Upgrading Cocoa Farming in Ecuador
When ACDI/VOCA began working in Ecuador in 2004, the cocoa sector was facing a set of serious problems. Poor planning, inadequate crop management and a lack of access to markets at the farmer level due to a low level of farmer organization was leading smallholder cocoa farmers—who account for approximately 85-90 percent of total cocoa production in the country—to lose interest in their crop, causing average cocoa production levels to decline significantly. Fungal diseases such as frosty pod rot and witch’s broom and the lack of knowledge and incentive to manage these diseases were also a major problem, provoking losses of an estimated $50 million annually. Handling of the cocoa at the exporter level was suffering as well, which led to mixing of different varieties of cocoa and mold and insect problems that harmed Ecuador’s reputation among cocoa buyers.
With funding from the United States Department of Agriculture through a Food for Progress award, ACDI/VOCA began working with smallholders to help them become better positioned along the cocoa value chain. After initially addressing production and post-harvest handling concerns, ACDI/VOCA expanded its programming to include the Farming as a Business curriculum and commercialization aspects of smallholder cocoa farming.
Smallholder farmers in Ecuador are typically not trained in basic planning, evaluation and analysis tools to apply to the daily management of their farms. The result is that many farming decisions lack the proper economic and agronomic analysis needed to maximize income derived from smallholder plots. The goal of Farming as a Business is to increase production efficiency through the delivery of participatory training at the farm level and to help farmers identify and assess potential upgrading opportunities. Farming as a Business improves farmers’ capacity to manage their activities from a more business-oriented standpoint, including introducing cost controls and analytic tools that result in improved economic performance. Cocoa farmers are thus enabled to bring their on-farm experience together with cost-benefit analysis to identify a farming strategy that serves their long-term interests. Farming as a Business also promotes strengthened horizontal linkages to facilitate the development of economies of scale, improved access to inputs and services, collective learning and risk sharing, and a strengthened market position.
The Farming as a Business course is given to groups of 15 farmers and employs several exercises to ensure learning by doing. Participants are asked to use data from their own farms in order to see how the course material applies to and will benefit them. The training enables farmers to develop a work plan and a corresponding budget for their farming activities, understand their cash flow, maintain a series of ledgers to quantify costs and income, analyze profit and loss, and apply lessons learned in the evaluation process. These tools provide farmers with a sound basis for decision making in terms of crop selection, costs and return on investments. Farmers are also advised and equipped to cultivate diversified crops based on end market demand to manage risks and maximize income.
In addition to Farming as a Business training, ACDI/VOCA facilitates direct contact between cocoa producers and local and international purchasers. Facilitating these market linkages ensures that farmers adopt new technologies in accordance with buyers’ specifications and are therefore able to sell their increased cocoa volume and be compensated for the improved quality.
For example, some producers in the province of Manabí started a commercialization process in which they built up working capital worth $5,000 by taxing their own cocoa sales. The working capital is then used to purchase additional fresh (unprocessed) cocoa in the town square. The cocoa is combined and processed together to improve quality and increase volume, enabling the farmers to sell directly to exporters or large intermediaries who can compete with exporters on price. When problems were encountered with one exporter, the producers showed great initiative and found alternative exporters. Prior to organizing direct sales, the farmers sold at $35 per 100 lbs. Now they sell at $65 per 100 lbs.
At the request of exporters, the project is introducing solar dryers to improve the quality of cocoa through collective fermenting which lowers levels of mold. Farmers are being taught how to build these simple structures, and 180 solar dryers have been built to date. The effective use of solar dryers requires groups of farmers to work together, which also encourages farmers to sell collectively. This is of interest to buyers as it reduces their transaction costs, and is beneficial to farmers who can sell further down the supply chain (where higher volumes are required) and eliminate a layer or more of intermediaries.
ACDI/VOCA’s work in Ecuador has gone beyond the original project goal of training 18,000 smallholder cocoa farmers in crop management and post-harvest handling. Our beneficiaries are learning how to make sound business decisions regarding the management and upgrading of their farms, how to organize with one another to increase their market options and negotiation power, as well as how to receive a higher price by selling directly to exporters. Ecuadorian smallholder cocoa farmers are increasingly contributing to the competitiveness of the cocoa value chain and are seeing their incomes steadily rise as a result.
Click here for more information about ACDI/VOCA's program in Ecuador.