Making International Supply Chains Work For Smallholder Farmers

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: Coopaga: CSR: DRC: ECookIm: INpC: kTDa: Community Interest Company Co-oprative agricole de gabiadji Corporate Social Responsibility Democratic Republic of Congo Enterprise Co-oprative kimb International Nut producers Co-operative kenya Tea Development agency kSh: maSFa: moU: mk: NaSFam: WTo: kenyan Shilling mchinji area Smallholder Farmers association memorandum of Understanding malawian kwacha National association of Smallholder Farmers in malawi World Trade organisation
Glossary
armer organisations: rural businesses which F engage primarily in collective marketing but also inother collective activities such as processing and production ass balance: where possible, the Fairtrade M 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. utgrower scheme: a contractual partnership O 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. ainforest Alliance: an organisation offering R food certification and verification services that aims toconserve biodiversity and ensure sustainable livelihoods. mallholder producer: Fairtrade International S defines a smallholder as a producer who is dependent on family, as opposed to nonfamily, labour as a basis for its definition. TZ CERTIFIED: an organisation that sets U 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-Amlie Ormires
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, Cte DIvoire. .......... 13 8. inlays Outgrowers Group and Michimikuru, F tea farmer organisations, Kenya. .............................................................. 15 9. ASFA and Ex-Agris Outgrowers, M 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
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: armer organisations model F of change (Twin, 2010)
List of boxes
Box 1 Box 2: Box 3: Box 4: Box 5: Box 6: Livelihood Scenario Definitions good practice from Divine Chocolate: the Divine Calendar good practice from Twin Trading: the coffee bulletin good practice from Liberation Foods: adding value good practice from Bukonzo Joint: gender action 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
EXECUTIVe SUMMARY
This report provides an analysis and evaluation of how specific business practices facilitate smallholder producer development and empowerment in Fairtrade supply chains. Thisresearch 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 offuture 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
Control over and % of the value chain
Influence on price and terms
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. Control 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.
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.
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
reform have always been central to Fairtrades 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 Sainsburys 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 (Sainsburys, 2012). The Co-operative has already converted to 100% Fairtrade on its 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). Cadburys have committed to investing significant sums of money to boost productivity in the Ghanaian cocoa industry through their Cadburys Cocoa Partnership programme (Cadburys, 2012). Through the World Cocoa Foundation (WCF) ADM Cocoa, Barry Callebaut, Cargill, The Hershey Company, Kraft Foods, Mars, Nestl 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.
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 Fairtrades 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
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 Cte dIvoire 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: 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 (see Box 1, p9) Control 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. Built 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
Net Returns
Built Capacity
Built Capacity
Smallholders perceive that involvement in the value chain is supporting development but not enabling empowerment through the process.
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 Twins knowledge by examining a broader range of case-studies in other commodities has cemented this understanding and enabled a more in-depth analysis.
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 Cte dIvoire) 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.
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.
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);
STEppIng up:
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.
STEppIng ouT:
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 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.
Ecookim, Enterprise Co-oprative Kimb: cocoa Location: Daloa, Cte dIvoire 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 womens 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.
TEA
COCOA
Coopaga, Co-oprative Agricole de Gabiadji: cocoa Location: San Pedro, Cote dIvoire 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.
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-operatives 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.
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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.
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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 thekey elements of the Supply Chain Assessment Framework andare presented by commodity.
which co-operatives manage their cash during the season and distribute any surplus to members at the seasons 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.
Table 1: Cocoa farmer organisations: basic information
Organisation Commodity Average farmer income from cash crop ($ pa) Cash crop as % of income % of crop sold as Fairtrade
Coopaga1 Cocoa 4915 100 2.5%
Ecooklm2 Cocoa 1014 90 14%
7. Coopaga and Ecookim, cocoa farmer organisations, Cte DIvoire.

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 (lvage), 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
Farmers ability to influence prices or terms of trade In Cte dIvoire 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 dont agree there is no future. The young men are planting cocoa. They believe there is afuture.
Female farmer with an average-sized cocoa farm (2 ha).
Like many farmer organisations, Ecookims 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.
Focus group participants, 2 Focus group participants
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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 unions 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. 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. 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. Supply chain co-ordination/information exchange 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
When you are making a soup you must know who isgoing to eat it.
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. Degree of control over the product and share of the value chain proceeds 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. Coopagas 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. Ecookims 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
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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
Net Returns
Ecookim
Net Returns
Built capacity
Built capacity
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 Finlays Outgrowers Groups 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 $2,930. In tea the issues of the timing of cash flows to farmers was complicated; with the timing of bonus payments
3 5
Table 2: Tea farmerto farmers Net returns organisations: basic information
Organisation Commodity Average farmer income from cash crop ($ pa) Cash crop as % of income % of crop sold as Fairtrade
Finlays3 Tea 2930 50-70 N/A
Michimikuru4 Tea 1247 90 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 couldnt directly compare the totals per kg earned by Finlays and Michimikuru smallholders, but the figures seem to be very close.
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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 dont know the buyer, how can wenegotiate?
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 Finlays 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.
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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 Michimikurus 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 Cafdirect buys tea directly from Michimikuru, rather than through the auction or from KTDA.
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 Cafdirect. Michimikuru drew attention to a partnership with Cafdirect 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.
Because thats how we earn our living; maybe we can improve on quality if we know more about our customers needs.
Michimikuru tea plucker
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We dont 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. Wewant to make direct sales so we can negotiate. If we dont know the buyer, how canwe negotiate
Member of smallholder co-op supplying Finlays.
Level of support from buyers to enhance capacity The Ainamoi smallholders were full of praise for Finlays 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 didnt 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 Cafdirect, 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
Finlays
Net Returns
Michimikuru
Net Returns
Built Capacity
Built Capacity
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9. MASFA and Ex-Agris outgrowers, groundnut farmer organisations, Malawi.

Net returns to farmer 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. 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 NASFAMs 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)
Net returns farmer organisations: basic information Table 3: Groundnutto farmers

Organisation Commodity Average farmer income from cash crop ($ pa) Cash crop as % of income % of crop sold as Fairtrade MASFA Groundnuts 1707 60 10% Ex-Agris Groundnuts 31 Not collected N/A
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 MASFAs 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 dont require fertiliserand pay immediately, with tobacco the crop is sold at the auction and the money comeslater.
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.
Based on average production per farmer
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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 MASFAs 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 NASFAMs 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 Sainsburys. 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 didnt 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
Net Returns
Ex Agris
Net Returns
Built capacity
Built capacity
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8A
CIC is an innovative hybrid organisational structure of a profit making company and a charity.
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.
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Figure 6: Comparison between six case studies of elements of Supply Chain Assessment Framework
MASFA
Net Returns
Ex Agris
Net Returns
Built capacity
Built capacity
Finlays
Net Returns
Michimikuru
Net Returns
Built Capacity
Built Capacity
Coopaga
Net Returns
Ecookim
Net Returns
Built capacity
Built capacity
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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.
Figure 7: Farmer organisations model of change (Twin, 2010)
Strength of Producer Organisations
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 Cte dIvoire, 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. Twins 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
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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 organisations ability to purchase from its 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
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. Twins 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
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It is a valuable, if modest act in humanising the value chain and giving some meaning to producers dailylabour.
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.
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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 DIvoire, 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
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 lions 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 Twins 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.
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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
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. Twins 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 Cafdirect and (some of) those interviewed singled out their close relationship with Cafdirect 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.
Women are calmer than men. They dont 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
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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
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. NASFAMs 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.
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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 Vorleys (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 organisations 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.
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 Physical 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 That 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
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.
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That 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 Net returns remain central but productivity may be a more important variable for farmers than price (although latter is important for a farmer organisations 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? 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.
16. Future research questions

The following issues emerge from the work and require further investigation: How 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? How 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)?
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Recommendations
17. Recommendations for buyers
The research and resulting conclusions suggest a number of recommendations for business engaging with smallholder value chains: Relationships Develop and regularly review MOU between business and farmer organisation to clarify expectations of relationship Where 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) Build 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). Information and transparency Provide information to farmer organisations on where their produce has gone including information on quality with recommended steps to address any issues Provide information on markets Encourage farmer organisations to provide transparent information on all relevant transactions to members to encourage transparency and accountability along the chain 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 Sainsburys, 2012. Sainsburys 20 by 20 Sustainability Plan. Available from: http://www.j-sainsbury.co.uk/responsibility/20by-20-commitments/ The County Focus, October 2011. Kenya TWIN, 2010. Redefining the development vision of Fairtrade: 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
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AnnEx 1
Research Timetable
When 4-15 November 2011 7-18 November 2011 10 October 2011 6-7 January 2012 9-10 January 2012 18-19 January 2012 07 February 2012 10 April 2012
Annex 1: Research timetable

What Fieldwork Michimikuru Fieldwork Finlays Fieldwork MASFA Fieldwork Coopaga Fieldwork Ecookim Fieldwork Ex-Agris Draft report Final report Who Andy Carlton and Joseph Ngubwa Andy Carlton and Joseph Ngubwa Ian Barney and Doreen Chanje Andy Carlton and Konan Kuassi Andy Carlton and Konan Kuassi Doreen Chanje
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 of these key elements of a trading relationship. Each frameworkcommonality and difference between participants. elements is defined by a simple qualitative scale: Element 1 2 3 4 5 Net returns to members Relative producer share of the value chain Ability to influence price or terms Supply chain co-ordination / information exchange Contribution from buyers to build farmers capacity Scale Hanging in / Stepping up / Stepping out Falling / Stable / Increasing Price-taker / Neutral / Price-setter None / Weak / Strong 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. 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? 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?
2.
4.
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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?
Market volatility (e.g. increasingly volatile commodity markets put added pressure on management to manage risks) Climatic change (e.g. changing weather patterns make volume and quality harder to forecast). 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 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 ability of women to participate effectively in decision making processes at the household level.
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 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 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?) 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 perspective Annex 3: De ning the Development Vision of Fairtrade: (Twin, Perspective (Twin, 2010) A Twin 2010)
Depth of impact:
Degree of producer development and empowerment ATOs/FTOs How to create incentives to shift trajectory upwards? Medium Mainstream players (e.g. Cadbury, Sainsburys) Downward pressure to cut costs Target Area: Volumes with transformative impact High
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 Limited 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 No 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
Minimum return threshold to escape poverty traps?
Low costs and minimal requirements on traders, manufacturers and retailer
Low
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
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Making International Supply Chains Work For Smallholder Farmers

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Making international supply chains work for smallholder farmers:

A comparative study of six fair trade value chains

A Fairtrade Foundation Report

Control over and % of the value chain

Influence on price and terms

Supply chain coordination

3. Smallholders in supply chains: challenges and opportunities

Figure 2: Illustrative example of the Supply Chain Assessment Framework

Control over and % of the value chain

Control over and % of the value chain

Influence on price and terms

Supply chain coordination

Influence on price and terms

Supply chain coordination

Box 1: Livelihood Scenario Definitions

6. Focus on farmer organisations

Table 1: Cocoa farmer organisations: basic information

Coopaga1 Cocoa 4915 100 2.5%

Ecooklm2 Cocoa 1014 90 14%

7. Coopaga and Ecookim, cocoa farmer organisations, Cte DIvoire.

Focus group participants, 2 Focus group participants

Figure 3: Supply Chain Assessment Framework: Coopaga and Ecookim

Control over and % of the value chain

Control over and % of the value chain

Influence on price and terms

Supply chain coordination

Influence on price and terms

Supply chain coordination

8. Finlays outgrowers group and Michimikuru, tea farmer organisations, Kenya.

Table 2: Tea farmerto farmers Net returns organisations: basic information

Finlays3 Tea 2930 50-70 N/A

Michimikuru4 Tea 1247 90 5%

Figure 4: Supply Chain Assessment Framework: Finlays and Michimikuru

Control over and % of the value chain

Control over and % of the value chain

Influence on price and terms

Supply chain coordination

Influence on price and terms

Supply chain coordination

9. MASFA and Ex-Agris outgrowers, groundnut farmer organisations, Malawi.

Net returns farmer organisations: basic information Table 3: Groundnutto farmers

Based on average production per farmer

Figure 5: Supply Chain Assessment Framework: MASFA and Ex-Agris

Control over and % of the value chain

Control over and % of the value chain

Influence on price and terms

Supply chain coordination

Influence on price and terms

Supply chain coordination

10. Mapping supply chain engagement

Control over and % of the value chain

Control over and % of the value chain

Influence on price and terms

Supply chain coordination

Influence on price and terms

Supply chain coordination

Control over and % of the value chain

Control over and % of the value chain

Influence on price and terms

Supply chain coordination

Influence on price and terms

Supply chain coordination