Making
international
supply chains
work for
smallholder
farmers:
A comparative study of
six fair trade value chains
A Fairtrade Foundation Report
May 2012
1
Abbreviations
CIC: Community Interest Company
Coopaga: Co-opérative Agricole de Gabiadji
CSR: Corporate Social Responsibility
DRC: Democratic Republic of Congo
Ecookim: Enterprise Co-opérative Kimbè
INPC: International Nut Producers
Co-operative
KTDA: Kenya Tea Development Agency
KSh: Kenyan Shilling
MASFA: Mchinji Area Smallholder Farmers
Association
MOU: Memorandum of Understanding
MK: Malawian Kwacha
NASFAM: National Association of Smallholder
Farmers in Malawi
WTO: World Trade Organisation
Glossary
• F
armer organisations: rural businesses which
engage primarily in collective marketing
but also in other collective activities such as
processing and production
• M
ass balance: where possible, the Fairtrade
system seeks to ensure full physical
traceability on certified products. However,
ingredients like cocoa, tea and sugar can
come from many different farms and
countries and often have to be mixed together,
Fairtrade with non-Fairtrade, for transport
and production. To make sure that Fairtradecertified farmers receive the correct price
and premiums the volumes used in products
carrying the Mark are carefully monitored by
the Fairtrade system. This ensures that there is
clear fiscal traceability between the finished
certified products and the purchase of the
required Fairtrade certified ingredients.
• O
utgrower scheme: a contractual partnership
between growers or landholders and a
company for the production of commercial
products. Outgrower schemes vary
considerably in the extent to which inputs,
costs, risks and benefits are shared between
growers and companies. Also, growers may
act individually or as a group in partnership
with a company, and use private or
communal land.
• R
ainforest Alliance: an organisation offering
food certification and verification services
that aims to conserve biodiversity and ensure
sustainable livelihoods.
• S mallholder producer: Fairtrade International
defines a smallholder as a producer who is
dependent on family, as opposed to nonfamily, labour as a basis for its definition.
• U
TZ CERTIFIED: an organisation that sets
standards for farmers for the sustainable
growing of coffee, cocoa and tea and offers
certification services that aims to achieve
socially and environmentally responsible
agricultural production and sourcing.
Disclaimer
This document has been prepared by Twin, and was commissioned by the Fairtrade Foundation. The views
expressed in this document do not necessarily represent the views of the Fairtrade Foundation, nor does
the Fairtrade Foundation take responsibility for the accuracy of information contained in the document. Any
recommendations presented refer to suggestions made by Twin to the Fairtrade Foundation, and have not
necessarily been endorsed by the Fairtrade Foundation.
ACkNowlEDgements
Twin would like to acknowledge the support of the farmer organisations involved in this study. Staff, members
and workers of these organisations gave their time generously and engaged with the work in an open and
positive manner.
Twin would also like to acknowledge the Twin staff and associates who contributed to the work including Andy
Carlton, Doreen Chanje, Joseph Ngubwa, Jessica Frank, Andy Stephens, Chris Penrose Buckley and Ian Barney.
We would also like to recognise the support and insight of staff at the Fairtrade Foundation and Konan Kuassi.
This publication has been produced with the generous financial support of The Co-operative. Its contents are the
sole responsibility of the Fairtrade Foundation and does not necessarily reflect the opinion of The Co-operative.
Photography credits: Anette Kay; Linus Hallgren; Simon Rawles: Marie-Amélie Ormières
2
The report
Contents
Executive summary . ......................................................................................... 4
Section 1: Introduction...................................................................................... 6
1. Research objectives...................................................................................... 7
2.Context......................................................................................................... 7
4.Methodology................................................................................................ 8
5.Limitations.................................................................................................... 9
6. Focus on farmer organisations................................................................... 10
Section 2: Research Findings.......................................................................... 12
7. Coopaga and Ecookim, cocoa farmer organisations, Côte D’Ivoire............ 13
8. Finlays Outgrowers Group and Michimikuru,
tea farmer organisations, Kenya................................................................ 15
9. MASFA and Ex-Agris Outgrowers,
groundnut farmer organisations, Malawi................................................... 19
Section 3: Analysis.......................................................................................... 21
10.Mapping supply chain engagement.......................................................... 21
11.Farmer organisations: model of change graph.......................................... 23
12.The nature of the trading relationship........................................................ 23
13.Revisiting the indicators............................................................................. 27
14.Structure and capacity of intermediaries................................................... 29
15.Conclusion.................................................................................................. 30
16.Future research questions. .......................................................................... 31
Section 4: Recommendations. ......................................................................... 32
17.Recommendations for buyers..................................................................... 32
References....................................................................................................... 32
Annex 1: Research timetable........................................................................... 33
Annex 2: Supply Chain Assessment Framework.............................................. 33
Annex 3: Defining the development vision of Fairtrade:
A Twin perspective.......................................................................................... 34
List of figures
List of boxes
Figure 1:Five elements of smallholder
supply chain relationships
Figure 2:Illustrative example of the Supply
Chain Assessment Framework
Figure 3:Supply Chain Assessment
Framework: Coopaga and
Ecookim
Figure 4:Supply Chain Assessment
Framework: Finlays and
Michimikuru
Figure 5:Supply Chain Assessment
Framework: MASFA and Ex-Agris
Figure 6:Comparison between six casestudies of elements of Supply
Chain Assessment Framework
Figure 7:Farmer organisations’ model
of change (Twin, 2010)
Box 1
Livelihood Scenario Definitions
Box 2:Good practice from Divine
Chocolate: the Divine Calendar
Box 3:Good practice from Twin Trading:
the coffee bulletin
Box 4:Good practice from Liberation
Foods: adding value
Box 5:Good practice from Bukonzo
Joint: gender action
Box 6:Good practice from The Body
Shop: community commitments
List of tables
Table 1:Cocoa farmer organisations:
basic information
Table 2:Tea farmer organisations: basic
information
Table 3:Groundnut farmer organisations:
basic information
3
EXECUTIVe
SUMMARY
This report provides an analysis and
evaluation of how specific business practices
facilitate smallholder producer development
and empowerment in Fairtrade supply
chains. This research comes at a critical
moment in time owing to a renewed interest
from the donor community and the private
sector into the central role that smallholders
play in driving rural development and also
ensuring the sustainability of future global
supply chains.
Six farmer organisations across three
commodities (cocoa, tea and nuts) were
chosen to represent different business
models within the Fairtrade movement.
Researchers used focus groups and
semi-structured interviews with a variety
of stakeholders to develop a case
study for each of the selected farmer
organisations. The information collected
was then analysed using a framework
for understanding the key indicators of
producer empowerment and development.
In this process five broad elements of the
smallholder supply chain relationship were
investigated and then presented in a radar
diagram set out in figure 1.
Figure 1: Five elements of smallholder supply chain relationships
Net Returns
Built Capacity
Influence on
price and terms
Control over
and % of the
value chain
Supply chain
coordination
The five broad elements of the radar diagram
are as follows:
• Net returns: the amount that the smallholders
receive for their produce and its significance
to their livelihood. This includes smallholders’
perception of whether they are ‘hanging in’,
‘stepping up’ or ‘stepping out’.
• C
ontrol over and % of the value chain: a
combination of smallholders’ perceptions of their
influence on the supply chain and the percentage
of the final retail price that smallholders receive.
• Supply chain coordination: the level of transparency
and the extent to which information is exchanged
between stakeholders within the value chain.
• Influence on price and terms: smallholders’
perception of their ability to influence the price they
receive for their produce.
• Built capacity: the extent to which trading partners
directly contribute to enhancing the long-term
capacity of the smallholders.
4
Research findings show that smallholder supply chain
relationships are not uniform and there is a great deal
of variability, even between farmer organisations based
in the same country dealing in the same commodity.
A model of change is presented that delineates
the stages that farmer organisations go through
on their path towards sustainability and examples
of best practice are given that will assist in a smooth
transition along this path. Analysis of findings
confirms the complexity of empowerment and
development and the fact that there is no single
formula to achieving either. They do, however,
provide a number of interesting insights on the
nature of the trading relationship.
The size of net returns varied significantly across
the different case studies and between different
groups of members and types of activities. What is
noteworthy is that price and the ability to influence
it seemed to play a much less significant role in
explaining relative returns than productivity.
The case studies also highlighted the importance of
the timing of returns both in tea and groundnuts. This
is not surprising given the important matter of access
to finance in the context of rural economies where
seasonality looms large.
A lack of transparency means that producers can
struggle to access the actual prices and margins
linking their payment to downstream sales. Very
little information regarding the end use of the product
appears to be relayed to farmers. Where it does,
an immense sense of pride and accomplishment
can be the result.
Farmers in many of the organisations identified
capacity building services provided or funded by
buyers as a key reason for trading with them. The
nature of relationships with buyers is a key theme
in most of the case studies. Relationships between
farmer organisations and buyers are often very
positive and constructive but there is a sense that
there is a fine line between building their capacity,
in an empowering way, and ‘replacing capacity’,
in a way that disempowers.
Analysis of these findings has led to the
following conclusions.
At the farmer organisation level pre-finance is a key
element in determining whether co-operatives are
able to operate on the same playing field as better
resourced traders and processors. Access to finance
at the appropriate time can also play an important role
in freeing up cash for farmers at the household level.
Underlying tensions between retaining cash to invest
in the business and the distribution of profits to
farmers to supplement their income also emerges as
a key constraint to the development of sustainable
farmer organisations. If cash is to be distributed to
farmers then the timing of this transfer should be
carefully considered.
When taking into account the appropriate levels
of support for farmer organisations it is proposed
that the need to provide intensive support is
balanced with the dangers of creating an unhealthy
dependency. It is recommended that organisations
consider how to encourage autonomous farmer
organisations rather than long term adoptive
relationships. A question is also raised as to whether
it is right to expect Fairtrade and private sector
players to engage at the level of household decisionmaking on how income is to be spent.
At the heart of creating more empowering
relationships between buyers and farmer
organisations (and between farmer organisations and
farmers) is a shift in attitude and perception. To move
forward it is important that buyers perceive farmers
as active partners and not passive beneficiaries. It is
also thought that buyers and traders need to move
beyond simply complying with Fairtrade standards if
they are to support improvements across the range
of indicators described.
Based upon these conclusions a set of
recommendations for buyers of businesses engaging
with smallholder supply chains are made. These
include the need to build administration capacity in
farmer organisations and ensure that there is a clear
understanding of the responsibilities and expectations
of all parties in the relationship. A number of future
research questions highlighting issues that emerge
from the research and require further investigation
are also presented.
5
Introduction
Fairtrade is
committed to ensuring
the empowerment
and development
of smallholder
producers in global
supply chains.
1. Research objectives
This piece of research had two broad objectives:
• Improve understanding of how specific business
practices and models deliver outcomes most
valued by farmers and contribute to development
and empowerment
• Based on these findings and examples of good
practice highlighted by the research, influence
businesses sourcing from smallholders to adopt
more developmental practices and models
2.Context
Fairtrade is committed to ensuring the empowerment
and development of smallholder producers in global
supply chains. In order to achieve this there needs to be
a much greater understanding of progressive business
practices and models that should be encouraged.
This research comes at a critical moment in time owing
to a renewed interest from the donor community and
the private sector into the central role that smallholders
play in driving rural development and also ensuring the
sustainability of future supply. It is also a significant
point in Fairtrade’s journey. The previous decade has
seen phenomenal growth of the scope and market of
Fairtrade and a huge interest in ethical standards in
general. This level of growth, alongside the increasing
levels of engagement of other key stakeholders,
provides Fairtrade with a number of opportunities and
challenges to ensure that smallholders are integrated
into global supply chains in a manner which facilitates
producer empowerment and development.
This piece of work follows on from a conceptual
research piece that Twin prepared with the Fairtrade
Foundation in 2010, entitled Defining the Development
Vision of Fairtrade: A Twin Perspective (see annex 3).
3.Smallholders in supply chains:
challenges and opportunities
This research is very timely in terms of the broader
development agenda, where farmer organisations
and also certification schemes in general are receiving
greater levels of attention. Both governments and
donors alike are increasingly recognising that collective
action, in the form of farmer organisations, enhances
the ability of smallholders to participate and compete
in markets, redressing market failures and strengthen
producers’ livelihoods (World Bank, 2008). Improving
market access needs to be balanced with the need
for market reform; greater market access on its own
may provide few benefits to smallholders if local and
global markets are driven by the interests of buyers
who influence prices, impose demanding standards
and push risk onto smallholders (Penrose Buckley,
2007). Improving market access and driving market
reform have always been central to Fairtrade’s vision
and mission. The renewed political focus on smallholder
agriculture creates an opportunity for Fairtrade to draw
on a wealth of practical experience of supporting the
development of farmer organisations and integrating
smallholders into international supply chains, to drive
new thinking and development of effective business
models, which place farmer organisations at the heart
of rural growth.
At the same time, the significant interest being
demonstrated by big players in the private sector to
engage more constructively with smallholder supply
chains, provides a unique opportunity at this moment.
A number of multinationals are making commitments
to working with smallholders as part of a sustainable
sourcing plan; a move which is motivated by what
is good for business in the long-term, and goes far
beyond any CSR initiative. For example, Unilever has
set a target to link more than 500,000 smallholder
farmers and small-scale distributors into their supply
chains by 2020 (Unilever, 2012) and Sainsbury’s
intends to convert 100% of a number of products
lines to fairly traded, as well as supporting farmers
and growers through their Fair Development Fund
(Sainsbury’s, 2012). The Co-operative has already
converted to 100% Fairtrade on it’s main categories
including coffee, tea, sugar, cotton wool, bananas and
block chocolate and has set a target in its Ethical Plan
to convert all remaining categories that can be Fairtrade
labelled, with a target of achieving 90% by the end of
2013.
In the cocoa sector the private sector response to
supply risks have been quite dramatic. The average
yield in Ghana (the second largest cocoa producing
country) has dropped to roughly 350-400 kg per hectare
(against a potential 1,000 kg per hectare), with farmers
failing to maintain their farms and adopt improved
practices owing to high cost of labour and inputs
(Institute of Development Studies, 2010). Cadbury’s
have committed to investing significant sums of money
to boost productivity in the Ghanaian cocoa industry
through their Cadbury’s Cocoa Partnership programme
(Cadburys, 2012). Through the World Cocoa
Foundation (WCF) ADM Cocoa, Barry Callebaut, Cargill,
The Hershey Company, Kraft Foods, Mars, Nestlé and
Olam International Ltd – amongst others – are making
similar investments. Twin envisages that comparable
investments will follow in other commodities.
These companies are recognising that democratic
farmer organisations represent an important
mechanism to support engagement with smallholder
farmers. They present an opportunity but also
challenge in working to build and foster strong and
sustainable farmer organisations. For many this is
a new and daunting challenge. For others this is
a continuation and development of work to build
stronger relationships with farmer organisations.
7
4.Methodology
The research focuses on six farmer organisations;
two related to cocoa, two related to groundnuts and
two related to tea. The two organisations in each
commodity were based in the same country but with
contrasting business models, e.g. co-operatives and
outgrowers schemes where a contractual partnership
exists between growers or landholders and a
company for the production of commercial products.
The organisational case studies were selected to
be representative of the different types of farmer
organisation within the Fairtrade movement. The three
commodities (cocoa, tea and nuts) were selected on
the basis of the experience, expertise and pre-existing
contacts of Twin, matched with the commercial
priorities of the Fairtrade Foundation. The overall
focus on Africa reflects the desire and potential for
future collaboration on advocacy with the Fairtrade
producer network, Fairtrade Africa.
Each smallholder organisation was visited by a
research team from Twin. Focus groups and semistructured interviews were carried out with a variety of
stakeholders including staff and boards, smallholder
members and, in the case of tea, hired labour (see
the research timetable in annex 1). The interviews
were structured around the Supply Chain Assessment
Framework (annex 2) and documented in separate
case-study reports. Interviews were conducted in
English, French and a variety of local languages with
staff from the smallholder organisations, and in the
case of Côte d’Ivoire a Fairtrade International Liaison
Officer, providing interpretations.
The information collected in the interviews was
then analysed using the Supply Chain Assessment
Framework. This framework was developed to better
understand and assess the key indicators of producer
empowerment and development. Five broad elements
of the supply chain relationship were investigated
in an attempt to capture basic quantitative and
qualitative data about the value chain and the
importance of crop to producer livelihoods. The
results are represented in a five sided radar diagram.
The five broad elements of the radar diagram are
as follows and represented in Fig 2 below:
• N
et returns: the amount that the smallholders
receive for their produce and its significance
to their livelihood. This includes smallholders’
perception of whether they are ‘hanging in’,
‘stepping up’ or ‘stepping out’ (see Box 1, p9)
• C
ontrol over and % of the value chain: a
combination of smallholders’ perceptions of their
influence on the supply chain and the percentage
of the final retail price that smallholders receive.
• Supply chain co-ordination: the level of
transparency and the extent to which information
is exchanged between stakeholders within the
supply chain.
• Influence on price and terms: smallholders’
perception of their ability to influence the price
they receive for their produce.
• B
uilt capacity: the extent to which trading partners
directly contribute to enhancing the
long-term capacity of the smallholders.
Figure 2: Illustrative example of the Supply Chain Assessment Framework
Net Returns
Built Capacity
Influence on
price and terms
Net Returns
Control over
and % of the
value chain
Supply chain
coordination
Smallholders perceive that involvement in the value
chain is supporting development but not enabling
empowerment through the process.
8
Built Capacity
Influence on
price and terms
Control over
and % of the
value chain
Supply chain
coordination
Smallholders perceive themselves as empowered
within the value chain but are experiencing little
economic benefit.
Where possible farmers were asked to assess where
they perceived they stood (literally) on each of these
issues – lining-up along an imaginary scale from
lowest to highest against each of the indicators to
capture their perception of their livelihood status.
Results of the case studies are displayed in radar
diagrams to give a visual representation of how
producers perceive their levels of empowerment and
development – the larger the shaded area, the more
progressive the trading relationship.
Triangulating Twin’s knowledge by examining a
broader range of case-studies in other commodities
has cemented this understanding and enabled a
more in-depth analysis.
Box 1:
Livelihood Scenario Definitions
Hanging in:
farmers are struggling to
maintain their existing
level of livelihood
and dependent solely
on agriculture. Their
vulnerability to stress or
shock is high. Migration,
for example, to urban
areas is an option.
Stepping up:
farmer livelihoods are still
dominated by a cash crop but
the individual is able to invest
in agriculture (e.g. new seed
or fertiliser) to improve their
returns from it and also consider
investing in alternative livelihood
strategies (e.g. better education
for children, primary processing,
product diversification);
5.Limitations
The data collection for each of the six case
studies took place within two-day visits owing to
resource constraints. This placed considerable time
limitations on the challenging process of recording
the complexities of six differently structured
farmer groups. For example in the case of the tea
organisations, the perceptions of hired labour,
smallholders, staff and board varied considerably
and more time would have been needed to fully
disaggregate the different reasons for different
levels of empowerment and development within
one organisation. The small sample size of both the
focus groups and number of farmer organisations,
combined with the case studies being restricted to
three commodities in three countries, also made
reaching robust conclusions difficult.
The methodology used was new. As such there
was a continual process of learning and adaptation
of the approach. Throughout the course of the
research and analysis it has become clear that the
framework could be refined further, both in terms of
the indicators being measured and also the degree
to which they overlap and interact with one another.
The fact that research in Malawi was carried out by
a different team added to the challenge of drawing
crosscutting conclusions across the six case studies.
Due to significant time restraints placed on the
primary data collection, the interview questions and
focus groups were limited to essential, or even top
level, discussions making it difficult to disentangle
the smallholders’ level of empowerment and
development from the farmer organisations ability
to communicate or to run an effective business.
Moreover, the extent to which the local context and
external environment (e.g. civil unrest in Malawi
and recent conflict in Côte d’Ivoire) have influenced
findings is also unclear, adding an additional level of
complexity to the comparisons and corresponding
ability to draw conclusions.
Therefore, the data presented in the study should be
interpreted as a set of initial and general findings. In
reaching conclusions Twin has supplemented these
findings with its own knowledge and experience of
building smallholder value chains over 27 years.
Stepping out:
farmers have the ability to
make choices about their
livelihoods. They are no
longer solely dependent on
agriculture, their vulnerability
to shock or stress has been
significantly reduced and
they can make an informed
decision about whether they
remain ‘on the land’ in the long
term or not.
9
6. Focus on farmer organisations
For this research a range of different organisational
structures have been included – co-operatives,
associations, outgrower schemes. For the purpose
of this paper these different structures will be referred
to as farmer organisations, which are defined as
rural businesses which engage primarily in collective
marketing but also in other collective activities such
as processing and production (Penrose Buckley, 2007).
TEA
COCOA
Michimikuru Tea Factory Limited: tea
Location:
Meru, Kenya
Membership:10,000 shareholders (300 women)
Certification(s): Fairtrade
Ecookim, Enterprise Co-opérative Kimbè: cocoa
Location:
Daloa, Côte d’Ivoire
Membership: 3,063 (less than 50 women)
Certification(s): Fairtrade, (UTZ certification
is planned)
Ecookim is a union of six co-operative societies, five
of which are currently Fairtrade certified (a women’s
society has also applied to join). The co-operative was
set up in 2004 and became Fairtrade certified in 2010.
Ecookim is in the process of achieving its aspiration
to export all their cocoa directly to international
importers of certified cocoa.
Michimikuru Tea Factory Ltd is a shareholder
company owned by about 10,000 smallholder tea
farmers. It is one of 65 smallholder-owned tea
factories and estates which make up the shareholders
of KTDA (Kenya Tea Development Agency Ltd), an
agency which provides management and marketing
services to the individual factories and estates which
are its owners.
TEA
COCOA
Coopaga, Co-opérative Agricole de Gabiadji:
cocoa
Location:
San Pedro, Cote d’Ivoire
Membership: 2,700 (32 women)
Certification(s):Fairtrade, Rainforest Alliance
and UTZ
Coopaga is a primary co-operative society of roughly
2,700 smallholders who are its direct members.
Coopaga is organised into a central board and
management and seven sections. Each section has
a committee who are tasked to assist smallholders
with their problems.
10
Finlays Outgrowers Group: tea
Location: Kericho, Kenya
Membership: 10,780 outgrowers (31 per cent
women)
Certification:
Fairtrade
Finlays Outgrowers Group is a registered communitybased organisation formed of five co-operatives.
Finlays Outgrowers Group became Fairtrade certified
in 2012 and is now supplying into The Co-operative’s
Fairtrade ‘99’ tea. However, at the time of research
collection, the co-operatives were still working
towards Fairtrade certification. Outgrowers supply
Finlays as part of the Kitumbe Group that consists of
four tea estates and a factory which were Fairtrade
certified in 2008.
GROUNDNUTS
MASFA, Mchinji Area Smallholder Farmers
Association: groundnuts
Location:
Mchinji, Malawi
Membership: 3,500 (1,358 women)
Certification(s): Fairtrade
MASFA was established in 2001, with the support
of the National Association of Smallholder
Farmers in Malawi (NASFAM). It brings together
local groundnut farmers, aiming to improve
market access and prices, share expertise and
give the farmers a collective voice. MASFA is one
of fourteen Association Management Centres
which make up NASFAM and is, in turn, made
up of six Chapters. MASFA became Fairtrade
certified in 2005.
GROUNDNUTS
Ex-Agris Outgrowers, Lisungwi Estate:
groundnuts
Location: Lilongwe District, Malawi
Membership: 165 outgrowers
Certification: None
Ex-Agris is a commercial agricultural company
that allocates about 20 per cent of its
commercial farmland in Malawi to associations
of smallholder farmers. The Lisungwi estate,
located in the Lilongwe District, currently
has 165 members separated into 14 clubs.
Groundnuts are grown through an outgrower
scheme where smallholders are provided with
a small plot of land, training, credit inputs and
better prices for their produce.
11
RESEARCH
FiNDINGS
‘…we send all our
children to school.
They need to be
educated so they can
look for jobs because
there is no future in
cocoa production.’
Male farmer with a relatively large
cocoa farm (10 ha).
The findings of the six organisational
case studies are outlined below.
They are structured according to
the key elements of the ‘Supply Chain
Assessment Framework’ and are
presented by commodity.
Table 1: Cocoa farmer organisations: basic information
Organisation
Coopaga1
Ecooklm2
Commodity
Cocoa
Cocoa
Average farmer income
from cash crop ($ pa)
4915
1014
Cash crop as % of income
100
90
% of crop sold as Fairtrade
2.5%
14%
7. Coopaga and Ecookim, cocoa
farmer organisations, Côte D’Ivoire.
which co-operatives manage their cash during the
season and distribute any surplus to members at the
season’s end). Fairtrade Premiums are not used to
supplement farmer income (as defined by Fairtrade
International standards) although at Coopaga both
UTZ and Rainforest Alliance premiums are partially
distributed to farmers as cash.
In conclusion the Coopaga farmers put themselves
mainly into the ‘stepping up’ category, with one, a
farmer-promoter, ‘stepping out’, and one, a woman
farmer, only ‘hanging in’. The Ecookim farmers all
felt they were only ‘hanging in’, even the best-off
amongst them. The major issue causing pessimism
seems to be low yields due to lack of rain in 2011,
and for the previous three seasons. The two groups
were receiving comparable prices. The Fairtrade
International Liaison Officer also suggested that
people had been shocked and made anxious by the
sudden violence in the early months of 2011 and this
affected their overall perception of vulnerability and
livelihood status.
Looking at the last 10 years, some of the Coopaga
farmers felt that things were now starting to improve,
although others did not agree; all the Ecookim
farmers felt that things were getting worse! The
key difference between the two groups of farmers
appeared to be productivity.
Net returns to farmers
For both groups, cocoa accounts for almost the entire
cash income of its members.
The farmers interviewed at Coopaga had bigger
farms, produced higher cocoa yields (755 kg /hectare)
and were on average significantly better off than those
at Ecookim. The average annual income for Coopaga
focus group participants was $4,915 in 2010-2011,
although some farmers interviewed had earned more
than $5,000 during this period.
The farmers interviewed at Ecookim were of two
types – those with medium-sized farms who had
other sources of cash income such as rearing and
sale of animals (élèvage), and those with smaller
farms who depended entirely on cocoa sales and
were on average much poorer. Average annual
income from cocoa in 2010-11 for the farmers
interviewed at Ecookim was $1,014. Our estimate
of the yields enjoyed by focus group members at
Ecookim was between 83 and 110 kg/hectare. This is
well below that at Coopaga and the national average
of 500 kg hectare.
The difference in net returns between Ecookim and
Coopaga would appear to be mainly the result of
significant differences in yield, but this conclusion
requires further corroboration.
At Ecookim and Coopaga, farmers are paid cash on
delivery by the farmer organisations, (either directly
or into their bank accounts) and there is no second
payment of any kind from Fairtrade sales (a bonus
paid at the end of the season is a common way in
1
Focus group participants, 2 Focus group participants
Farmers’ ability to influence prices or terms
of trade
In Côte d’Ivoire the buying of cocoa is deregulated
and prices are relatively free. There appears to
be some competition from local traders to the
co-operatives and the fact that the prices in both
organisations are comparable suggests a relatively
efficient market.
‘I don’t agree there is no future.
The young men are planting cocoa.
They believe there is a future.’
Female farmer with an average-sized cocoa farm (2 ha).
Like many farmer organisations, Ecookim’s ability to
purchase cocoa from its members is determined by
its access to cash. Since it exports directly (rather
than through a local trading company) its working
capital requirement is more significant (working
capital is required for a longer of period of time
before an income is generated) than at Coopaga.
Coopaga also has its own wholly-owned bank,
CEFA, and pays its members for cocoa deliveries
by cheque, which they have to deposit into their
account before they can get cash. This encourages
them to save, and provides working capital for
the co-operative, giving it ‘significant financial
independence’.
13
‘If we know the buyer we
can influence the price they
pay. Right now we cannot
influence the price.’
Ecookim farmer
Ecookim has an export office and exports as much
as it can, has the aspiration and is on track to export
almost all of its cocoa as Fairtrade certified. It has
two Fairtrade customers, (Customer A and Customer
B). Last year it was dependent on Customer A, who
refused to negotiate the price. This year it has a large
Fairtrade order (3,500 tonnes) from Customer B,
so feels in a much stronger negotiating position.
Customer A does not provide any prefinance, which
imposes difficult demands on the union’s cash flow.
At Coopaga the attainment of certification standards
is associated with quality and productivity. It currently
is certified under three different systems; Fairtrade,
Rainforest Alliance and UTZ. This allows it to choose
the most beneficial market at any point in time and
continue to benefit from value added markets even
if demand for a particular scheme varies from one
season to the next. Most of its cocoa is currently
sold as certified, all locally to multinational exporters.
Coopaga farmer
relationships, particularly with cocoa manufacturers.
There was little evidence of an understanding of
the structure of the chocolate industry in consumer
markets in terms of the separation of importing,
manufacturing and retail branding.
None of the cocoa farmers we met knew anything
about any of their customers, either local or
international. Farmers from both organisations said
that it was important to know, partly in order to be
able to negotiate, but partly just to know, but that it
had never occurred to them to ask. They said they
would now ask. ‘We work with Ecookim. We need to
know who we are working with,’ Ecookim member.
Ecookim is currently only Fairtrade-certified, but is
seeking UTZ certification. This year for the first time
all its exported cocoa will be sold as Fairtrade.
Degree of control over the product and share of
the value chain proceeds
In conclusion farmers at Ecookim, with some local
competition (pisteurs) have some but not a significant
influence on price. Coopaga farmers are largely
price‑takers but their diversification of certification
schemes offers them some power and discretion to
influence price.
Coopaga sells locally to multinationals, and does
not export. This means it does not need an export
office in Abidjan, which reduces its working capital
requirement and costs significantly. It has invested
heavily in certifications – Rainforest Alliance,
Fairtrade and UTZ.
Supply chain co-ordination/information exchange
Coopaga’s major buyers also appear to change their
certification requirements in any particular season to
meet their own customer specifications. The strategy
of running three certifications together is deliberately
designed to enable Coopaga to meet any demand
for certified cocoa made by its customers.
Management at Coopaga could not quite understand
why we would ask the question ‘where does your
product go?’ Why did we think Coopaga needed
to know anything about their customers or their
consumers? Surely that was a matter for Fairtrade
International not for them. They believed that the big
traders would not tell them anything about the endcustomers even if they asked. Farmers had a slightly
different view and appeared hungry for information.
The management of Ecookim knew the international
offices of the importers they sold to. Ecookim
management wanted to have more direct commercial
14
‘When you are making a soup you
must know who is going to eat it.’
Ecookim’s export ambitions provide greater control
over its value chain but carry higher costs. In 2012, it
gained a Fairtrade exporters licence, so can now export
on behalf of other Fairtrade-certified producers as well
as handling its own exports.
It has been extremely difficult to estimate with any
accuracy the share of the value chain enjoyed by
farmers. However, the government taxes all cocoa
exports at 40 per cent, which means farmers get only
around 50 per cent of the international market price
for their cocoa.
Level of support from buyers to enhance capacity
Coopaga have received support from a major buyer
to enhance productivity via the UTZ premium, from
which farmers report significant improvements in yield.
Coopaga board, however, drew attention to a
perceived problem between the training organisation,
(which is contracted by the major buyer to train
Coopaga farmers on UTZ compliance), and the buyer.
Coopaga pays for the training services through the UTZ
premium, but does not contract the services itself. The
dispute between the two third parties has interrupted
the training of Coopaga farmers. As a result Coopaga
staff complain that they are tied to the service providers
who are perceived to be expensive. They complain
about a lack of transparency.
The following radar diagrams present this information
according to assessments provided by farmers against
the key dimensions of the Supply Chain Assessment
Framework.
Figure 3: Supply Chain Assessment Framework: Coopaga and Ecookim
Coopaga
Ecookim
Net Returns
Built capacity
Influence on
price and terms
Net Returns
Control over
and % of the
value chain
Supply chain
coordination
8. Finlays Outgrowers Group
and Michimikuru, tea farmer
organisations, Kenya.
Net return to farmers
Tea is estimated to account for around 90 per cent of
total income amongst smallholders in Michimikuru.
Other economic activities include selling food crops,
milk, eggs and chickens. Gross income per farmer
from tea is estimated at $2,310 per annum but there
are deductions which include a 1 per cent tea cess
that goes to the government; although some of this
comes back for road maintenance on the estate and
a Kenyan Shillings (KSh)1 ($0.01 ) contribution to
build a new factory about 5km away. For ordinary
(non-committee) members, at Michimikuru, income
from tea is estimated to account for approximately
half their annual income. Income for ordinary
members is estimated at $1,247 per year.
Members from the Ainamoi Co-operative, one
of Finlay’s Outgrowers Group’s five primary cooperatives suggested that they were reliant upon tea
for between 50 and 70 per cent of their household
cash income. Tea generated an average annual
income of $2,930.
In tea the issues of the timing of cash flows to farmers
was complicated; with the timing of bonus payments
Influence on
price and terms
5
Supply chain
coordination
Table
Tea farmerto
organisations:
Net 2:returns
farmersbasic information
Organisation
Finlays3
Michimikuru4
Commodity
Tea
Tea
Average farmer income
from cash crop ($ pa)
2930
1247
Cash crop as % of income
50-70
90
% of crop sold as Fairtrade
N/A
5%
being a major issue and highlighted significantly
different practices in the two case studies.
At Finlays outgrowers are paid a monthly advance
payment of KSh14 ($0.17) for green leaf delivered
(compared with KSh12 ($0.14) by Michimikuru), and
six weeks later a balancing payment after the tea is
sold in Mombasa. In recent months the balancing
payment has varied between KSh29 ($0.34) and KSh44
($0.53), and averaged KSh36 ($0.43) in 2010-115. No
bonus is paid at year end, any profit declared after the
end of the year is not distributed to out-growers (or to
employees). Finlays’ management commented that
out-growers prefer this system of monthly balancing
payments since ‘It is their money. Why should the
company keep it for up to a year before distributing it?’.
Ainamoi Cooperative ordinary (non-committee) smallholders, 4 Tananga Tea Buying Centre non-committee members
We did not get the monthly green-leaf collection figures at Finlays so we couldn’t directly compare
the totals per kg earned by Finlays and Michimikuru smallholders, but the figures seem to be very close.
3
Control over
and % of the
value chain
Built capacity
15
‘We would like to know how
our tea is sold and to be put
in touch with our buyers,
e.g. over blending. We want
to make direct sales so we
can negotiate. If we don’t
know the buyer, how can
we negotiate?’
Tea smallholder at Ainamoi Co-operative,
Finlays Outgrowers Group
By contrast, at Michimikuru as at all KTDA members,
the final payment made after the end of the year
was 76 per cent of the total annual payment for tea.
We were told by more than one interlocutor that the
majority of men, who are family – and/or businessminded, use the money for school fees, buying land,
buying vehicles, and building for rent, or if they are
not family, or business-minded, the funds are used for
less productive activities.
Michimikuru board and management insisted that
this system of a high final payment is to the farmers’
benefit. They suggested that paying bonuses at the
end of the year meant that they could reduce the
need to borrow cash, reduce the associated finance
costs, and thereby increase profits. The Michimikuru
board also highlighted this as one of the trade-offs
made by farmers when deciding to move up the value
chain and the associated working capital burden that
this creates. The Finlay’s smallholders had, however,
migrated from the KTDA structure, partly because of
better payment terms on offer at Finlays.
The great majority of the tea smallholders interviewed,
including all the smallholders at Finlays, felt
themselves to be ‘stepping up’; a few smallholders
at Michimikuru still felt that they were ‘hanging in’;
no-one interviewed at either location felt that they
were ‘stepping out’. The majority of those interviewed
felt that things had improved in recent years, although
much of that improvement was being eroded by
inflation. No one said things had got worse.
Farmers’ ability to influence prices or terms
of trade
The ability to influence price appears to be minimal.
Tea is largely sold at auction in Mombasa to the highest
bidder for tea. The tea farmers in Kenya are, hovwever
largely price-takers. They have limited knowledge
of who is buying most of their tea or the price it was
sold for.
At Michimikuru the competition amongst buyers is
low. The farmers have little choice of who to sell to,
and as a consequence they must sell all their green
leaf to Michimikuru. Competition is to some extent
evident at Finlays where farmers appear to have a
number of choices of green-leaf buyer in Kericho
including KTDA, Unilever and Finlays.6
The smallholders at Finlays said that currently they
have little influence over price but acknowledged that
better quality leaf did receive a better price.
They believed that once they are Fairtrade certified
they will be able to influence the price more, via
negotiations with Fairtrade buyers.
16
6 It should be noted that under the existing Kenyan tea act it is illegal for a farmer to be registered with more than one factory.
Whilst this legislation appears to be difficult to enforce it represents a potential constraint on farmer choice.
At Michimikuru smallholders and tea pluckers said the
only influence they have on price is through quality,
but that basically they are price-takers. The board
and senior management said that they can negotiate
direct sales contracts with buyers, but that only 15
per cent of their tea is currently sold directly – the
auction price was the dominant force.
Supply chain coordination/information exchange
80 per cent of Michimikuru’s tea is sold in the weekly
Mombasa auction via brokers to international buyers
who are often not known. It is bought by, for example,
Unilever, Tata Tetley, Van Rees, James Finlay (who
in addition to producing tea in Kericho also have a
trading tea business). Some is bought as commercial
tea and later retrospectively certified as Fairtrade by
the buyer, at which point he/she pays a premium to
Michimikuru. Sometimes Michimikuru does not know
who this Fairtrade buyer is and can only find out from
the bank credit advice when the premium is deposited.
Michimikuru board members believe that sometimes
tea is sold as Fairtrade by an auction buyer but he/
she does not pay a premium to the company. Of all
international buyers, Fairtrade and commercial, only
Cafédirect buys tea directly from Michimikuru, rather
than through the auction or from KTDA.
‘Because that’s how we earn our
living; maybe we can improve on
quality if we know more about our
customers’ needs.’
Michimikuru tea plucker
Degree of control over the product and share of
the value chain proceeds
Michimikuru Tea Company Ltd is a shareholder
company owned by about 10,000 smallholders.
Non-smallholder tea pluckers are not members.
Michimikuru is a part-owner, together with many
other smallholder tea companies, of Kenya
Tea Development Agency (KTDA), formerly the
government tea authority. Michimikuru is also a
shareholder in Cafédirect. Michimikuru drew attention
to a partnership with Cafédirect that enabled the
development of a product with producers in Rwanda.
Even though this was not commercially successful
it was felt to be a positive joint initiative.
Finlays has made a significant investment (in
partnership with DFID, Africa Now! and The
Co‑operative College) in supporting the smallholder
farmers to organise into co-operatives, offering
support with Fairtrade certification, governance,
capacity-building and agricultural training. The five
co-operatives which make up Finlays Outgrowers
Group are also seeing a better price now that they are
selling their tea to Finlays. Ainamoi smallholders are
full of praise for Finlays who they feel treat them fairly.
Moreover, Finlays collect the green leaf on time and
do not make the farmers wait around for hours as is
the case with other buyers.
It has been extremely difficult to estimate with any
accuracy the share of the value chain enjoyed by
farmers. The fact that Michimikuru can negotiate a
proportion of its business directly, and has a stake in
both KTDA and a market facing brand, would suggest
that they have a marginally higher percentage of
the value chain although it has not been possible to
confirm this.
17
‘We don’t know anything
about our tea after Finlays
have sold it’. ‘We would like
to know how our tea is sold
and to be put in touch with
our buyers, e.g. over blending.
We want to make direct sales
so we can negotiate. If we
don’t know the buyer, how
can we negotiate
Member of smallholder co-op supplying Finlays.
Level of support from buyers to enhance capacity
The Ainamoi smallholders were full of praise for
Finlay’s efforts to build capacity. Farmers mentioned
that they had joined the co-operative to get a better
market for tea, a better price, and to receive training
in agriculture. They didn’t appear to be disappointed
‘We are seeing a better price. Training has enabled
both better quality and quantity of tea to be produced’.
Buyers at Michimikuru, particularly Cafédirect,
demonstrated a desire to build the capacity of the
farmer organisation strategically, e.g. investing in
processing and the development of new market offers.
The following radar diagrams present this information
according to assessments provided by farmers
against the key dimensions of the Supply Chain
Assessment Framework.
Figure 4: Supply Chain Assessment Framework: Finlays and Michimikuru
Built Capacity
Influence on
price and terms
18
Finlays
Michimikuru
Net Returns
Net Returns
Control over
and % of the
value chain
Supply chain
coordination
Built Capacity
Influence on
price and terms
Control over
and % of the
value chain
Supply chain
coordination
9.MASFA and Ex-Agris Outgrowers,
groundnut farmer organisations,
Malawi.
Net3:returns
farmers
Table
Groundnutto
farmer
organisations: basic information
Organisation
MASFA
Ex-Agris
Commodity
Groundnuts
Groundnuts
Net returns to farmer
Average farmer income
from cash crop ($ pa)
1707
31
MASFA members were the least dependent on the
cash crop of those we met. The latter receive income
from other crops in particular tobacco, although this is
now on the decline.
Cash crop as % of income
60
Not collected
% of crop sold as Fairtrade
10%
N/A
At MASFA groundnut sales are estimated to account
for 60 per cent of the farmers’ income. In addition, 25
per cent of the crop is consumed within the household.
The focus groups highlighted the improvement in
income over many years to the point where groundnuts
were considered a particularly profitable crop.
Ex-Agris, by comparison, is a new scheme and
relationship between outgrowers and a commercial
farm. This is the second season in which this scheme
is running, and the farmers mentioned that they have
not yet started getting significant monetary benefits
although they acknowledged the constructive nature
of the engagement with the company.
The timing of payments to farmers became a key topic
of debate in MASFA each of the focus groups.
At NASFAM the crop itself had a low input requirement
and NASFAM’s payment was in cash and faster than
other crops such as tobacco.
At MASFA all five interviewees clustered between
‘stepping up’ and ‘stepping out’. Indicators of stepping
up included: vehicle ownership; owning a shop; owning
a maize meal; owning cattle (more than five); owning
a house (big, with tin roof); should have maize (main
staple) throughout the year; owning a handheld plough.
The women in the group were more cautious.
They said that they were female headed households
(and therefore had less available labour) and that they
generally had less land than the men in the group. The
men were also using certified seed of better varieties
hence their yields were much higher. As a result they
were benefiting more from the better prices.
According to the interviews, it is too early for
outgrowers in the Ex-Agris scheme to assess
the benefits to a livelihood level. But farmers are
hopeful that this scheme will move them up the
livelihood ladder.
Farmers’ ability to influence prices or terms
of trade
At NASFAM the success of local farmers to meet
international Fairtrade standards and invest in
groundnut production has resulted in a highly
competitive market place (with changes in exchange
rate particularly supporting aggressive competition from
buyers from the DRC, Tanzania and Zambia) with good
market information. NASFAM started the latest season
offering Malawi Kwacha (MK) 70/Kg ($0.43)
7
Based on average production per farmer
and increased to MK120 ($0.73) week by week. Once
immediate market demands had been met poor crop
quality led to NASFAM stopping purchases beyond this
level. The competitive market continued to push price
up to MK180/kg ($1.09).
At MASFA quality does appear to influence the price
that NASFAM pays but this is not the case with
other buyers, who ‘will just buy anything’, and yet
are able to offer higher prices. This is perceived to
significantly undermine MASFA’s efforts to improve
quality particularly reducing aflatoxin – an unseen and
potentially harmful fungus found in groundnuts.
At MASFA all farmers are price-takers, and yet they
acknowledged that they are still keeping some stock
in their houses, waiting for the prices to go up. One
could, therefore, argue that the farmers are influencing
the prices by hoarding – although the extent of this
practice is debated. The farmers believe they cannot
influence prices because sometimes they are forced
to sell to buyers other than MASFA to meet immediate
cash needs.
‘Groundnuts don’t
require fertiliser and pay
immediately, with tobacco
the crop is sold at the auction
and the money comes later.’
MASFA Farmer
Ex-Agris is perceived to communicate very late about
purchase prices, and the opening of their ‘market’.
They tend to wait until other buyers have set the price
but often Ex-Agris will buy at a higher price than the
local market. For farmers who are looking to sell as
quickly as possible, the perception is that the delay in
purchasing forces them to side sell at a lower price.
Farmers do not perceive themselves as having any
power in the relationship. The farmers indicated that
they are ‘price-takers’, and do not perceive themselves
as having any influence on setting prices.
Supply chain co-ordination/information exchange
Ex-Agris outgrowers were ‘curious’ about where the
groundnuts are finally sold, but they do not have the
confidence to make enquiries about this. They believe
that if they start asking such questions, they might even
lose the ‘potential market’ that Ex-Agris represents.
19
MASFA farmers acknowledged the significant feedback
on quality they received from NASFAM. They also took
great pride that one of their members was featured
on the back of a packet of groundnuts available in the
UK market.
NASFAM and International Crops Research Institute
for the Semi-Arid Tropics (ICRISAT) recently facilitated
a workshop with growers and traders about aflatoxin.
Some buyers were unaware of aflatoxin as an issue and
said that ‘we must make plans to work together’.
Of the MASFA focus group participants two men felt
that they had good knowledge but little influence and
stood at the ‘strong’ end. Two women and one man
stood in the middle also feeling that their knowledge
of the supply chain was poor.
Degree of control over the product and share of the
value chain proceeds
MASFA’s groundnuts are now processed at Afri-Nut
(see Box 4) a $1 million nut processing plant based in
Lilongwe in which NASFAM has a 26 per cent stake.
NASFAM are also members of the International Nut
Producers Co-operative that owns 42 per cent of
Liberation Foods Community Interest Company (CIC)8.
It has been extremely difficult to estimate with any
accuracy the share of the value chain enjoyed by
farmers. Basic information from MASFA, NASFAM,
Afri-Nut and Liberation Foods CIC suggest that
each benefit from approximately 3 per cent of the
final product price. Given that farmers have a stake
in each of these entities this represents a significant
percentage.
Level of support from buyers to enhance capacity
MASFA and NASFAM’s efforts to build capacity are
acknowledged by farmers. Awareness of training,
the building of warehouses, efforts to improve quality
management systems and the introduction of shellers
was high. Farmers were also aware of the relationship
that this has facilitated with Sainsbury’s. However,
comments were made by farmers on the way in which
these efforts to support and build capacity had been
designed and implemented ‘they (the mechanical
shellers) break the nuts. The sieve was the wrong size!
Why didn’t anyone ask us!’.
Ex-Agris’ relationship with outgrowers is relatively new
but their support is acknowledged by farmers. They
have provided training on Good Agricultural Practice
(GAP), aflatoxin control and provided good quality
seed for free. Farmers also acknowledged social
support that Ex-Agris renders to the community,
which they felt demonstrated an intention from ExAgris to build a long-term relationship with community
members. This support includes boreholes, repairs
to local bridge, and sometimes transport for the
football team. By supporting farmers with good
quality free seed, training and market access, but
not asking farmers to sign a contract to sell their
product, Ex-Agris is shouldering most of the risk in
this arrangement.
The following radar diagrams present this information
according to assessments provided by farmers
against the key dimensions of the Supply Chain
Assessment Framework.
Figure 5: Supply Chain Assessment Framework: MASFA and Ex-Agris
MASFA
Ex Agris
Net Returns
Built capacity
Influence on
price and terms
20
8A
Net Returns
Control over
and % of the
value chain
Supply chain
coordination
Built capacity
Influence on
price and terms
CIC is an innovative hybrid organisational structure of a profit making company and a charity.
Control over
and % of the
value chain
Supply chain
coordination
AnAlysis
Our research looked at six very different propositions
in three commodities in three countries. They
represented traditional farmer-led co-operatives,
outgrower schemes, smallholder-owned companies,
workers collectives, and in the case of Finlays,
hired labour. The particular focus of this research
was to look at producer and worker perspectives
on the nature of the trading relationships in which
they engaged, and to assess how these were
valued and how they contribute to development and
empowerment of producers and farmer organisations.
In seeking the perspectives of farmers on their own
experience of the trading relationship, it is difficult
but necessary to disentangle internal factors that are,
or should be, part of their circle of influence, from
external factors (e.g. government policy, including the
level of liberalisation and the commodity tax regime,
infrastructure, access to finance) which are beyond
the immediate control of farmers and intermediary
organisations.
10.Mapping supply chain
engagement
This research on the nature of the supply chain
engagement focused on a simple framework of five
key dimensions of a progressive trading relationship.
In each case study we discussed a series of
questions related to the thematic area and then asked
participants to assess the nature of the engagement
on a simple and subjective scale.
The following six radar diagrams summarise
the findings across the case studies. The logic
of the approach is to provide a simple visual
representation of the nature of the engagement; the
larger the area within the diagram, the more positive
the trading engagement (it does not seek to prioritise
one element of the engagement over another). It also
does not consider movement over time although
this was part of the discussion within focus groups.
In trying to draw conclusions from the assessment
of the six case studies we will first look at a
number of key issues relating to the nature of the
trading relationship, largely as observed by the
farmers. We will then revisit some of the indicators
to assess their relevance in light of the case study
findings. Lastly we explore what role the structure
and capacity of the intermediary organisation
plays in building capacity and returning benefits
to smallholders.
21
Figure 6: Comparison between six case studies of elements of Supply Chain Assessment Framework
MASFA
Ex Agris
Net Returns
Net Returns
Control over
and % of the
value chain
Built capacity
Influence on
price and terms
Supply chain
coordination
Control over
and % of the
value chain
Built capacity
Influence on
price and terms
Finlays
Michimikuru
Net Returns
Net Returns
Control over
and % of the
value chain
Built Capacity
Influence on
price and terms
Supply chain
coordination
Control over
and % of the
value chain
Built Capacity
Influence on
price and terms
Coopaga
Influence on
price and terms
22
Supply chain
coordination
Ecookim
Net Returns
Built capacity
Supply chain
coordination
Net Returns
Control over
and % of the
value chain
Supply chain
coordination
Built capacity
Influence on
price and terms
Control over
and % of the
value chain
Supply chain
coordination
11.Farmer organisations:
model of change graph
As a first step towards unpacking best-practice
engagement with smallholder organisations, Twin
has begun to develop a model of change which
delineates the stages that farmer organisations go
through on their path towards sustainability.
The way many conventional commodity supply
chains are structured makes it hard for smallholders
to have any oversight and control over their product
within the chain and as a consequence producers
are marginalised and disempowered, unable to
exert influence and capture greater value. The
ability of smallholder organisations to travel this
pathway of change (outlined in the graph above) will
therefore depend significantly on the commitment of
buyers and other supply chain actors to go beyond
complying with Fairtrade standards to employ ‘best
practice’ business principles.
Strength of Producer Organisations
Figure 7: Farmer organisations’ model of change (Twin, 2010)
Producer Organisation is sustainable
Producer Organisation is resilient to shock
and not dependent on others
ed
sir
De
th
pa
Producer Organisation is
able to invest strategically
Producer Organisation has market
access and basic business capacity
Producer Organisation Established
Time
12.The nature of the trading
relationship
Net returns
Net returns from trade in cash crops is clearly a
significant element of income for most of those
interviewed. In the case of many, cash crops
accounted for the majority of household cash income.
The size of net returns varied significantly across the
different case studies and between different groups of
members and types of activities. What is noteworthy
is that price and the ability to influence it seemed to
play a much less significant role in explaining relative
returns than productivity. In fact in the case of Côte
d’Ivoire, the producers that have direct relationships
to buyers and therefore arguably more scope to
negotiate on price have significantly lower net returns
than those who do not. Clearly prices are important as
is the ability to influence them. Twin’s experience with
coffee producers in the DRC suggests that having
farmer organisations as intermediaries for direct
export can have a dramatic impact on farm gate
prices, e.g. by helping to differentiate the product and
negotiate directly. But once a certain level of market
development is reached, and in the absence of other
market failures, the cost benefit of interventions to
increase bargaining power may be less significant
than an investment in productivity. As some of the
case studies suggest, raising individual farmers’
yields may be one of the more effective routes to
‘stepping out’.
Cash – at the right time – is king
The case studies also highlighted the importance
of the timing of returns both in tea and groundnuts;
this was absent as an issue where cash is usually
paid immediately, such as in cocoa. The NASFAM
groundnut study highlights the importance to farmers
of receiving cash early from their groundnuts as
opposed to tobacco where payment is delayed.
The two tea case studies involve two different
23
approaches to paying surpluses to producers:
a final payment, after the end of the season, in the
case of the Michimikuru, and a more regular payout,
in the case of Finlays. These examples highlight how
much the timing of payments matter in the context
of rural economies where seasonality looms large. It
is notable, though not surprising, that it was Finlays
that operated a more (though not entirely) timely and
transparent payment system than the farmer-owned
co-operative (although the co-operative members
consulted did not seem to identify the bonus payment
as a major problem).
This is not surprising given the important matter
of access to finance. Michimikuru, like many other
farmer organisations Twin works with, find it difficult
to access affordable working capital and management
therefore draw on their members’ cash, in the form
of a delayed payment, to finance the business and
also manage price risk. This could be a mutually
advantageous arrangement, at least for some
members, providing members understood it, had
consented to it and it was transparently managed.
Having said this, for poor households access to cash
throughout the season and/or at critical times of the
season is a major priority and it seems unlikely that all
but the wealthiest members would voluntarily choose
a delayed payment. This challenge emphasises the
value and importance of pre-finance, as a key enabler;
enabling farmer organisations to compete with other
businesses with better access to finance, and as an
important key to unlock household access to cash
at the right times. Experience from other countries
suggests that in increasingly competitive markets,
the co-operative second payment system – its historic
‘solution’ to financing problems – is undermining their
ability to compete for members’ production.
The provision of pre-finance or even just timely
payment of accounts outstanding is a key determinant
of a farmer organisation’s ability to purchase from it’s
members in a competitive fashion.
Transparent transactions
The lack of transparency was a recurring theme
particularly where there was no traceable supply
chain or where producers could not access
actual prices and margins linking their payment
to downstream sales. For example, while Finlays’
practice of paying auction surpluses promptly is to
be commended over the more opaque management
of bonuses by tea co-operatives, in neither case can
ordinary members verify whether they are being paid
the correct amount.
At most farmer organisations increased transparency
is the responsibility of the board and management.
Regular information about sale (auction) prices and
sales volumes posted publicly would represent a
major advance.
This is an area where further work is encouraged to
identify ways in which accurate and timely information
can be provided to enable farmer organisations and
24
Box 2: Good practice from Divine
Chocolate: The Divine Calendar
Making farmer ownership real is very important
to Divine Chocolate. Divine wants to make sure
that all members of Kuapa Kokoo Farmers
Union get to hear how the company they own
45 per cent of the shares in is doing. So every
year Divine designs an A2 calendar which
includes a summary of the financial performance
of the company and a description of some of
the activities over the year and some of the
plans. This calendar is printed in Ghana and is
distributed to every village representative at the
Annual General Meeting so that they can take it
back to their village and put it up in the cocoa
shed so that all members have a chance to read it
when they are delivering their cocoa.
their members to make informed decisions and be
accountable to stakeholders, and who should be
responsible (see Box 2 for a best-practice example
of how Divine Chocolate is ensuring a degree of
transparency of financial performance and future
activities).
Certification has the potential to play a role
in encouraging enhanced transparency and
accountability.
Information and feedback
Very little information regarding where the product
‘goes’ appears to come back to farmers. While this
is not surprising given the usual position of farmers
within global value chains, it is worth considering
the value and importance of this knowledge to
producers. In the case of NASFAM the very direct
and visible portrayal of the farmers on the Liberation
product is a source of pride and also has enhanced
the sense of ownership in the finished product.
Many other producers, when prompted expressed
an interest in knowing where their product ends up.
Twin’s experience of working with cocoa farmers
in Ghana and coffee farmers in Uganda suggests
farmers derive an immense sense of pride and
accomplishment from handling and tasting the
final product, the fruit of their hard labour. While
producers gain no material advantage from this
knowledge and experience, we would argue that
it is a valuable, if modest act in humanising the
value chain and giving some meaning to producers’
daily labour.
It is also noteworthy that not all producers thought that
information about buyers (‘downstream engagement’)
was important or advantageous to them: Coopaga
staff seemed puzzled by the very question and
suggested this was a matter for the certifier, not for
them. This example is interesting because unlike
Ecookim, Coopaga does not export directly and
It is a valuable, if modest
act in humanising the
value chain and giving
some meaning to producers’
daily labour.
has no immediate ambition to do so. Furthermore,
Coopaga members are, on average, significantly
better off than Ecookim farmers. This challenges any
simplistic assumption about the inherent benefits
of producers moving up the value chain and we will
return to this question below.
Of particular importance to farmers would seem to be
feedback on quality which offers a clear mechanism
to enhance returns (e.g. Michimikuru, NASFAM).
The ability or even willingness of the intermediary to
communicate this information to its members is clearly
an additional factor to facilitate positive change.
It is also critical that at the business-level, farmer
organisations have access to market information to
enable them to negotiate contracts and exert influence
with buyers. With increased internet usage, access
to international market information has improved
but it is not necessarily readily accessible to farmer
organisations (see Box 3 for a best-practice example
of how Twin Trading provides market information
to enable farmers to understand the market and
negotiate fairer prices and terms).
Box 3: Good practice from Twin
Trading: the coffee bulletin
Twin Trading publishes a fortnightly coffee bulletin
which is sent to producer partners. It outlines
recent market movements and provides a simple
analysis of past events as well as a view of what
may happen in the coming weeks. It also quotes
coffee differentials for different origins.
The information in the bulletin is shared in a
manner which is highly accessible to producer
partners and provides a tool to support them
to make informed decisions when negotiating
contracts.
25
Upstream investment
Producers in many of the organisations we met
identified services provided or funded by buyers as
a key reason for participating in the chain. MASFA
members identified service provision as a key factor
differentiating NASFAM from other traders, who only
bought their groundnuts (see Box 4 for a best practice
example of how Liberation Foods has made upstream
investments in their supply chains). In Cote D’Ivoire,
although Coopaga staff expressed reservations
about how the service arrangement with their major
buyer was managed, Coopaga members consistently
identified training to improve productivity as a key
benefit of membership. This is hardly surprising as
Coopaga members’ yields had risen significantly as
a result of the training and were, on average, much
higher than the national average and those of Ecookim
members. The two tea case studies provide a similar
contrast, with Finlays co-operative members achieving
higher yields than their counterparts at Michimikuru.
Whilst climatic variations undoubtably played a role
in this, the provision of training also appears to be a
significant contributing factor.
The nature of relationships with external actors is a
key theme in most of the case studies. Relationships
are often very positive and constructive but there is
a sense, and it supports some of our own analysis,
that there is a fine line between building capacity,
in an empowering way, and ‘replacing capacity’,
in a way that disempowers. While the agronomic
training that accompanies UTZ certification is highly
valued by Coopaga members, staff perceived this
as an ‘imposition’ and replacing existing capacity.
Operating within the constraints of a commercial
arrangement and the pressure to meet market
demand, this balance or distinction is not easy to
draw but it remains crucial to building a healthy
trading relationship built on mutual respect,
whether or not the producers wish to develop more
26
autonomous relationships in the long-term. The
challenge, it seems, is to find the right trade-off or
middle ground between building producer resilience
and autonomy, on the one hand, and the risk of
dependency resulting from the intensive investment
necessary to facilitate producer organisation, market
access and efforts to, for example, increase yields.
We return to this important trade-off below.
Box 4: Good practice from
Liberation Foods: adding value
Twin launched Liberation Foods CIC in 2007 in
partnership with NASFAM and other producer
organisations from Africa and Latin America.
This company now supplies the lion’s share of
Fairtrade-certified nuts within the UK.
In 2010 NASFAM built on its growing interest in
groundnuts and invested in a $1m processing
business in Lilongwe – Afri-Nut.
By supplying nuts directly to Liberation Foods,
Afri-Nut Ltd will add value for peanut exports from
Malawi as well as further developing supply chain
coordination, facilitating communication and
trading between players (producers, processors,
other manufacturers, distributors and different
types of consumers). The work to establish a
viable export supply chain which controls aflatoxin
contamination has enabled Twin’s partners to
identify further interventions (e.g. local brand
development, partnership with manufacturer of
ready to use Therapeutic Foods) for local and
regional value chains.
13.Revisiting the indicators
Traceability
Based on what producers said in our field work,
they attach limited significance or importance
to physical traceability. Indeed, one of the few
explicit references was in Coopaga where staff
expressed their appreciation of the mass balance
system under Fairtrade, which gives them greater
flexibility in responding to market demand.
However, producers’ comments about other issues,
on which traceability directly impinges, enables us
to infer some further points for consideration. Firstly,
some of the downstream accountability problems
identified above, particularly in tea in Kenya, are
arguably associated with a lack of traceability and
the practice of retro-certification . These practices
and the absence of compensatory interventions,
means producers have diminished oversight over
relevant transactions and therefore simply have to
hope that they are not being cheated. Traceability
does not necessarily solve such problems, nor is it
always technically or economically viable. However,
wherever producers cannot physically trace their
product through critical transactions, buyers and
certification systems have to work that much harder
to create a level playing field in terms of producers’
capacity for oversight and the associated sense
of empowerment.
Another important aspect of traceability raised
indirectly in the case studies is the potential it
creates to identify and connect with downstream
customers. As noted above, many of the producers
interviewed expressed their desire to know where
their product went and the identity of buyers further
down the chain. Although, again, traceability does
not always have to preclude such connections, its
‘Women are calmer than men.
They don’t fight each other.
So they contribute more to
development. They manage
household income better than
men. Men have to encourage
their wives to grow their own
cocoa. There has to be deep
sensitisation of women but
also of men. Women have to
come to the meetings and all
the activities, men have to
be able to accept a woman
manager, a woman president.
Our culture must modernise.’
Ecookim group discussion
absence creates virtual rather than real customers
and reinforces the natural tendency of information
only to flow in one direction, down the chain.
Whether or not such connections have economic
significance is debatable, but the important message
from these case studies is that producers seem to
attach significance to them.
One obvious area where such connections could
make a real difference to both producers (and to
other actors in the chain) is the opportunity it creates
for producers to develop personal relationships with
downstream buyers and thereby build more durable
trading arrangements and maybe even contribute
to growing the market. This ambition or desire was
expressed by at least two of the groups in our case
studies and the MASFA groundnut farmers have
already begun to develop such relationships. Twin’s
experience in other supply chains is that such ‘nonstandard’ relationships can play an important role
in building more durable trading relationships and
subverting producers’ usual, disempowered position
at the end of the chain. We are not naive in believing
such relationships can transform producers’ position,
but getting producer representatives around the
table with a buyer from a major retailer or brand
can begin to ‘humanise’ the chain and ensure
greater weight is attached to other factors besides
price. As global markets become more volatile and
competitive, and climate change increases supply
risks, such relationships are likely to become even
more important and provide an opportunity for
collaborative solutions that build more resilient
chains rather than increasingly footloose chains
that can create vulnerability (as implied by the tea
case studies).
Moving up the value chain
One other aspect of traceability not covered above
is that it provides a basis for product differentiation
– a key strategy to add value and move up the
value chain. This ambition or objective is reflected
in one of the five core indicators of the smallholder
supply chain relationship, ‘relative producer share
of value chain’. Before considering how relevant
this indicator is and its underlying ambition, what
can we say about producer priorities from the case
studies? NASFAM have made strong steps to invest
in processing facilities and also taken an active role
in the establishment of the UK brand Liberation.
MASFA members interviewed displayed a clear
sense of pride in a retail product displaying a fellow
member and in which they have a stake. Michimikuru
are shareholders in Cafédirect and (some of) those
interviewed singled out their close relationship with
Cafédirect as a positive example of downstream
engagement. The same members also expressed
their disappointment that an origin product
containing their tea had not been commercially
successful. Finlays’ outgrowers stated a desire some
day to build and own their own tea factory. While
such ambitions were not voiced by all producers,
there is clear desire among some to get more value
out of their product.
27
Farmers need to be
seen and treated
as active agents
within the supply
chain not as passive
recipients of solutions
identified by external
experts or, mere
‘beneficiaries’ of
premium projects.
From experience, this desire comes from producers’
experience of long-term declining farm gate prices,
their sense of powerless in the face of this decline,
and, for those with access to the information, a
painful knowledge of how their income represents an
ever smaller fraction of the final retail price. These are
the classic problems of the commodity trap faced by
farmers worldwide to which product differentiation,
into niche markets, is put forward as a partial solution.
At the outset, the Fairtrade system was developed,
in part, as a response to this problem and many
producers have over the last two decades benefited
from access to niche markets that rewarded the very
attributes that tend to disadvantage smallholders
in conventional chains. With the mainstreaming
of Fairtrade, there is a risk that certification and
the mark alone no longer provide a differentiated
market channel. Increasingly smallholders need
to differentiate and add value, beyond the mark,
if they are to remain competitive within increasingly
crowded fair trade markets. However, while there
are some notable examples of smallholder producer
organisations moving up the value chain further
work needs to be done on how these changes can
be made sustainable and scaleable. Linking such
initiatives to the policy environment and the creation
of, for example, national integrated agricultural
strategies would seem an essential prerequisite
for this.
Supply chain co-ordination
There are some strategic issues that transcend
particular farmer groups or buyers where solutions
require coordinated action among different players.
Reducing aflatoxin in groundnuts and increasing
yields of cocoa are two good examples from
our case studies. To what extent can we expect
producers organisations and buyers to work together
to address some of these challenges? What role
28
can Fairtrade or other certification schemes play
in attempting to facilitate such initiatives?
Both are systemic problems affecting all actors in
the chain and yet the incentives for investment and
action by downstream players are often limited if
they cannot recover their investment. This is likely
to favour investments and solutions in closed
supply arrangements, where a buyer can be sure
of benefiting from the investment. The major buyer
involved with Coopaga seems to be partly motivated
by the desire to ensure the costs of its ‘investment’
in raising productivity is at least partly covered
through its own premium. While such arrangements
make commercial sense and are a necessary means
of managing risk, the manner of their execution
can make all the difference between producers
feeling empowered or, as in the case of Coopaga,
disempowered.
Developmental co-ordination, aimed at
empowerment, requires a number of things: firstly,
farmers need to be seen and treated as active
agents within the supply chain not as passive
recipients of solutions identified by external experts
or, mere ‘beneficiaries’ of premium projects. Farmers
and their organisations need to be part of a twoway conversation with key value chain actors to
identify and respond to systemic problems. External
experts are certainly required but the starting point
has to be farmers’ reality and capacity. Secondly,
farmers have to be organised and organised in
structures and systems designed to empower them,
not just deliver advice and instruction to them.
NASFAM’s example of facilitating a workshop of
other buyers in the region to increase awareness
of the aflatoxin challenge and encourage a collective
response is good example of action initiated by a
farmers’ organisation, across an entire commodity
in one country.
Household decision-making
The five indicators we chose as a starting point
for this study focus largely on the interface and
relationship between farmers, intermediaries
and the rest of the chain. What they miss is the
critical interface between farmers and families.
And yet to deliver developmental impact we have
to look beyond the efficiency and effectiveness of
intermediary organisations and the fairness of trading
relationships and consider how such benefits feed
through to households. It is not enough to talk about
an increase in family income as though this were an
unqualified good regardless of what happens to it.
There is a need to look at what happens to it and
especially how decisions are made and who makes
them. Gender relations are particularly significant in
determining how such benefits are distributed.
Unfortunately, gender awareness and positive action
to promote gender equality or ‘gender justice’ is
a weak element in all six case studies. There is a
tendency amongst farmer organisations to focus on
gender in terms of proportion of female members
or staff, and to ignore gender relations at home
and within the organisation (see Box 5 for a bestpractice example of how Bukonzo Joint Co-operative
is improving gender relations and household
decision‑making in Uganda).
Box 5: Good practice from
Bukonzo Joint Co-operative:
gender action
Bukonzo Joint Co-operative realised that to
address the endemic poverty in the community
they would have to look at family relationships
and behaviour. From this they developed the
Gender Action Learning System, a community-led
process focusing in particular on gender relations
in member-households. The impact has been
remarkably powerful in unseating cultural norms
that have existed for generations.
Participants have reported remarkable life
changes. These relate to male participation
in domestic tasks such as drawing water and
cooking and also increased male participation in
farming tasks. A central area of change was in
shared household decision-making over income
and expenditure. Furthermore, rates of genderbased violence have reportedly fallen considerably.
Increased cooperation has had positive impacts
for the co-op which is receiving much better
quality and a greater quantity of coffee.
14.Structure and capacity of
intermediaries
The discussion above has touched on the role
and significance of different farmer organisations’
structure along the pathway of development and
empowerment, but we now return to this question in
more depth; what do the case-studies examined in
this paper suggest about the importance of different
types of structure and business models?
Firstly it is useful to distinguish between Vorley’s
(2011) two broad models of autonomy (where farmer
organisations professionalise to be autonomous
economic organisations e.g. by building management
capacity, strengthening supply chain relationships,
improving quality and traceability systems) and
adoption (where farmer organisations economically
associate with a buyer or trader e.g. by organisation
outgrowers or contract farming models).
What is striking is that in the tea and cocoa case
studies analysed here, there seems to be some inverse
association between autonomy and scale of return (it
is too soon to see this in groundnuts). For example,
in the cocoa case studies Coopaga, which has a high
level of adoption compared with the autonomous
Ecookim, seems to be securing higher net returns for
farmers who in turn feel like they are ‘stepping up’
rather than just ‘hanging in’. In the case of Finlays,
whilst there is an adoptive feel about the relationship,
29
there is a higher degree of supply co‑ordination,
encouragement to find other buyers and a better flow
of information. However, care still needs to be taken
here that producers do not end up too reliant on their
adoptive trading partners, with all of the organisational
capacity sitting outside of the farmer organisation itself
(see Box 6 for an example of a formal commitment
from The Body Shop to reduce a farmer organisation’s
dependency on them over time).
How to resolve this paradox? Perhaps there needs
to be some recognition that the autonomy of many
traditional co-operatives is often overstated with
democratic structures at the level of unions often
masking weak processes and participation at
grassroots level. This raises the question of whether
the benefits of democracy always outweigh the costs.
Moreover, there can be significant advantages in
adoption depending on the nature of the relationship.
Adoption may leverage the investment required to step
up and out of poverty; it can also disempower and
reduce farmers to labourers. Adoption with growing
responsibility might be a reasonable ambition.
Box 6: Good practice from
The Body Shop: community
commitments
The Body Shop has made fair trade commitments
to the communities they work with, which they will
achieve by:
1.Including Community Trade ingredients, gifts
and accessories in new product development
wherever appropriate and possible.
2. Aligning corporate and personal objectives
to the success of the Community
Trade programme.
3.Ensuring that demand is appropriate and
sustainable by assessing the capacity of each
supplier, and working where possible to manage
the business level placed to that which the
supplier can support.
4.Benchmarking their Community Trade Supplier
Guidelines against the highest external standard,
e.g. Smallholder Guidelines of the Ethical Trade
Initiative and Fairtrade Labelling Organisation.
5.Undertaking regular participatory audits, and
providing all suppliers with clear information
and feedback to assist in maximising longterm benefits.
6.Working with suppliers to access the market
place in order to reduce community dependency
on The Body Shop.
7.Creating in-store communication to raise
awareness of the benefits of Community Trade
to their customers.
8.Engaging with the wider fair trade community
to share best practice and address
common issues.
30
However, the internal structure of the organisation
may be less important than the model of engagement
with buyers. Vorley and others point to the need
for double-facing intermediaries that will invest in
governance and capacity at the organisationallevel as well as increasing productivity or gaining
certification at the farm-level. Whilst in our view
autonomy is a better aim than adoption, there is an
acceptance that a phased transition from adoption
to autonomy may be helpful. What perhaps matters
more is that farmers are fully informed and engaged in
these processes.
15.Conclusion
Livelihoods approaches to development broadly
support the hypothesis that, while an increase in
income and the building up of key assets is an
important element of positive development, it is the
ability of the poor to engage and influence the policies
(e.g. Fairtrade Standards, government support to a
sector), and processes that affect their lives (e.g. trading
relationships) and institutions (e.g. farmer organisations)
that determines the level of vulnerability or security
and that this is a key determinant of ‘poverty’.
These case studies confirm the complexity of
empowerment and development and the fact that
there is no single or magic formula. They do, however,
provide a number of interesting insights and highlight
areas that require further investigation.
These case studies suggest:
• That in order to really support a process of moving
up the empowerment/development scale for each
of the indicators described, buyers and traders
need to go beyond complying with Fairtrade
Standards to a broader and deeper commitment
to Fair Trade principles
• P
hysical traceability has helped to establish a
connection between the producer and consumer
and help differentiate a product. This is particularly
important to counter the increase in the mobility
of supply chains. It is interesting to note that
the accountability and transparency of trading
relationships and transactions is valued more
highly than physical traceability
• T
hat the underlying tension between retaining cash
to invest in the business, and the distribution of
profits to farmers, is a key tension (and constraint)
to developing sustainable farmer organisations.
This is a more acute problem for co-operatives
• That the provision of pre-finance is correspondingly
a key element in the Fairtrade model and to
some extent determines whether co-operatives
and mainstream players are playing on a level
playing field
• T
hat the need to provide intensive support to a
farmer organisation should be balanced with the
dangers of creating an unhealthy dependency.
Efforts to build autonomy should be built into
engagements at the earliest opportunity
• That while crucial to enhancing livelihoods, efforts
to increase yields should not bypass the capacity
of farmer organisations
• That it is necessary for Fairtrade and actors within
it to have a strategic perspective on particular
commodities and origins within it to effectively
tackle sector-wide challenges
• N
et returns remain central but productivity may
be a more important variable for farmers than
price (although latter is important for a farmer
organisation’s competiveness)
• Engagement in household level decision-making
is a key determinate of developmental impact but
is it feasible (given the level of resource required)
for Fairtrade or the private sector to engage at
this level?
• A
t the heart of creating more empowering
relationships between buyers and farmer
organisations (and between farmer organisations
and farmers) is a shift in attitude and perception. To
move forward it is important that buyers perceive
farmers as active partners and not passive
beneficiaries.
16.Future research questions
The following issues emerge from the work and
require further investigation:
• H
ow can trade relationships be enhanced to help
farmer organisations become more resilient and
strategic organisations?
• How can trade relationships be enhanced to
increase the ability of farmer organisations
to influence the external polices and process
that impact smallholder farmers?
• Under what conditions can an adoptive relationship
be transformed to a more autonomous one?
• How can the strength or autonomy of farmer
organisations be measured?
• If household decision making is a key contributing
factor to enhancing livelihoods, how can licensees
or certified farmer organisations be reasonably
encouraged to engage at this level?
• H
ow can a more progressive engagement with
producer organisations be achieved which also
delivers benefits to business (e.g. improved quality,
greater assurance of supply, market differentiation)?
31
Recommendations
17. Recommendations for buyers
Information and transparency
The research and resulting conclusions suggest a
number of recommendations for business engaging
with smallholder value chains:
• Provide information to farmer organisations
on where their produce has ‘gone’ including
information on quality with recommended steps to
address any issues
Relationships
• Provide information on markets
• D
evelop and regularly review MOU between
business and farmer organisation to clarify
expectations of relationship
• Encourage farmer organisations to provide
transparent information on all relevant transactions
to members to encourage transparency and
accountability along the chain
• W
here possible articulate long term commitment to
relationship
• Consider the timing of cash payments, especially in
light of seasonality, and how availability or lack of
finance also impacts on households.
Autonomy
• Set targets over time for farmer organisations to
sell to other buyers (jointly commit to reduce direct
dependency over time)
• B
uild administrative capacity of farmer
organisations not just of farmers, e.g. when seeking
to enhance farmer access to inputs support the
farmer organisation rather than directly supplying
• Where investment is only attractive with adoption
and with greater control, consider how to
encourage more autonomy and responsibility
over time (e.g. encourage some ‘side-selling’,
development of new trading relationships).
• Encourage farmer organisations to communicate
effectively with members
• Where physical traceability is not feasible consider
what additional steps are required to ensure
producers have confidence in transactions and can
identify key downstream customers.
Supply chain control
• Connect with producers (invite farmers to meet
buyers) and link them to downstream buyers; use
them to build the market
• Respect producer Intellectual Property (IP) when
marketing product but promote the face and
people behind it.
REFERENCES
Dorward, A., 2002. Pro-Poor Livelihoods: Addressing the
Market/Private Sector Gap. Paper presented at the Sustainable
Livelihoods Seminar on ‘Private Sector and Enterprise
Development’. DfID, November 2001
IDS (Institute of Development Studies), 2010. Mapping
sustainable production in cocoa, Report to Cadbury
Penrose Buckley, C., 2007. Producer Organisations: A Guide to
Developing Collective Rural Enterprises. London: Oxfam GB
Sainsbury’s, 2012. Sainsbury’s 20 by 20 Sustainability Plan.
Available from: http://www.j-sainsbury.co.uk/responsibility/20by-20-commitments/
The County Focus, October 2011. Kenya
32
WIN, 2010. Redefining the development vision of Fairtrade:
T
A Twin perspective (prepared for the Fairtrade Foundation)
Unilever, 2012. Sustainable agriculture and sourcing: Our strategy
and footprint, Unilever Report. Available from: http://www.unilever.
com/sustainability/environment/agriculture/
Vorley, 2011. The challenges and opportunities of working
with other value chain actors. Presentation prepared for Food
Security, Health and Impact Knowledge Brokering Conference.
Available from: http://www.africacollege.leeds.ac.uk/conf2011/
documents/vorley.pdf
World Bank, 2008. Agriculture for Development, World
Development Report. Available from: http://siteresources.
worldbank.org/INTWDR2008/Resources/WDR_00_book.pdf
AnnEx 1
Research Timetable
Annex 1: Research timetable
When
What
Who
4-15 November 2011
Fieldwork Michimikuru
Andy Carlton and Joseph Ngubwa
7-18 November 2011
Fieldwork Finlays
Andy Carlton and Joseph Ngubwa
10 October 2011
Fieldwork MASFA
Ian Barney and Doreen Chanje
6-7 January 2012
Fieldwork Coopaga
Andy Carlton and Konan Kuassi
9-10 January 2012
Fieldwork Ecookim
Andy Carlton and Konan Kuassi
18-19 January 2012
Fieldwork Ex-Agris
Doreen Chanje
07 February 2012
Draft report
10 April 2012
Final report
AnnEx 2
Supply Chain Assessment
Framework
The tool is particularly designed to engage actors in
discussing the nature of the trading relationship and
to facilitate an assessment of this relationship. While
based on a set of semi-structured focus groups
This tool was developed by Twin to help to
(with key questions) the assessment relies heavily
articulate and then assess and visualise the nature
on focus groups physically assessing their place
of relationships between buyers and producer
on the scale. The interaction between focus group
organisations.
members in placing themselves on the scale adds to
the depth of the engagement illuminating issues of
The supply chain assessment framework defines five
Annex
2: Supply
chain
assessment
commonality and difference between participants.
key
elements
of a trading
relationship.
Each framework
of these
elements is defined by a simple qualitative scale:
Element
Scale
1
Net returns to members
Hanging in / Stepping up / Stepping out
2
Relative producer share of the value chain
Falling / Stable / Increasing
3
Ability to influence price or terms
Price-taker / Neutral / Price-setter
4
Supply chain co-ordination / information exchange
None / Weak / Strong
5
Contribution from buyers to build farmers capacity
None / Some / Significant
1.
Net returns to members
• How important is the crop to you?
• What % of your cash income does sale of the
crop make up?
• How have you used the proceeds?
• What difference has this made to you?
• Assessment: returns allow me to ‘survive’
or to ‘grow’.
2. Relative producer share of the value chain
• Where possible inform by quantitative value
chain assessment
• Has your organisation invested in moving
up the value chain?
3. Ability to influence price or terms
• What is the level of the competition locally for
members’ produce?
• Do you know what market prices are when you
want to sell? (On a day-to-day basis)?
• Are you able to negotiate price of terms?
• Does quality impact prices?
4. Supply chain co-ordination/information
exchange
• Do you know where your product goes after
you sell to your farmer organisation or other
buyers? Does it matter to you?
• Have you met any of the buyers?
33
• Market volatility (e.g. increasingly volatile
commodity markets put added pressure on
management to manage risks)
• Have you ever been involved in discussing
how your nuts get to the market?
• Do you receive feedback on issues of quality
from your buyers?
• Climatic change (e.g. changing weather patterns
make volume and quality harder to forecast).
5. Contribution from buyers to build capacity
• Are you aware of any initiatives involving
buyers to build farmer capacity (e.g.
governance, business management, quality)?
• Have they made a difference?
The ability for this enhanced value at a producer
organisation level to then result in improved
livelihoods at a household level will be affected by a
number of factors. These include:
The ability of a producer organisation to return value
to its members (its efficiency) is influenced by the
nature of the trading relationship but also other key
factors. These include:
• The extent to which the level of poverty impacts
the ability to take medium to long term investment
decisions (the short term imperative means added
value is consumed rather than invested)
• The capacity to manage an agri-business (e.g.
can you get the right staff, at reasonable wages to
run the business, can you access the finance you
need?)
• T
he ability of women to participate effectively in
decision making processes at the household level.
• The capacity to manage a democratic
and accountable organisation (e.g. do you
communicate effectively with your members?)
• The enabling environment within which the
producer group operates (e.g. the level of support
offered by public sector, the infrastructure, the level
of corruption and bribery prevalent in the sector)
AnnEx 3
Defining the Development Vision
of
Fairtrade:
A Twin
PerspectiveVision of Fairtrade:
Annex
3: Defining
the Development
(Twin,
2010)
A Twin Perspective
(Twin, 2010)
Depth of impact:
Degree of producer
development and
empowerment
Target Area: Volumes with
transformative impact
?
ATOs/FTOs
Minimum return
threshold to
escape poverty
traps?
High
How to create incentives
to shift trajectory upwards?
Medium
Mainstream players
(e.g. Cadbury, Sainsbury’s)
Downward pressure to cut costs
Low costs and minimal requirements on traders,
manufacturers and retailer
Low: <1%
market share
Med: 1-10%
market share
High: >10%
market share
Breadth of impact:
FT share of market / total number
of producers benefiting
34
Low
• Significant value addition at source/returns = ‘growth wage’
• Relative producer share of value within chain increasing
• Producers have clear oversight over product flow through
whole supply chain and ability to control intangible assets
• Producers have strong bargaining position/ ability to
influence terms of contracts
• Capacity to participate in and influence FLO system
• L
imited value addition at source / returns support ‘stepping up’
• Relative producer share of value within chain stable
• Product traceability; producers have good knowledge of supply
chain with some influence over intangible assets
• Negotiation capacity and ability to influence terms if not price
• Knowledge of FLO system and ability to respond reactively
to consultations
• N
o value addition / returns merely support ‘hanging in’
• Relative producer share of value within chain static or falling
• No traceability; limited knowledge of supply chain and no
influence over intangible assets
• Weak bargaining position and negotiation capacity
• Weak knowledge of FLO system and no capacity to engage
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