Towards a Sustainable Cocoa Economy:Rural transformation of West African cocoa communities – how?

Towards a Sustainable Cocoa Economy:

Rural transformation of West African cocoa communities –

how?S. Weise

Sustainable Tree Crops ProgramInternational Institute of Tropical Agriculture

September 15, 2008Ibadan

0

0.5

1

1.5

2

2.5

coco

acit

rus

oil palm

coco

nuts

mangoco

ffee

papaya tea

cash

ewru

bber

shea

nut

avocado

kolanut

Commodity

Billions USD $

Relative size of tree crop sectors in SSA

(FAOSTAT 2004)

Economics of Cocoa

• Annual global production = 3.5 million tons

• Annual increase in demand = avg. 3% per year

• W. Africa supplies ca. 70% of world production worth US$ 3.5 billion

• Ca. 2 million farms in W. Africa on ca. 5 million ha of land

• Smallholder crop based on household labour and with a size of 3 to 7 ha

• 50-70% of household income from cocoa

The Backdrop

Productivity Stagnation

Indonesia

4.3% Yield

growth

0

200

400

600

800

1000

1200

1400

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

YEAR

yie

ld (

kg

/ha)

West Africa

1.0% Yield

growth

0

100

200

300

400

500

600

700

800

900

1000

Cameroon Ghana Nigeria Cote d'Ivoire All

country

yie

ld (

kg

/ha

)

1st quartile

2nd quartile

3rd quartile

4th quartile

Cocoa Yields by Production Quartiles

Larger producers

have higher yields

Source 2000/2001 STCP Baseline Survey

0

50

100

150

200

250

300

350

400

450

less

than

130

0

(-10

50,-1

000]

(-75

0,-7

00]

(-45

0,-4

00]

(-15

0,-1

00]

(150

,200

]

(450

,500

]

(750

,800

]

(105

0,11

00]

(135

0,14

00]

(165

0,17

00]

(195

0,20

00]

(225

0,23

00]

(255

0,26

00]

(285

0,29

00]

(315

0,32

00]

(345

0,35

00]

(375

0,38

00]

(405

0,41

00]

(435

0,44

00]

(465

0,47

00]

(495

0,50

00]

(525

0,53

00]

net returns to investment & mgt (2001 USD$)

fre

qu

en

cy

Mean = $233 per household

Median = $33 per household

Proportion with negative returns= 44%

Profitability of Cocoa Farming in West Africa

Source 2000/2001 STCP Baseline Survey

What is the greatest threat to the cocoa supply?

Low income of cocoa farmers

Summary facts:

• Productivity has stagnated (1% over 10yrs)

• 50% of farmers with yields less than 300 kg/ha

• Majority of farmers sell a few bags of cocoa 3 to 4 times a year

• Largest 25% of farmers produce 2/3 of total revenues

• Ca. 1/3 of farmers have a net negative return to their investments in cocoa

• Youth want to get out (all of over 125 interviewed)

The Development Context

So what is the fundamental research question?

What is required to efficiently and effectively increase the income of cocoa farmers and cocoa communities?

And how can this be done in an environmentally and socially responsible manner, and ensuring the competitiveness of the sector?

The R4D Context

Need to prioritize research accordingly

Need to ensure research is development driven

Need to introduce innovations at different levels

Sustainable Tree CropsDevelopment Alliance

Supported a 3-year Regional Action Plan in 5 West African countries (2003-2006): Ghana, Cameroon, Cote d‟Ivoire, Nigeria, (Guinea)

With the intention to expand the original

Alliance to government agencies, development

groups and industry to increase the number of

beneficiaries and enhance future development

Radiates from the core alliance formed in 1998

between Global Cocoa & Chocolate Industry /

Trade and USAID

INNOVATION PLATFORM that brings together public and private partners with a common interest:

Promoting production and marketing of quality tree crops

Improving market access and income for smallholder producers

Creating systems that are environmentally friendly, socially responsible and economically sustainable

Sustainable Tree Crops Program

Tree crops as an engine of rural development

Synergies of the Partnership

Public Sector

Country and regional understanding, deep knowledge of development and networks of

expertise, financing capacity

Private Sector

Market discipline, integrated technologies, specific knowledge of industry, skills and experience to

better design market focused activities

Farmer Organizations

Ensure that priority needs of the farmers are addressed, willing to contribute directly as

benefits become evident

Pilot Phase 2003-2006:

“making knowledge and technologies work”

Introduced Innovations

• Regional approach to cocoa production, marketing and research

• National networks and strategic alliances allowing for communication between regional and national partners and across stakeholders

• Farmer organizations linking production with the supply chain, and providing a conduit for the transfer of knowledge and technologies

• Linking social messages with technical ones (child labour and HIV/AIDS)

• Participatory approaches building the skills of farmers, e.g. Field Schools and Field Research

Farmer Field Schools „03-‟05

• Farmer training curriculum on cocoa integrated crop, pest & quality management, child labour sensitization

• Trainers from extension services and farmer organizations together

• >150 trainers in 4 countries, >13,000 farmers in FFS, >26,000 farmers associated

FFS 2003 Graduates

• Cameroon: 41% greater yields; 20% lower fungicide use

• Nigeria: 17% greater yields and 12% lower fungicide use when farmers transmit knowledge to sharecroppers; younger farmers also perform better

• Ghana: 15% greater yields

• Cote d‟Ivoire: 25% greater yields

Change in Revenue

US$ 317

US$ 440

US$ 36

US$ 92

(area, price, yield, labour, agrochem)

Decision-making Skills:

• 59% of graduates make observations before making management decisions

Social Capital:

• 77% transfer skills

Empowerment:

• 41% appreciate benefits of group learning/work

Change in Attitude:

• “Before I used to neglect my work, now I take it seriously”

FFS 2004 Graduates

Farmer Organizations

• Systematic approach to strengthening farmer organizations (SOCODEVI)

• 15 large farmer coops linked to over 31,000 farmers in 4 countries

• Improved market access, information, confidence, and transparency

• Farmers receiving 5-15% better prices and improving quality

Group Learning & Sales

Cameroon Cote d‟Ivoire

Yield increase (kg/ha) 72 40

Price individual ($/kg) 1.03 0.60

Price collective ($/kg) 1.18 0.63

Gross revenues control ($) 654 511

Gross revenues less costs w/

FFS & group sales ($) 1,015 631

Increase in cocoa income ($) 361 120

55% 23%

Social Issues: Child Labour

• Family household main labour source, including children

• Ca. 1% of HH employ adolescent migrants

• Child slavery and trafficking in cocoa are uncommon

• Children can be exposed to hazardous tasks on farms

• The more children work, the less likely they go to school

FFS 2003 Graduates

For every 1000 farmers sensitized on child labor in FFS will result in the voluntary removal of 210 children from hazardous work on cocoa farms (Ghana)

Identifying Opportunities

Market systems:

Market power exerted by exporters in RCI leading to 9-20% lower farmgate prices

A guaranteed minimum „Fair Trade‟ price applied across the sector would result in market imbalances and wasted resources.

Decoupled payments in the form of communal goods least distorting vs. price supports

Regulated weights and standards (ca. 10% loss)

Responsiveness to quality and pricing

Identifying Opportunities

Rural Credit Markets:

In Cameroon & Nigeria, access to credits resulted in >20% purchased inputs leading to >5% output

In Cameroon, the benefit to cost ratio is between 5-6 for fungicide application

In Cote d‟Ivoire, the benefit to cost ratio is between 5-6 for fertilizer application

Financing of cocoa sales by cooperatives

Identifying Opportunities

Production Research:

IPM of black pod disease using biocontrol agents

Use of pheromones to manage capsids

Rational pesticide use – farmer field research

Integrated soil fertility management

Genetic characterization and diversity of cocoa germplasm collections, breeding material, and plantings in farmers‟ fields

Identifying Opportunities

Diversification:

Cocoa agroforests: Biodiversity, environmental services, local and scientific knowledge, management

In Cameroon and Nigeria, on avg. non-timber forest products contributed 15-20% of gross revenue of a cocoa farm

Access to market a significant limiting factor

Lack of timber rights: timber being cut and sold at a fraction of the value

Limited technical knowledge of complex systems

Looking Forward

• Scale up the successful innovations

• Develop necessary tools and institutional linkages

• Align with national and regional development efforts

• Fill innovation gaps, e.g. intensification,diversificationfinancing systems, institutional arrangements

Phase II 2007-2011:

“contributing to rural income and structural transformation

in cocoa communities”

Agricultural transformation is the process by which individual farms shift from highly diversified, subsistence-oriented production towards more specialized production, oriented towards the market.

The process involves a greater reliance on input and output delivery (marketing) systems and increased integration of agriculture with other sectors of the domestic, regional and international economies.

Rural Transformation

Productivity Growth (intensification):

• Integration of production innovations

(improved planting material, IPM, soil fertility mgt, replanting-regeneration, quality management, labour saving, service providers, financing)

• Lowers costs of production

• Maintains/increases competitiveness and market share

Prices decline

Sector revenues usually decline (inelastic)

Early adopters innovate, increase income, & get bigger

Strategic Element 1

Market Efficiency:

• Integration of marketing innovations

(competitive markets, market information, collective marketing, organized farmers, quality management and responsiveness, value-addition, financing)

• Lowers costs of marketing

Increases farmer prices (if market is freely competitive)

Lowers consumer prices

Strategic Element 2

Non-Adopters:

• Non-competitive producers exit sector

• Meet the needs of these farmers through diversification

(alternative income generation options: cocoa agroforests, other crops, rural enterprises)

Pro-active policies to facilitate transition

Strategic Element 3

Relative share of Cocoa and Non-Cocoa Value in

the $13 billion Cocoa Belt Rural Agricultural

Economy of West Africa

staple crops,

$8.5

fruits, $1.8

vegetables,

$0.9

other

industrial

crops, $0.3

cocoa, $1.5

Cocoa accounts for

approximately 12%

of the farm gate

value in the cocoa

belt of West Africa

(versus 65% for

staple crops).

Cocoa accounts for

2/3rds of the cocoa

household income.

Policy Environment:• Policies & institutions to ensure competitiveness

and allow efficient producers to grow (public & private services, e.g. extension, credit, inputs; knowledge and skills development; incentive systems, e.g. land tenure)

• Policy & institutions to increase marketing efficiency (regulatory framework, e.g. standards; infra-structure)

• Policies & institutions to find alternative income options

Policies to facilitate transformational process

Strategic Element 4

R4D: Research is required along the full stretch of the research and development continuum

Innovation packages: Need to develop, validate and scale up innovation packages that integrate: technical-institutional-financial aspects (FIT-solutions)

Policy reform: Innovation packages need to be accompanied by institutional and policy reform

Local capacity: Strengthening of capacity along the full value chain critical for success

Innovation platform: Public or private sector alone can not make this happen Public-private partnerships

Modus Operandi

Agent of change: STCP/IITA are playing a criticial role by contributing to and fostering a process of change

to contribute to the agricultural transformation of the cocoa belt leading to rural income growth and a sustainable cocoa economy that is environmentally & socially responsible

Modus Operandi

THANK YOU

STCP team:Blaise, Chris, Denis, Isaac, Jim, Jonas, Mac, Mario, Mike, Richard, Sonii, Yapo

Core support by:World Cocoa Foundation and the global

cocoa industryUnited States Agency for International

DevelopmentGovernments/Agencies of Cameroon, Cote d’Ivoire, Ghana, Nigeria, Liberia