Smallholder Producers Who is this guide for? „Organic business“ Cooperative or Company...
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Transcript of Smallholder Producers Who is this guide for? „Organic business“ Cooperative or Company...
Smallholder Producers
Who is this guide for?
„Organic business“
Cooperative or Company
Processors, Traders
Final consumers
Economic and non-economic benefits of organic & fairtrade
Net income = ( Harvest Price ) – Production costs
+ less financial and production risk, less indebtedness
+ diversification of crops and income, more food security
+ environmental benefits (soil, water, bio-diversity)
+ health benefits (no pesticides, better food)
Simplified income model:
Reduction of input costs
Organic, fairtrade and quality premium
Stabilized yields
Organic Fair Trade
Other sustainability
initiatives
„Business as usual“
Quality and social standards in conventional
production
Leve
l of s
usta
inab
ility
Sustainability triangle
„You can‘t push a chain…“
Which products are in demand? (where? when? prices? trends?)
What can we produce?(farming systems, technology)
Can we meet the requirements? (quality, volume, timing, packaging)
Which products are profitable?(production costs, margins)
Can we compete with others?(price, quality, added value)
Potential products
Start from the market!
Local vs. regional vs. global markets
Local rural markets
Regional urban markets
Global markets
Logistics, quality requirements, premium, competition
Mainly staple food (rotation crops), with little or no organic premium
Mainly fresh produce for urban centres; possibly with some organic premium
Mainly export of commodities, with formal certification, organic and/or fairtrade premium
Provision of inputs
Production Bulking
Cleaning Grading
Trade Retail Processing Packaging
Value chain chart
Services (financial, certification, advice etc.)
Business environment
Cotton farmers
Boutiques
Traders
Consumers local / abroad
Certification agencies
Research Institutes
Financial service
providers
Development NGOs
Rotation crops
Supporters
Organic cotton value chain map
Retailers
Input suppliers
Producer Coope-rative / Company
Industrial textiles Handmade textiles
Brands
Traders Textile processor
Retailers
Prod
uctio
nB
ulki
ng /
proc
essi
ng /
trad
eR
etai
lC
ons.
Government agencies
Cotton trader
Ginning Factory
Consumers abroadConsumers local / abroad
Donors / Investors
Prod.
Workshops
Provision of inputs
Production Bulking
Cleaning Grading
Export Retail Processing Packaging
Downstream integration
Present business scope Downstream integration
SWOT
Strengths Opportunities
Weaknesses Threats
Analysis of the organic business
Analysis of markets and trends
Analysis of competitors
Analysis of the business environment
Organisational structure of an organic business
Processing unitExtension & ICS
• Field officers• Internal inspectors
Lead farmers
Trade departmentAdministration
Executive director
Governing body
• Accountant• HRD manager
• Logistics staff• Marketing staff
• Processing staff• Quality manager
Specialisation or diversification?
Specialisation
• sufficient know-how of production methods, processing technology, markets
• professional manage- ment of business relations
• making use of econo- mies of scale
Diversification• reducing risks (production risk, price risk)• opening up new development oppor- tunities• making use of syner- gies (farming system, infrastructure, certifi- cates, management systems etc.)
Breaking even
first break even point
second break even point$
revenues
costs
investment for up-scalingor diversification
years
profit
loss
Monthly liquidity
-20'000
-10'000
0
10'000
20'000
30'000
40'000
50'000
1 2 3 4 5 6 7 8 9 10 11 12
Cash demand
Total income
Liquidity
US$
month
Typical producer organisation set-up
Retailer 1
Producer organisation
• Management and Administration
• Extension and ICS
• Bulking
• (Processing)
• Marketing
Farmer Group 3
Retailer 3
Farmers
Farmer Group 2
Farmers
Farmer Group 1
Farmers
Organic
business
Processor / Trader Trader
Retailer 2
Roles and functions of extension and ICS
Head of ICSHead of extension
Extension service Internal Control System
Field officers
Lead farmers
Farmers
technical advice internal controlextension ICS
Inspection of farms
Mutual control
Training and supervision of field officers
Training and supervision of lead farmers
Training and technical advice of farmers
Mutual exchange
Training and supervising of internal inspectors
Internal inspectors
collaboration
Note: Field officers of one zone can be internal inspectors in another zone
Fair trade pricing
Fairtrade organic price
Fairtrade minimumprice
organic premium
market price
$
time
Internal Control System (ICS)
ExternalCertifier Processing
& Trade
Retail
Consumers
Trust
(adapted from IFOAM)
What is the Internal Control System (ICS)?
Actors, functions and tools in the ICS
field visits
Internal inspection of farms
Support farmers in documentation; report non-conformities
Documentation of farm activities;mutual control
Head of ICS
Internal inspectors
Lead farmers
Farmers
Approval committee
Management of the ICS; checking its functioning
Decision on sanctions and exclusions
Actors Functions Key tools
Internal inspection report
ICS forms
Operating manual,data base
Sanction catalogue
ICS forms
Data handling and management
Database - lists (farmers etc.) - data tables - calculations - reports - forms - checks
Farm documents
- farm data - field data
Internal Inspection
reports
Decisions of Approval
Committee
Commercial transactions
Distribution of inputs
External certification agencies (organic & FT) Management of the project
Purchase and payments
Training and extension
Product Organic fairtrade cotton fibre for textile industry Fairtrade certificate (FLO-Cert) and organic certificate (EU,
NOP, certified by Ecocert) Quality:
Staple length: 27-32 mmMicronnaire: 4.8
Producer: smallholders associated with producer organisation (certificate holder) Country of origin: XXXXX Packaging: in bales of 220 kg, wrapped in cotton tissue
Price Producer price based on FLO minimum price for organic seed cotton Fibre: premium price level Price differentiation (discounts) based on volumes, readiness to enter into long-term partnership, and provision of pre-financing
Place (Distribution) Direct export to spinning mills or via cotton trader (exporter); Small volumes sold to local handmade processing units
Promotion Personal selling: getting in contact with potentially interested final distributors Linking with potential clients through partner NGOs Participation in organic and fairtrade fairs Inviting potential clients to field visits Promotional materials for clients and/or consumers After-sales follow up on client satisfaction with spinning mills and distributors
Target MarketFibre: Top sustainability (Organic & Fairtrade), clients committed to poverty reduction in Africa Final Product: Retailers or wholesalers with Corporate Social Responsibility policyMedium to high quality/price market segment
Marketing mix