Benin - Second Borgou Rural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY eR D(77-7 13E7 Report No. 6460-BEN STAFF APPRAISAL REPORT PEOPLE'S REPUBLIC OF BENIN SECOND BORGOU RURAL DEVELOPMENT PROJECT January 12, 1988 Agriculture Operations Country Department I Africa Region 'Uis document has a resticted distribution and may be used by ediplents only in the perfonnance of their offcial dutes. Its contents may not otheise be dbslosed without Wodd Bank authorzation.  CURRENCY EQUIVALENTS Currency Unit CFA Franc (CFAF) US$l = CFAF 295 (October 1987) FF 1 CFAF 50 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS BCEAO - Banque Centrale des Etats de l'Afrique de l'Ouest BCB - Banque Commerciale du Benin BOAD - Banque Ouest-Africaine de Developpement CAA - Caisse Autonome d'Amortissement CAETS - Cooperative Agricole Experimentale de Type Socialiste CARDER - Centre d'Action R6gionale pour le Developpement Rural CCCE - Caisse Centrale de Cooperation Economique CEAO - Communaute Economique de l'Afrique de l'Ouest CFDT - Compagnie Fran,aise pour le Developpement des Textiles CLCAM - Caisse Locale de Credit Agrico.e Mutuel CNCA - CaisRe Nationale de Credit Agricole COBEMAG - Cooperative Beninoise de Materiel Agricole CRCAM - Caisse Regionale de Credit Agricole Mutuel DEP - Direction des Etudes et de la Planification FAO - Food and Agriculture Organization (UN) GRVC - Groupement Revolutionnaire a Vocation Cooperative GV - Groupement Villageois IFAD - International Fund for Agricultural Development MDRAC - Ministere du Developpement Rural et de l'Action Cooperative ONC - Office National des Cerdales OPEC - Organization of Petroleum Exporting Countries RCF - Recherche Coton Fibre SAFGRAD - Semi-Arid Food Grain Research and Development SONAPRA - Societe Nationale pour la Production Agricole SRDR - Service des Routes et des Dessertes Rurales URP - Unites de Recherche et de Production GOVERNMENT FISCAL YEAR January 1 - December 31  FOR OFFCIL USE ONLY PEOPLE' S REPUBLIC OF BENIN SECOND BORGOU RURAL DEVELOPKMENT PROJECT TABLE O CONTENTS Paa SUPPORTING DOCUMENTS ................M............. ............* iii CREDIT AND PROJECT SU oo ooo o......................................... v BASIC DATA SHL.T FOR THE RURAL SECTOR .... o ......................... .,... ix I. BACKGROUND ....................................................o.. 1 II. THE RURAL SECTOR ........................... ................. 1 A. Sector Characteristics I............ ................... ..... 1 B. Sector Institutions . ......... ......... .......... 2 C. Government's Agricultural Objectives & Strategy ............ S D. Experience with Past Lending ................................... 7 E. The First Borgou Rural Development Project ............. o ... 7 F. Recent Developments in the Cotton Sub-Sector.......... ... 9 G. Bank Sector Lending Strategy ................... 11 III THE PROJECT o 12 A. The Project Area . . . 12 B. Project Obje^tives and Summary Description .............. 13 C. Detailed ProJetct Features ........ . 13 lo Rural Development Activities ... is1 2. Institutional Development ... ... . . 1 3. Cotton Sub-Sector Rebabilitation Program .............. 22 D. Project Cost and Financing .. .................. 26 1o Cost Estimates .o. ooo.o.o...o..oo.. . ...oo..o...0 26 2. Financing Plan and Arrangements ......... ........... 29 3. Financing Procedures and Special Project Account....o o 30 4. Procurement ...... ............. ......... 31 5. Allocation and Disbursements of IDA Credit .........oo 33 6. Financial Control, Audit and Reporting Requirements ... 34 This report is based on the findings of an IDAICCCE appraisal mission in May 1986. The mission consisted of J. Baah-Dwomoh, G. Wightwick, A. fah, E. Sinodinos (IDA staff - Western Africa Projects Department), and B. Hirschi (consultant) for IDA. The CCCI team consisted of J.C. DevMse, J.-P. Neumann, and Aerts. The report was checked by Mrs. M.-L. Kpatchibo and the secretarial work done by Mrs. C. Asare. This document hba a _eutd dstubuon nd my be usod by eients on in tb. pMfonnam of their olfcal duies Its contnts may not otwi be diclosd whout Word Dn a _utoutln  - ii - TABLE OF CONTENTS (continued) pafRe E. Project Implementation ................................... 34 1. Extension and Training ............................. 35 2. Research ............... 36 3. Input Supply and Seasonal Credit .................... 36 4. Medium-Term Credit .... ...... . . .. . . . . . . .. ............ 37 F. Production, Markets, Ptices and Farm Incomes ............. 37 1. ;technical Themes ...... ..... . * .... .. ................ . 37 2. Environmental Impact ..................... 39 3. Production ......... ................................. 39 4. Demand, Markets and Prices 9999999999999 ...... ...... . 40 5. Impact on Farm Incomes .............................. 41 G. Project ;ustification and Risks .......................... 42 1. Benefits .............................................. 42 2. Economic Analysis .... .......... ................... 43 3. Economic Ra'ce of Return and Sensitivity Analysis .... 44 4. Project Risks ........... 99999999999999999999 *9.....9 45 IV. AGREMFNIS AND RECOMMENDATION 99999..................... ...... 46 ANNES 2-1 Statement of Policy for a Rehabilitation Program in the Cotton Sub-Sector 2-2 Summary of Measures Already Taken and Measures To Be Taken 2-3 Key Indicators of the First Borgou Project 2-4 Cash Flow of Cotton Sub-Sector 3-1 Stabilization Fund 3-2 Financial Analysis 3-3 Project Cost Summary by Time 3-4 Estimated Disbursement Schedule 3-5 Organizal.ional Chart of CARDENS 3-6 Summary of Technical Recommendations 3-7 Area, Yield and Production Assumptions and Estimates 3-8 Economic Analysis 3-9 Sensitivity Analysis MAPS: 19394R1 Benin Borgou Rural Development Project Supplemental Credit 20637 Benin Borgou Rural Development Project - Principal Centers and Location of Development  - iii - PEOPLE B S PUBLIC OF BENIN SECOND BORGOU RURAL DEVELOPMENT PROJECT SUPPORTING DOCUMENTS A. PROJECT WORKING PAPERS (Available from AFIM) 1. Technical 1.1 Perme Semenciere 1.2 Vulgarisation et Formation 1.3 Le Programme Culturel 1.4 Description Technique du Projet 1.5 Recherche Agronomique 2. Proiect Cost Tables 2.1 Summary Project Costs by Time 2.2 Summary Project Costs by Component 2.3 Detailed Project Costs 1.1 Ddveloppehent Agricole 1.2 Ferme Semenci6re 2.1 Recherche Vivrire 2.2 Recherche Coton Fibre 3.1 Developpement Cooperatif 3.2 Protection de l'Environnement 4. Am6nagements, Puits et Pistes 5.1 Developpement Institutionnel - CARDER Borgou 5.2 Personnel CARDER Borgou 5.3 Vehicules CARDER Borgou 6. Developpement Institutionnel - SONAPRA 7. Developpement Institutionnel - Services Communs 3. Farm Models 3.1 Modbles d'Exploitation - Zone Extreme Nord 1. Culture Manuelle sans coton 2. Culture Manuelle avec coton 3. Culture Atteles avec coton 4. Culture Attelde sans coton 3.2 Modales d'Exploitation - Zone Nord 1. Culture Attelee avec coton 2. Culture Manuelle avec coton 3. Culture Nanuelle sans coton 3.3 Mod4les d'Exploitation - Zone Sud 1. Culture Attelde avec coton 2. Culture Nanuelle avec coton 3. Culture Nanuelle sans coton 3.4 Resume des Activit6s du Projet  _ iv - 4. Farn Budget Analysis 4.1 Zone ExtrOme Nord 1. Culture Manuelle avec coton 4.2 Zone Nord 1. Culture Attel4e avec coton 2. Culturo Manuelle avec coton 3. Culture Nanuelle sans coton 4.3 Zone Sud 1. Culture Attel6e avec coton 2. Culture Manuelle avec coton 3. Culture Manuelle sans coton 4.4 Farm Budget per Hectare - Cotton 4.5 Farm Budget per Hectare - Groandauts 4.6 Farm Budget per hectare - Maize 5. Labor Use by Crop ner Hectare 6. Economic Analvsis 6.1 Economic Farmgate Prices for Cotton, Groundnuts, Maize and Sorghum 6.2 Economic Farmgate Prices for Fertilizer 6.3 DRC & IEC Calculations for Cotton 1984-1989 6.4 Base Case Scenario ERR Calculation 6.5 Alternative Case Scenario ERR Calculation 7. Terms of Reference - Expatriate Staff B. ADDITIONAL SUPPORTING DOCUMENTS 1. Post Appraisal Mission Reports - January 7, 1987 and May 22, 1987 2. Preparation Report - FAO/World Bank Cooperative Program 3. Rapport de Pre-evaluation du Projet Borgou 2 - CCCE 4. Etude de la Filibre Coton au Benin - CCCE 5. Supervision Reports - Cr. 1127-BEN 6. Various Documents on SONAPRA 7. Production, Yield and Area Estimates for Major Crops (1970171 - 1985186) 8. Terms of Reference for Benin Agricultural Sector Study I  - v - PEOPLE'S REPUBLIC OF BENIN SECOND BOR6OU RURAL DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrowers People's Republic of Benin Beneficiaries: Ministry of Rural Development and Couperative Action, SONAPRA, CARDER Borgou, and Stabilization Fund Credit Amounts SDR 15.9 million (US$21 million equivalent) Termst Standard, with 40 years maturity Onlendint Termss Up to CFAP 600 million to Stabilization Fund to be repaid over 15 years, including a five-year grace period at 4Z annual rate of interest Cofinancierss Banque Ouest-Africaine de D4viloppement (BOAD) Caisse Centrale de Coop6ration Economique (CCCE) International Fund for Agricultural Development (TFAD) Proiect The proposed project is in part a conventional DescriDtion: three-year area-based rural development project that follows on the first Borgou Rural Development Project and in part a sector adjustment program to undertake structural reforms in the cotton sub-sector. It aims at: (a) consolidating the substantial gains of the first Borgou Project with specific emphasis on productivity improvements at the farm level and executing agency level; (b) preparing a medium-term restructuring and development program for the rural sector; and (c) reorganizing the cotton sub-sector to improve its financial viability through cost reduction and better financial management of associated agencies. The rural develonment component includes (a) provision of incremental inputs, improved extension and animal traction for farmers in the Borgou Province; (b) applied foodcrop and cotton research; (c) consolidation of farmer groups; (d) environmental protection and infrastructure development programs; (e) pilot rehabilitation of 100 ha of bottomlands and ccastruction/rehabilitation of 65 wells; (f) rehabili- tation and maintenance of about 300 km of feeder roads.  - vi - The institutional comaonent aims at (a) strengthening the financial management and procedures of the CARDER Borgou and SOAPRA; (b) preparing a medium-term development program; (c) establishing a cotton Stabili- zation Fund and a central audit, accounting and financial training unit for the cotton sub-sector as a whole; and td) providing studies and consultant services to help prepare a medium-term restructuring and development program for the rural sector. The aim of the cotton sub-sector rehabilitation arosram is to make it competitive and reestablish its comparative advantage. The main items to be financed are the residual deficit in cotton revenue for 1986-87, resulting from the fall in cotton prices in 1985 and 1986, and a financial restructuring and increase in working capital of agencies involved in the sub-sector. Estimated Proiect Costs Local Foreign Total X of Base Costs US$ million ------ Agricultural Development 3.8 5.5 9.3 15.3 Research 1.7 1.7 3.4 5.6 Cooperative Development 0.7 0.3 1.0 1.7 Environmental Protection 0.1 0.3 0.4 0.7 Bottomland and Well Program 0.3 0.7 1.0 1.7 Rural Roads 1.1 2.9 4.0 6.7 Institutional Development 3.2 7.8 11.0 18.2 Studies and Audits 0.3 2.2 2.5 4.1 Cotton Program Support 6.3 1.1 7.4 12.4 Fiaancial Restructuring 20.3 0.0 20.3 33.7 Base Costs 37.8 22.5 60.3 100.0 Physical Contingencies 1.4 1.7 3.1 5.1 Price Contingencies 1.6 2.3 3.9 6.5 Total Project Costs 40.8 26.5 67.3 (including taxes) Taxes 2.8 -- 2.8 Total Project Costs 38.0 26.5 64.5 (net of taxes) Proposed Financina Plan IDA 11.5 9.5 21.0 BOAD 2.2 4.9 7.1 CCCE 14.6 6.3 20.9 IFAD 4.7 5.8 10.5 Government/Beneficiaries 7.8 7.8 Total 40.8 26.5 67.3  - vii - Estimated IDA Disbursements IDA Fiscal Year 1988 1989 1990 1991 1992 --------------- ns million --------------- Annual 1.0 5.2 4.6 3.0 2.1 Cumulative 1.0 6.2 10.8 13.8 15.9 Proiect Benefits The main direct quantifiable benefits will be the consolidation of yield and production improvemaents achieved under the first Borgou Project in the face of an unfavorable world market situation. The project will help increase production of both food and cash crops, and open up the rural areas and reduce transport costs through the rural road component. It will enable Benin's key productive sub-sector to survive a rather abrupt but expectedly temporary drop in export prices, thereby averting possible severe depression in the economy at large. The project will also help restore the financial viability of the key institutions in the rural sector and, through its research and studies component, look for alternative crops to permit diversification and prepare for the future. Proiect Risks The main risks ares (a) the possibility that international cotton prices may recover more slowly than currently projected; and (b) a negative farmer reaction to the 1987 farmgate cotton price reduction. If low international cotton prices persist for a long time, several adjustments in farm output mix will be necessary. Farmers could also adopt extensive methods of production, reducing Input costs b- following simple technical recommendations on cultural practices. However, in this circumstance, cotton production would be lower than projected in this report. In addition, there is a risk that the market for increased foodcrop production will not materialize due to stagnation in national income. In that case, food production increases will aslo be lower than projected or entail lower food prices, which will benefit the consumers but not the producers. Economic Rate of Returns 252. Mapes IBRD 19394R Benin Borgou Rural Development Project Supplemental Credit 20637 Benin Borgou Rural Development Project Project Area with Principal Centers and Location of Development.  - ix- PEOPLE'S REPUBLtC OF BENIN SECOND BORGOU RURAL DEVJLOPMENT PROJECT BASIC DATA SHMT SOR TME RURAL SECTOR UNIT 1974-76 Av. 1984185 1. Population Total M 3.1 3.9 Rural as S of Total X 90.0 85.0 Rural Families '000 320.0 390.0 2. Economic Overview GDP/Head of Total Population $ 235.0 270.0 (constant 1983) Agric. GDPIRead of Rural Population , $ 116.2 140.0 Agriculture GDP as S of Total S 39.0 44.0 3. Land Use Land Area '000 Sq. km 113.0 113.0 Perennial Crops '000 ha 143.0 135.0 Annual Crops '000 ha 723.7 1042.3 4. Production (Volume Indices) Cotton 100.0 347.6 Maize 100.0 171.9 Sorghum 100.0 164.4 Root Crops 100.0 139.8 5. Inguts Fertilizer '00: tons 7.5 15.8 insecticides '000 1 631.0 940.0 ULV Equipment No. 947.0 2030.0 6. Trade (Current Prices) Total Exports (FOB) $ a 37.4 170 of which Agricultural Products S 72.0 n.a. of whichs Cotton X 29.6 24 Cocoa 1 8.3 25 Palm Products S 20.3 4 Total Imports $ m 185.2 312 of which Agricultural Products X 7.0 35 Cereals I 1.8 n.a. Agricultural Inputs S 0.2 1.9 n.a.s not available  PEOPLE'S REPUBLIC OF BENIN SECOND BORGOU RURAL DEVELOPMENT PROJECT STAFF APPRAISAL REPORT I. BACKGROUND 1.01 The Government of the People's Republic of Benin has requested lDA's assistance in financing the second phase of a rural development project in the Province of Borgou. The project will follow on activities started under the First Borgou Province Rural Development Project (Cr. 1127-BEN), which became effective in March 1982 and was originally scheduled to close in December 1985. The closing date has subsequently been exter4ed to December 1988 to allow for construction and equipment of two ginneries being built under a loan from the French aid agency, Caisse Centrale de Cooperation Economique (CCCE) and a dupplementary credit approved by IDA in April 1986. The basic objectives of the ongoing Borgou Province Rural Development Project, which,aim to increase rural incomes and promote exports by expanding agricultural production through improved technical infrastructure, extension, training, credit, marketing, and other support services, will remain valid for the second phase. Greater emphasis will, however, be placed on farm productivity improvement and the efficiency improvement of rural development institutions. The project will also aim at initiating structural reforms in the rural sector, starting with an action program for the cotton sub-sector during the project period. 1.02 The project has been prepared by the FAO World Bank Coopera- tive Program (FAOICP) in collaboration with officials of the Planning Unit (Direction des Etudes et de la Planification - DEP) of the Ministry of Rural Development and Cooperative Action (MDIRAC) and personnel from the Borgou Province Rural Development Agency, CARDER (Centre d'Action R4gionale pour le Developpement Rural). A joint appraisal mission consisting of IDA and CCCE staff visited Benin in May 1986. The mission was assisted by DEPIMDRAC, management and staff of the CARDER Borgou and the central marketing and input supply agency, SONAPPA, and staff responsible for cotton and foodcrop research in the northern provinces. II. THE RURAL SECTOR A. Sector Characteristics 2.01 Benin has a land area of about 112,600 km' and its population is estimated at 4.3 million in 1987, growing at 3.1X per annum as of 1984. With an estimated per capita GNP of US$280 in 1986, Benin remains one of the poorer nations in the world. Average annual growth rate of GDP has been estimated at 3.42 for the period 1980-85. Agriculture, the  most important eector of the economy, employs about 75? of the active popuiation and accounts for about 45? of GDP and, in recent years, about half of recorded export earnings, in addition to some revenues earned from unofficial exports of foodstuffs. Within the sector, about 721 of the value of output comes from crops, 222 from livestock, and 32 each from fishing and forestry products. Over 95 of rural output is produced by individual small-scale farm units. There is however much diversity in farm size, labor availability, ownership of agricultural capital, productivity and revenues. 2.02 Historically, Benin has been self-sufficient in food production. Between 1976 and 1986 local cereal production in volume terms (principally maize, sorghum and millet) increased at the rate of about 3.92 per annum, higher than the annual population growth rate of 3.12. Root crop production has been much more erratic and has only increased on average at about 1.92 per annum. Rice and wheat imports have risen from about 4? of cereal production in 1970-75 to about 19? in 1979-83. 2.03 The cotton sub-sector has rapldly become one of the more important of the economy. In 1980, ezpDrts of cotton products accounted for about 6? of the value of merchandise exports. This percentage rose to an estimated 24? in 1985 due to the rapid increase in seed cotton production from about 15,000 tons in 1981/82 to 89,000 tons in 1985-86, in response to price incentives and prompt distribution of inputs made possible through rural development projects started in 1982. Between mid 1985 and the first half of 1987, however, world market cotton prices fell drastically to levels about 40 to 50? below the long-term average. Prices are expected to remain low in real terms for the next two to three years. This, together with the appreciation of the CFA Franc relative to the dolla&, means that the sub-sector will face financial difficulties in the next few years and will need to make some adjustments. In view of this, the Government will undertaki- measures to reduce possible deficits, as contained in its Statement of Policy, which includes an action plan for the cotton sub-sector. The Statement of Policy was agreed upon at negotiations and submitted to IDA (paras 3.25 and 4.02(a) and Annex 2-1). A summary of actions already taken and actions to be taken is given in Annex 2.2. B. Sector Institutions 2.04 All rural sector development policy and planning activities fall under the general responsibility and supervision of the Ministry of Rural Development and Cooperative Action (MDRAC). Regional rural development agencies (CARDERs), at the provincial level, and several semi-autonomous state companies at the national level are responsible for executing policy. Central and regional Government institutions have periodically been subject to sweeping staffing changes &t all higher and medium levels. The latest such change occurred in the fall of 1987. While it aimed a,. bringing staff with field experience into the central administration and transferring younger staff to field positions where  - 3 - they can develop some experience (an objective which was not apparent in previous changes), it has created a need for extensive training combined with a reduction in the frequency of such changes in the future. 2.05 The CARDERs' broad mandate covers all aspects of rural development in their respective provinces, including extension, livestock, forestry, credit, input delivery, development and supervision of cooperatives, marketing and, it the case of three of the CARDERs, management of cotton ginneries. The ginneries have however been transferred from the CARDERs to SONAPRA from the 1987/88 season (para 3.24(a)). The CARDERs are also expected to execute various infrastructure projects on force account. As the rural development agency for the Borgou Province, CARDER Borgou has beexs involved in all the above activities. It has up to now been relatively efficient, especially in promoting cotton production and cooperative development, providing agricultural extension and performing primary marketing. It has however been demonstrably weak in the areas of civil works, management of ginneries and general accounting. Nevertheless, with the support of the first Borgou Rural Development Project, much improvement has been made in its accounting situation during the last four years. 2.06 The National Agricultural Production Atency (SONAPRA) has been the official agency responsible for input procurement and export marketing. It plays an important role vis-&-vis the CARDERs and supplies them with fertilizer, insecticide, sprayers and other inputs for distribution to farmers. It also acts as an intermediary with the national banks to obtain credit for inputs. It finances the cotton sub-sector's needs in inputs, primary marketing, transport and ginning. It is responsible for the marketing of all export crops, including cotton, coffee, karite, cashew, and tobacco. It also acts as an intermediary between the CARDERs and SONICOG, the Government agency responsible for fats and oils processing. 2.07 SONAPRA has managed stabilization funds for the various export crops until now: cotton, coffee, cocoa and karite. The audited accounts at the end of 1985 showed the cumulative level of the stabilization funds at about CFAF 13 billion. Until now, however, the true size of the stabilization funds has not been known with certainty owing to the fact that budgeted costs (bareme), on which the stabilization fund estimates were based, were often different from actual costs. Besides, there have been no rules governing the operation of the fund, and hence monies have been withdrawn from the stabilization account for SONAPRA's general operations. A large part of the stabilization funds has been used by SONAPRA to prefinance the cotton sub-sector. The prefinancing needs have increased more than fivefold since 1981/82 because of the rapid expansion of cotton production. Over the past three years for example, SONAPRA has had to bear extra costs not included in the cotton budget, but related to additional storage, transport and processing of the national seed cotton production in excess of ginning capacity. Measures to improve control of the cotton sub-sector's financial management Include the creation of a Stabilization Fund with an independent Management Committee, xhich will also be responsible for supervising the cotton account (para 3.20).  - 4 - 2.08 The Caisse Nationale de Credit Agricole (CNCA) is the national agency responsible for agricultural credit. It has extended credit to state enterprises, the CARDERs and farmer groups. At the provincial level, it has operated through the regional agricultural credit banks (CRCAM) and at the district level through the local agricultural credit banks (CLCAMs). CNCA has extended several credits to non-viable state enterprises and groups and, as a result, has now suspended all its credit activities. The Government is considering a general banking reform which will include CNCA's liquidation. The CRCAMs, which are managerially autonomous, are relatively more efficient and able to continue credit processing in their provinces. Under the project, agricultural credit for fertilizer and insecticides will continue to be channelled through SONAPRA and medium-term credit through the CRCAM of the Borgou Province. 2.09 Agricultural Research responsiblity has recently been transferred from the Ministry of Higher Education to MDRAC. The Department of Agricultural Research (DRA) is the main organization responsible for formulating and implementing agricultural research programs. It works through 13 research and production units (URPs), which comprise research stations, laboratories and research centers. Foodcrop research is conducted on trial sites, but cotton research is directed from Cotonou. In 1985, the International Institute for Tropical Agriculture (IITA) signed a cooperative research agreement with Benin; it opened a station in Cotonou in September 1985. Overall, agricultural research lacks appropriate funding and is supported only partially through some of the ongoing rural development projects such as the first Borgou and the Zou Projects. Up to now, it has had limited impact on foodcrop production. 2.10 The Office National des Cdr4ales (ONC) was established at the end of 1984 to market and guarantee the supply of cereals to the population and agro-industrial units by constituting a security stock. ONC's start-up was delayed at the suggestion of Bank staff to permit the completion of a foodcrop marketing study financed by IDA. The final repo,rt issued in May 1986 and a Food Security Study completed by FAO suggest limiting government intervention in foodcrop marketing. The main recommendations of the reports are that (a) efforts be made to improve village level storage; (b) a system be set up to forecast and diffuse output and price information; and (c) ONC establish and manage a regulatory stock of approximately 12,000 tons of maize (about 32 of 1985186 production) and 1,000 tons of sorghum (12 of 1985186 production) for the country as a whole. In this context, ONC would have to give up most of the 35,000 tons of storage capacity it has since developed, where substantial cereal losses have been registred as a result of improper design and management. These recommendations have been accepted in principle by the Government, and ONC is expected to start operating along the lines recommended by the reports, except for the constitution of the security stock. Bank staff are discussing the overall foodcrop marketing issue with the Government to arrive at an acceptable national policy. The project will support the improvement of village level storage and the information gathering system on prices recommended in the reports (para 3.11).  - 5 - 2.11 The Coogerative Movement. Cooperative development was first attemvA.ed in Benin around 1965 with the introduction of block cultivation. Village groups (GVs) were also created to coordinate fertilizer and other input distribution, extension services and crop marketing. The Government introduced in 1977 the revolutionary cooperative groups (GRVCs), where members had to regroup their individually owned plots into a block and were expected to make independent but coordinated decisions concerning the use of labor, inputs, equipment and cultivation practices. As planned, the GRVCs evolved in 1978 into a *superior' form of farmer organization called Experimental Agricultural Cooperative of the Socialist Type (CAETS), where farmers work together utilizing jointly-owned means of production and share their output based on a point system. Despite official preference for GRVCs and CAETSs, membership has been on the decline and today constitute only 52 of the total number of farmers in the Borgou Province. Because of this lack of interest, the old notion of village groups has been revived. They performed well under the first Borgou Project and their support will continue. The GVs provide numerous farmer services, such as credit, input supply and primary marketing. C. The Government's Agricultural Obiectives and Strategy 2.12 The Government's general rural development objectives (as stated in the Third Development Plan under preparation) are to increase agricultural production to maintain food self-sufficiency; supply raw materials for local processing; and increase export revenue (from both foodcrop and cash crop sales). The implicit objective is to increase rural income. Implicit also is the Government's point of view that food self-sufficiency means ensuring regular supplies of low cost foodstuffs to urban areas, as evidenced by its creation of the ONC to purchase and market cereals (para 2.10). The promotion of cotton has also been a consistent part of Government policy, justified because cotton has proved to be an efficient and profitable use: of domestic resources. Important losses were incurred by the cotton sub-sector in 1986 due to a sharp fall in world cotton prices, but this situation has since reversed itself. 2.13 Past Government attempts at implementing a coherent agricultural strategy have failed (other than for cotton) due to institutional weaknesses and a lack of farmer enthusiasm for many of the policies promoted. Direct Government involvment in the production, procuring and marketing of agricultural products other than cotton have not achieved their intended objectives. This has particularly been the case for farmer cooperatives, state farms and state ranches. The Government started reviewing its approach to agriculture as early as 1982. More recently it has introduced price incentives and removed most subsidies in a stated attempt to promote the private sector. It is, however, in the process of solliciting a US$20 million equivalent credit from the African Develoment Bank to revive three state ranches. The justification of such a project is being questioned under the ongoing discussions between IDA and the Government for the establishment of a structural adjustment program. The weakness of central agricultural  institutions has resulted in a large degree of operational autonomy for the CARDERs, which have become the preferred instrument of foreign lenders for rural development. 2.14 The Government's main effective support to agriculture has been for integrated rural development projects executed through the CARDERs. While these operations are to some extent typical insulated area-development projects, major efforts undeitaken through them in five of the six provinces (Atlantique, Atacora, Borgou, Oueme and Zou) have enabled the Government to extend services to about 952 of the country's land area. The activities and approaches adopted have included similar project components, with obvious variations to account for the economic, social and ecological differences in the zones concerned. 2.15 Various multilateral and bilateral donors, including IDA, have been close partners of Benin in executing these projects. As a result, cotton production which had gradually dropped from an index of 137 in 1972/73 (base 100 in 1970/71) to 40 in 1981/82 (a severe drought year), rose up again to 253 in 1985/86, when climatic conditions were much more favorable. The same year, however, a substantial drop in cotton yields accompanied an equally substantial increase in planted area, indicating that cotton may have started spreading into less suitable soils. Over the last 10 to 15 years, all food production has been cyclically influenced by climatic factors and in particular by the 1980/82 drought. Otherwise, r