The Importance of Cash Crops to Smallholders

Over the last three to four years I’ve been lucky to work on a couple of development projects with smallholder farmers in Uganda and Malaysia.

The Ugandan farmers grow robusta coffee as a cash crop. Cash crops are those that are raised to be sold for a profit. The Malaysian farmers grow cocoa. In both cases the projects were – at least on the surface – concerned with a pest or disease problem that had become acute over a relatively short time. It became clear that the focal issue of each project was, in reality, a symptom of larger problems in both farming systems.

Drying robusta on tarps.

Each pest or disease problem opened a window to the difficulties smallholder farmers can face in improving crop quality and value in poorly regulated markets, particularly when the crops in question are a source of much-needed ready cash.

The importance of cash crops to smallholders in developing countries is often misunderstood. There is a tendency for the simplistic classification cash crop=bad, staple crop=good to dominate thinking, either explicitly or implicitly. But for smallholders (as for farmers everywhere) sustainability begins with money; cash crops are often the main source of the cash that underpins a viable household economy.

Having a cash crop option available is, then, in many ways a good thing, but it is not without problems; particularly if, as in the case of robusta coffee growers in Uganda, what is best for the country’s coffee growers as a whole over the long-term conflicts with the short-term needs of individual growers.


What is the Conflict?

Robusta transplants.

The problem stems from the changes that occurred in the national Uganda coffee market as part of trade liberalization. Prior to era of the World Trade Organization (WTO), the Ugandan government owned and operated the coffee export market as the country’s sole exporter of robusta coffee. Farmers grew for the national coffee company, which was the only route to the export market. Along with the monopoly on coffee purchasing came the infrastructure and effort to run an effective quality control system that monitored every step of the supply chain from production to processing and export.

Growers could only sell ripe cherries (as coffee beans are called when fresh) and were only paid if they dried the harvested cherries on tarpaulins, not on the bare ground.

This, and a range of other quality enforcement steps meant that prior to the market being opened to competition, Ugandan robusta was considered among the best in the world. It generally sold at a price premium to European buyers; particularly Italians who wanted the high quality beans to blend for espresso roasts. It’s not possible to make a really high quality espresso without robusta in the mixture because the particular chemistry of the lowly robusta bean is needed to form a tight crema on the top of the final product; pure arabica just won’t get the job done.

Government control of the supply chain was given up as one of the requirements to join the WTO; unfortunately, control of quality disappeared along with control of the market. A network of local middlemen and traders replaced the centralized purchasing system and the role of coffee in the household economy changed subtly. Coffee was before, and remains, a cash crop, but because in the past the cash entered the household economy only when the government traders bought the aggregated harvest of ripe cherries from a village or group of growers, now small-scale traders will buy small quantities for ready cash at any time.

Many traders will buy unripened cherries (at a lower price), mix them with ripe cherries and dry them before selling them on to bigger traders or the processors in the larger towns or Kampala.  Once the cherries have been dried it’s very difficult to tell if they were harvested ripe or unripe until they have been processed, so larger traders and processors face a risk when buying dried beans from some of the local traders. In addition, bags of dried cherries of varying true quality are often mixed with stones to increase the weight, adding to the problems of quality management.

Because the decentralized industry has no single entity large enough to impose quality control, there is no way for the processors to sample the shipments they are buying in an effective manner, so the price offered is low, as a safeguard against excessive losses that would be incurred by buying doctored loads in good faith.

Furthermore, although the processors can clean up the shipments they receive, because there is no quality control process on production, the overall quality of the crop has declined and Uganda robusta no longer commands a price premium among international buyers. This forces the industry to compete in the world market purely in terms of production; with massive new plantings of robusta in Vietnam and Brazil (among other places) the world market for standard beans is fully supplied and the price is not very good.

Lacking Incentives

Under the system as it now exists there is little-to-no incentive for the growers to invest in good husbandry and efforts to improve the quality of their production, since there is always someone willing to buy cherries of any condition. In addition, selling to the local traders allows them to treat the trees as a form of ready cash when children need school books, new shoes, or anything else.

What is needed to turn things around is more coordination among growers, voluntary efforts to impose quality standards and a mechanism to ensure grower incomes so that there is an incentive to forego the ease of dealing small volumes of beans to local traders.

Other Challenges

Against this background, problems such as coffee wilt (caused by a soil-borne plant pathogenic fungus) or black twig borer (an invasive insect pest) are much harder to deal with than they should be, because there is almost no extra financial resource available in the system to allocate to combating them. The government is doing its best to help with its own somewhat limited resources. A state breeding program has produced elite lines of robusta which are claimed to have increased resistance to wilt, but the Extension system is struggling to get the new material off the breeding stations and into the hands of growers.

There has been intermittent interest in trying to stimulate the development of grower cooperatives through fair-trade partnerships with European NGO’s but the examples we heard about and visited were mostly failing. This was either because the growers found the certification process too costly, time consuming, or too difficult to accommodate alongside all the other constraints they face, or because the NGO’s simply ran out of money before they were able to establish a profitable trading relationship for their cooperatives with overseas buyers.

In one example we visited, about half a day’s journey north of Lake Victoria, the German fair-trade cooperative involved had stopped buying the growers’ beans because of the large quantity they were already holding in stock waiting for the world market price for robusta to increase enough to make selling profitable.

It turned out that they had agreed a price with the growers at a time when the international trading price was high, to which they also added a small fair-trade premium. After the first year the market price fell but the NGO honored the price they had previously agreed to pay and decided to stockpile the harvest in the hope that the market price would increase. After this pattern was a repeated for a second season they simply stopped buying beans, having run out of both storage space and funds.

The farmers told us that the NGO had assured them that once the stockpiled beans were sold, they would start buying again, but at a lower price than had originally been agreed, since the world price seemed to have settled into a new, lower, equilibrium. Not surprisingly the growers were having doubts about whether to continue participation in the fair-trade certification scheme, since it has definite costs (in time, effort and money) and even when the cooperative was buying their beans, the premium was barely enough to compensate for the extra demands; without the guaranteed purchase of the crop, there was less than zero (this was how they expressed it) incentive to carry on.

When we asked them why, given all that, they had not yet abandoned the scheme, they told us that participation had never been about the immediate return (which they had rightly estimated ahead of time would be negligible) but about the hope of better things in the future, the security of what had appeared to be a guaranteed market, and the chance to get their coffee known in Europe and the potential for future growth that might offer.

They had dared to dream and could not easily let that dream go, having brought it to life.

Reverting to previous practices

Three years from the start of the project there they were back to selling their beans to the local traders, putting extra effort in to practices needed to qualify for fair-trade status, and watching the trees that had survived the coffee wilt epidemic, struggling to grow under the combined effects of a drought and the arrival of black twig borer.

At the end of the visit the chairwoman of the growers’ cooperative committee thanked us for visiting. “Thank you”, she said, “for coming. Just knowing that someone would come all the way from California to hear about our troubles means a lot to us. It tells us we’re here and we matter, even though we know there’s nothing really you can do to help.” Extension 101.

Malaysian cocoa growers face a similar situation

Making chocolate blocks at Malaysian Cocoa Board.

The situation facing Malaysian cocoa growers has some remarkable parallels to that of the Ugandan robusta coffee growers. A decade ago Malaysia grew about 200,000 hectares (roughly 495,000 acres) of cocoa. In global terms this was not the largest crop, but it was substantial and Malaysian cocoa – because of a combination of good varieties, a favorable climate and good soils – is generally of a very high quality. Cocoa was one of the dominant crops in plantation agriculture both on the Malaysian peninsula and on the Malaysian portion of Borneo.

Now, the national crop is about 2000 hectares (a 100-fold reduction) and has all but disappeared from plantation production being solely a small-holder activity. Cocoa has been replaced in the plantations by oil palm.

Like the Ugandan coffee growers, the Malaysian cocoa growers face a situation in which there is a poor domestic market for their product, getting it to market involves aggregating the production of a large number of small-scale producers, there are invasive pest and disease problems, and the solutions to the problems the growers face all need a level of coordination (if not cooperation) that the growers find difficult to achieve on their own.

Government Solutions

Luckily for them, they are not as isolated as the coffee growers in Uganda; the Malaysian government, through the agency of the Malaysian Cocoa Board (MCP), is actively involved in trying to help the cocoa growers in a number of important ways.

First, through the “Cocoa Cluster” project they are providing support to growers to help them organize themselves into local groups to work collectively on pest and disease management issues, quality control, and harvest, aggregation, transport and marketing of beans. The MCB also has a small-scale chocolate production facility in Kota Kinabalu where they produce bulk chocolate blocks that are sold to local artisan chocolate makers at a subsidized price, in an effort to stimulate a local market in chocolate confectionery production.

The Malaysian government’s investment in cocoa breeding, biotechnology, agronomy, integrated pest management and post-harvest processing is disproportionate to the size and value of the remaining crop. It stems from the value of the cocoa genotypes in its long-term breeding program to the rest of the global cocoa industry, and in its historical leadership in cocoa production and science. Its status a leader in cocoa technology is something that the Malaysian government wants to maintain, so it is concerned about the welfare of its remaining growers; which is good for them.

Pest and diseases remain a challenge

Cocoa flowers.

Just as the Ugandan coffee growers are battling pest and disease problems, so too are the Malaysian cocoa smallholders. In their case the problems are cocoa pod borer (the caterpillar of a tiny moth) and black pod spot (a disease caused by an Oomycete closely related to the organism that causes sudden oak death – so familiar, unfortunately, to all of us in California).

The work in Uganda was supported by a UC Davis Seed Grant and was part of a collaboration with Imperial College, London, where a former Masters student of mine, was studying the links between plant pest and diseases, global trade and economics.

Counting pod borers on a pod.

My involvement with the MCB came through the World Cocoa Foundation when it was trying to find mentors for successful Borlaug Fellowship applicants. Albert Ling, a biostatistician and IPM Extension scientist who works for the MCB, has developed a pod borer IPM program. He was looking for a US-based group to visit to increase his expertise and with whom to collaborate on the design of field evaluation trials. Albert spent 6 weeks working with me last summer and I visited him in Sabah in December 2016 to evaluate progress on the trials we designed together in Davis.


Editor’s Note: Photo credit: Neil McRoberts. You may also enjoy this piece by UC Berkeley’s Ann Thrupp: Progress in sustainable agriculture must be supported.