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


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Economics of Cocoa,Profitability of Cocoa Farming in West Africa,What is the greatest threat to the cocoa supply?The R4D Context,Sustainable Tree Crops Development Alliance and Program,Synergies of the Partnership

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

  1. 1. Towards a Sustainable Cocoa Economy:Rural transformation of WestAfrican cocoa communities – how? S. Weise Sustainable Tree Crops Program International Institute of Tropical Agriculture September 15, 2008 Ibadan
  2. 2. Relative size of tree crop sectors in SSA 2.5BillionsUSD $ 2 1.5 1 0.5 0 s s o a a r t t co coa citru l palm nut ang offeeapay te shewubbe eanuocado lanu oi coco m c p ca r sh av ko Commodity (FAOSTAT 2004)
  3. 3. 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
  4. 4. The Backdrop Productivity Stagnation 1400 1200 Indonesia 4.3% Yield 1000 growthyield (kg/ha) 800 600 West Africa 1.0% Yield 400 growth 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 YEAR
  5. 5. 1000 Cocoa Yields by Production Quartiles 900 Larger producers 800 have higher yields 700yield (kg/ha) 600 1st quartile 2nd quartile 500 3rd quartile 400 4th quartile 300 200 100 0 Cameroon Ghana Nigeria Cote dIvoire All country Source 2000/2001 STCP Baseline Survey
  6. 6. frequency le ss t (-1 han 05 13 0 50 100 150 200 250 300 350 400 450 0, 00 (-7 -10 50 00 (-4 ,-7 ] 5 00 (-1 0,-4 ] 50 00 , ] (1 -10 50 0] Profitability (4 ,20 50 0] (7 ,50 (1 50, 0] 05 80 (1 0,1 0] 35 10 (1 0,1 0] 65 40 (1 0,1 0] 95 70 (2 0,2 0] 25 00 (2 0,2 0] 55 30 (2 0,2 0] 85 60 (3 0,2 0] 15 90 (3 0,3 0] 45 20Source 2000/2001 STCP Baseline Survey (3 0,3 0] 75 50 Mean = $233 per household (4 0,3 0] Median = $33 per household 05 80 (4 0,4 0] 35 10 (4 0,4 0] of Cocoa Farming in West Africa 65 40 net returns to investment & mgt (2001 USD$) (4 0,4 0] 95 70 (5 0,5 0] Proportion with negative returns= 44% 25 00 0, 0] 53 00 ]
  7. 7. The Development ContextWhat is the greatest threat to the cocoa supply? Low income of cocoa farmersSummary 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)
  8. 8. The R4D ContextSo 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?Need to prioritize research accordinglyNeed to ensure research is development drivenNeed to introduce innovations at different levels
  9. 9. Sustainable Tree Crops Development Alliance Radiates from the core alliance formed in 1998 between Global Cocoa & Chocolate Industry / Trade and USAID 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
  10. 10. Sustainable Tree Crops ProgramINNOVATION 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 Tree crops as an engine of rural development
  11. 11. Synergies of the Partnership Public Sector Country and regional understanding, deep knowledge of development and networks of expertise, financing capacity Private SectorMarket 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
  12. 12. Pilot Phase 2003-2006:“making knowledge and technologies work”
  13. 13. 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
  14. 14. 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
  15. 15. FFS 2003 Graduates• Cameroon: 41% greater Change in Revenue yields; 20% lower fungicide US$ 317 use• Nigeria: 17% greater yields and 12% lower fungicide use when farmers transmit knowledge to sharecroppers; younger farmers also perform better US$ 440• Ghana: 15% greater yields• Cote d‟Ivoire: 25% greater US$ 36 yields US$ 92 (area, price, yield, labour, agrochem)
  16. 16. FFS 2004 GraduatesDecision-making Skills:• 59% of graduates make observations before making management decisionsSocial Capital:• 77% transfer skillsEmpowerment:• 41% appreciate benefits of group learning/workChange in Attitude:• “Before I used to neglect my work, now I take it seriously”
  17. 17. 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
  18. 18. Group Learning & Sales Cameroon Cote d‟IvoireYield increase (kg/ha) 72 40Price individual ($/kg) 1.03 0.60Price collective ($/kg) 1.18 0.63Gross revenues control ($) 654 511Gross revenues less costs w/ FFS & group sales ($) 1,015 631Increase in cocoa income ($) 361 120 55% 23%
  19. 19. 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
  20. 20. FFS 2003 GraduatesFor every 1000 farmers sensitized on child labor inFFS will result in the voluntary removal of 210 childrenfrom hazardous work on cocoa farms (Ghana)
  21. 21. Identifying OpportunitiesMarket 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
  22. 22. Identifying OpportunitiesRural 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
  23. 23. Identifying OpportunitiesProduction 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
  24. 24. Identifying OpportunitiesDiversification: 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
  25. 25. 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,diversification financing systems, institutional arrangements
  26. 26. Phase II 2007-2011:“contributing to rural incomeand structural transformation in cocoa communities”
  27. 27. Rural TransformationAgricultural 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.
  28. 28. Strategic Element 1Productivity 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
  29. 29. Strategic Element 2Market 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
  30. 30. Strategic Element 3Non-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
  31. 31. Relative share of Cocoa and Non-Cocoa Value in the $13 billion Cocoa Belt Rural Agricultural Economy of West Africa other industrial vegetables, crops, $0.3 $0.9 cocoa, $1.5 Cocoa accounts forfruits, $1.8 approximately 12% of the farm gate value in the cocoa belt of West Africa (versus 65% for staple crops). Cocoa accounts for staple crops, 2/3rds of the cocoa $8.5 household income.
  32. 32. Strategic Element 4Policy 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
  33. 33. Modus Operandi 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
  34. 34. Modus OperandiAgent of change: STCP/IITA are playing acriticial role by contributing to and fostering aprocess of change to contribute to the agricultural transformationof the cocoa belt leading to rural income growthand a sustainable cocoa economy that isenvironmentally & socially responsible
  35. 35. 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