Saturday, February 11, 2012

Phase 1: Introduction to Cacao Farming - Part 3

Here are my notes on some of the things I have learned so far about cacao farming and the cocoa industry based on my time with the CocoaPhil team, farmers, and agriculturalists (part 3):

Problem for Farmers

  • Farmers aren’t profitable enough to sustain themselves
  • Farmers don’t have the money to invest in their own growth
  • Current microfinance institutions require too much collateral or too high interest rates for it to be a viable option for farmers
    • 12% interest rate
    • 4% to 5% interest per month
CocoaPhil Roadmap

  • Transparent & Dynamic Market and Market Information System
    • Establish and operate fermentation and drying centers
    • Accreditation, licensing PH centers
    • Means of Markets, price info dissemination
    • Packing houses
  • Improved Production Techniques
    • Quality planting materials
    • Farming inputs, assistance for crop nutrition and protection
    • Research /institution to formulate and continue improving Good Agricultural Practices
  • Efficient & Effective Extension Services
    • Enabling farmers on Good Agricultural Practices
    • Business Skills
    • Core of capable extension agents
    • Farm-based technology resource centers
  • Enabling Policies and Regulations
    • Loan schemes and credit windows
    • Implementation of Philippine National Standard (PNS) for cacao
    • Program on Research & Development
    • Policies on trading, exporting, logistics
  • Contract Growing Scheme - The key is massive production of quality planting materials and facilitate sustainable production
    • Seedlings (Plant now, pay later)
    • Other inputs (fertilizer, IPM materials – paid on deliveries)
    • Training and other extension services
    • Post-harvest facilities and marketing
Developing Research and Technologies

  • solar drying – shortening the drying time
  • better environmental approaches
    • composting
    • insect protection management (no pesticides)
Investing in Small Farm Holders

  • Because of the work that CocoaPhil has been doing with training small farm holders, they can properly identify those that are best suited for a microfinance program. CocoaPhil can leverage the existing relationship and knowledge of small farm holders so that collateral would not be required for a microloan. This means that they have a ready-made borrower pool.
  • CocoaPhil would start with $1 million (43 million pesos).
  • Microloans would be issued in the amounts of 100,000 pesos per hectare over 3 years.
    • One hectare - $2,500 (100,000 pesos)
    • Two hectares - $4,700 (200,000 pesos)
    • Three hectares - $7,000 (300,000 pesos)
  • Microloans would support approximately 230 farm families
    • One hectare – 80 microloans x 100,000 pesos = 8 million pesos
    • Two hectares – 100 microloans x 200,000 pesos = 20 million pesos
    • Three hectares – 50 microloans x 300,000 pesos = 15 million pesos
  • Farmers will use the microloan for:
    • the purchase of cacao seedlings – 500 seedlings per hectare
    • farm equipment, supplies, and materials
    • family subsidy (farm worker salary)
  • CocoaPhil continues to offer assistance programs to ensure farmer success
  • In 3 years, farmers will reach the post-harvest stage of the Cocoa Value Chain. They sell their cocoa beans to CocoaPhil’s post-harvest centers.
    • This ensures that the farmers will be able to sell their beans at a good price and thus be profitable. Farmers can either sell their beans for the profit so that they can pay back their microloan or they can give their beans to the post-harvest center in-kind towards the payback of their microloan. Once the microloan is paid back, the farmers can continue to harvest and sell their cocoa beans to the post-harvest centers.
    • This ensures the quality-control. Farmers focus on the agriculture. The post-harvest center takes care of the quality processing.
  • Post-harvest centers continue the value chain with processing and production. They can now sell quality cocoa beans to global buyers.
  • Profits of post-harvest centers can be used to further benefit the livelihoods of farm families and farm workers
    • health care centers for farm families
    • day care centers for farm families
    • set up approximately 30 around the country
Financial Impact

  • Farmers can sell dry beans to CocoaPhil for 40-60 pesos per kg
  • 50 pesos x 1,500 kg = 75,000 pesos / 42.3 = $1,773.05 per metric ton extra income for farmers
  • CocoaPhil can sell to buyers for 80-120 pesos per kilo
  • 100 pesos x 1,500 kg = 150,000 pesos  / 42.3 = $3,546.10 per metric ton

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