the farmers who supplied produce.
Q: Can you better explain the knowledge center?
A: The knowledge center was originally a part of the storage. Our initial idea was to include a local center that can help farmer with selecting and buying the right seeds, pesticides and tools and get insights on how to best go about farming their potatoes (and potentially other crops). Building an actual center for this next to each and every storage will be overkill. Instead, parallel to this project, we want to set up a knowledge network with the help of private sector partners that can tap into a new market for their products while share knowledge. It is out of the scope for the contribution in this competition.