as raw nuts. An inter-store price %yas negotiated between the coopetive unions and the TCMB, ostensibly geared toward enabling the unions to recover their procurement and wider operating costs.

At approximately the same time, the Second Cashewnut Development Project was restructured, with the remaining undisbursed funds going toward a pilot program of applied research, extension and training.' Under this program, the powdery mildew problem was investigated and farmers were encouraged to dust their trees with sulphur as a remedy. Such efforts were geared toward reversing the decline in production yields, thus stimulating farmers to harvest their crop. In addition to the technical measures, official producer prices were increased in real terms from the 1987/88 season onward3" Such measures, however, were overwhelmed by inefficiencies and graft in the marketing system. The cooperative unions, iacking strong managerial capabilities and having weak accounting systems, were not effective in performing their functions and also built up huge arrears on their bank loans.<sup>2</sup> 1 These financial problems fed down through the system with cooperative societies being able to purchase the cashew crop only on an erratic basis and making payments to farmers only after several months.' In several years, large quantities of nuts remained unsold at the farm or village level at the end of the buying season. Between cooperative societies and unions, significant quantities of nuts 'leaked' out of the system. A total breakdown in the system of grading also occurred, with more than 95% of nuts delivered during the late 1980s being classified as standard (e.g. first) grade.<sup>3</sup> Declining marketed production and problematic buying agents were important, yet not the only factors constraining the operations of the TCMB during this period. Foreign exchange shortages led to shortages in spare parts and oil to operate the factories. At the same time, the factories were required to make employees permanent after only three months of work. This greatly added to labor costs for factories which operated only 100 or fewer days per year. Even in the procurement of nuts, the factories ran into barriers set up by local authorities who viewed the factories as local assets and thus sought to prevent local nuts being transported to otier factories for processing. Between 1985 and 1990, nine factories were closed entirely, while the three others operated only intermittently. The value added from processing was either negadve or too low to cover processing costs. Raw nut exports also plummeted, reaching below 7500 in 1989/90.31 Table 7 provides various indicators of performance for the industry over the L984/85 to 1990/91 period, while Table 8 summarizes the limited utilization of Tanzania's large-scale, state-of-the-art processing factories. 26This was the Cashew Production Improvement Pilot Project.

_n_ The exten **t** o which farmers realized these higher prices is not clear. During this period, local cesses (for education, building, and other fimds) on cashew nuts, paid either by farmers or by cooperative societies, were increased significantly. One thing is clear, however. Farmers benefitted little or none from the large international price increase over the 1986-88 period, with windfaU profits accruing to the TCMB.

**23** This analysis is based on Duncan (1988) and cooperative union records.

**29** Farmers were also directed taxed to cover for cooperative union losses via excessive deductions for 'shrinkages' between the farm-gate and cooperative union delivery to the TCMB.

30 Historically, 80-85% of nuts were graded as standard grade.

31 During this period, the TCMB began to mix nuts from different locations, completely undermining foreign buyer confidence in Tanzania' **s** ystem of grading and weakening the tender systerm Concerns were also expressed about the non-transparency of the tender system, with the possibility of private interests overriding public interest.

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