Post Harvest Survey for Contract Farming in RARP-CSF Program. With Support From

Transcription

1 Post Harvest Survey for Contract Farming in RARP-CSF Program With Support From

2 Acknowledgements SNV is grateful for the unwavering support of DANIDA, the contracting companies and most importantly the smallholder farmers who gave us their time and volunteered their information. SNV would also like to acknowledge the individual and collective effort of the Post-harvest Survey team: Dowsen Sango Bianca Charuma John Masunda and Tsitsi Ziyambi

3 Contents Acknowledgements Tables & Figures Background & Introduction The RARP-CSF Contract Farming Component The Post-Harvest Survey 2.1 Objectives 2.2 Log Frame Indicators Study Methodology Major Findings 4.1 Demographic Data 4.2 Household Livelihood Strategies 4.3 Contract Farming Arrangements Productivity Conclusion and Recommendations

4 Tables & Figures Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table Achievements On Outputs Sample Size Major Household Income Sources Cost of Labour Crop Production Yields Income from Crops Contribution of Crop to Household Income Gross Margins 2015 Achievements against Key RARP-CSF Indicators Figure 1 N Computed Figure 2a Demographic Data Figure 2b Demographic Data Figure 2c Demographic Data Figure 2d Demographic Data Figure 3 Livelihood Strategies Figure 4a Farmers interviewed by company Figure 4b Farmers interviewed by company Figure 5 Contracting Arrangements Figure 6 Forms of Contract Farming Figure 7 Input Loan Repayment Figure 8 Input Loan Repayment Comparison Figure 9 Labour Hiring Practices Figure Percentage of people linked to the project living on less than $2 per day by crop Contract Farming Post-Harvest Study 03

5 Background & Introduction Background In the past, the agriculture processing industry relied on commercial farmers for their raw material supply. But after the fast track land reform in 2000, the Zimbabwe farming sector saw the shifting of the land ownership structure from commercial farming to semi-commercial and subsistence farming. It not only shifted the land ownership structure but changed the agriculture financing sector too. The immediate impacts of the collapse in financing arrangements affected the agricultural productivity as contracting companies struggled to cope since they had relied heavily on commercial farmers. With the absence of the commercial farming sector, companies needed to adjust to working with new actors mostly A1, A2, and communal farmers. They increasingly started focusing on those smallholder communal farmers whose productivity had increased and were ready to become small-scale commercial farmers. But the country s economic regression is giving these farmers a lot of challenges, including limited access to inputs, viable markets and poor agricultural practices. Introduction Contract farming refers to agricultural production that is carried out under a contract. The contract specifies the conditions for production and marketing of specific products and the roles and responsibilities of each stakeholder is clearly defined. The demand for linking farmers to finance has grown recently. The contract farming scheme approach involves: Orienting contracting companies on best practices in out-grower models. Orienting farmers to understand the model, building usually on their experiences. Capacity building of farmers for effective management of contracts. Capacity building of company personnel on interaction with communal farmers and local leadership. Supporting contract companies to plan and execute their programme in line with agreement signed with farmers. 04 Contract Farming Post-Harvest Study

6 The RARP-CSF Contract Farming Component 1.0 SNV Zimbabwe, with financial support from DANIDA, initiated a Rural Agriculture Revitalization Programme (RARP) in 2009 on Commercializing Smallholder Farming (CSF). RARP-CSF, SNV programme has piloted different models of contract: 1. The input supply and output market is organized by a buyer like IETC. A contract is signed between the farmers and the Contract Farming (CF) Company and SNV provides advisory information. 2. The farmers received from Micro Finance Institutions (MFIs) for input support from Micro Finance Institutions (MFIs), through a credit program. These linkages helped the farmers in signing a marketing contract with the buyer of their produce, who would also provide logistics and transport services for the output. Tripartite MoUs were signed between these private sector players and SNV, with the latter playing monitoring and advisory roles. This model reduces risk for the CF companies since often the buyers were no longer willing to take all the risk. This also takes care of the complaints by farmers that contracting company s offer very little price for their produce. To date the contract farming component of RARP-CSF has linked 2,948 smallholder farmers to 12 private sector companies. With SNV s advisory interventions, these farmers are producing 7 commodities, and accessing extension services through various contract farming arrangements. Of these 12 contracting companies, SNV brokered contracted smallholder farmers access to inputs from 5 private companies with input packs varying from seed to fertilizers and chemicals. 49 Agritex officers were trained on production and post-harvest handling of horticultural produce farmers were trained in Farming as a Business and 12 companies were assisted to improve contract farming models. In an effort to penetrate the high value niche markets, SNV facilitated the certification of 685 small scale farmers under UTZ, Rainforest Alliance and Zim Organic, so that their produces are certified for both local and international markets. The table on the following page illustrates the contract farming outputs. Contract Farming Post-Harvest Study 05

7 Outputs OUTPUT 2.4 Smallholder commercial farmers accessing input, extension and output markets through contract farming Indicator(s) Number of smallholder farmers accessing extension services from contracting companies Number of Agritex officers trained on specialised contract farming extension service delivery Target 12, Oil Seed 7,093 farmers have been trained as follows: (Soya: Guruve 2,012 - Gokwe 1,016) (G/Nuts: Mutoko Gokwe 703) (Sesame: Chiredzi + Chipinge 1,524 - Gokwe 1,296) 153 AGRITEX extensions officers were trained in Chiredzi, Guruve and Gokwe. The trainings covered general agronomy for crops like sesame and farming as a business. PROGRESS Horticulture 2,948 farmers accessed extension services to date 49 AGRITEX officers trained to date Total Achievements, Table 1: Achievements on Outputs Number of smallholder farmers accessing inputs from contracting companies 3,000 2,845 farmers accessed inputs under cntract from Sidella, Quest, UNTU and VIRL in the following crops: Seasame 2,594; G/Nuts 69; Soya Beans 182 2,560 farmers accessed input from Cairns, NTS, HVSDC, Servcor and African Preserves 5, Percentage % Percentage increase in value of produce marketed through contract companies 20% - 35% - OUTPUT 2.5 Sustainability of contract farming initiatives between smallholder farmers and contracting companies enhanced Percentage % Percentage of input loans repaid Number of new small scale farmers trained in Farming as a Business (FAB) 70% 3,000 The following repayments have already been made and selling is in progress. Soya: Guruve % Soya: Goromonzi - 86% Groundnuts: Gokwe - 43% Sesame Farmers paid at 0% A total of 6,829 contracted and non-contracted small scale farmers were trained at least once in FaaB as follows: SE Sesame: 1,260; Gokwe Sesame:1,296; G/Nuts: 1,245; Goromonzi Soya: 1,016 & Guruve Soya Beans: 2, ,736 farmers trained in FaaB - 8, Number of companies assisted to develop/improve contract farming models for engaging small scale farmers 6 The following companies have had direct exposure to improved contract farming models: VIRL, Shatbury, Sidella, UNTU, IETC and Quest 11 private companies assisted to fine-tune their models from 2014 whilst 1 (Cairns) assisted to develop a model for Number of Producer Group receiving capacity building on contract farming 5 5 oil seed groups were formed and assisted to register (3 in Gokwe on groundnuts and 2 in Mutoko also on groundnuts). Group formation is currently under way for 7 other groups for soya bean and sesame. 13 producer groups (DOHOPA, SACU, Chinamora, Badzaharinyepi, Muriganzara, Highlands, Shurugwi Ass, Nyakomba, Chipendeke, Kuguta, Rimatigute, HVSDC and Mupangwa) supported to date 18 OUTPUT 3.1 Multi stakeholder platforms for horticulture, soya and dairy value chains established and functional Percentage % Percentage increase in number of active members participating in multi stakeholder platforms (horticulture, oil seeds and dairy) 30% The number of registered stakeholders on the Oil Seeds platform increased to 7. 9 Stakeholder dialogue meetings were held and a draft business plan was produced. 120 Shurugwi horticultural farmers certified on Zim Organic and 565 tea farmers on UTZ and Rainforest Alliance to date. With 1,056 farmers at the verge of being certified in 2015 after undergoing audit by AfriCert from May Contract Farming Post-Harvest Study

8 The Post-Harvest Survey Objectives The purpose of the post-harvest survey of contracted crops in season was to evaluate whether contract farming made a difference in: Production - productivity, hectares, inputs, extension, crop variety Post-harvest handling - grading, and quality, Marketing - distances, prices/returns, grading, logistics The survey specifically wanted to: 2.2 Log Frame Indicators The survey is intended to contribute to the assessment of the following RARP-CSF Log Frame indicators: 1.1 Number of smallholder households earning 200 United States Dollars net income from agricultural production 1.2 Percentage of people, linked to the project, living on less than $2 per day 2.1 No. of small-scale farmers with 5% increase in yields (for promoted crops) Assess yields for the various crops Determine production levels Determine volumes of produce sold through contracting companies Determine production and marketing challenges Determine income earned from the contracting arrangements Assess the viability of the contracted crops Determine the ability of farmers to repay input loans 5 The Annual ZADT Sentinel Survey provides the primary and comprehensive data source (Bothe contracted and free farming) Contract Farming Post-Harvest Study 07

9 3.0 Study Methodology The study employed a quantitative survey approach. Information for the study was collected through a smallholder farmer household questionnaire which was administered on the ODK survey platform of android based mobile phones. The questionnaire had six main sections: 1. Demographic Data (Household characteristics and location) 2. Contracting Arrangements 3. Crop Production for Contracted Crops 4. Crop Production for Non-contracted crops 5. Crop Sales and Marketing 6. Extension Support Services Note: Effect size was computed for two representative crops - Sugar Beans (Horticulture) and Groundnuts (oilseeds) using the 2012 contract farming program as a baseline. Yields calculated for contracted sugar beans in 2012 was 403kg/ha with a standard deviation of The yield for groundnuts was 1575kg/ha with a standard deviation of The following formula was used to calculate δ: δ = (Treatment Mean - Control Mean) (Standard Deviation) The following n was computed. An enumeration team was trained on: Using mobile devises for data collection Questionnaire interpretation and administration (at the homestead/farm and at all identified enumeration sites) Interviewing techniques and Site entry protocols Sampled Size The survey used the Optimal Design Software to estimate the optimal sample size with the following settings: X axis range = 2,000 to 12,000 (12,000 being the target population for RARP-CSF) Significance level (α) = 0.05 Effect size (δ) = 0.01 and 1.08 Figure 1: N Computed The study however increased the sample size to 120 (about 0.05 which was done to improve the data set. Thus the sample size was distributed across the intervention sites and value chains. The table below illustrates the distribution after rationalizing the proportional distribution. 08 Contract Farming Post-Harvest Study

10 Component District Ward Number Number of Farmers Treatment Group Control Group (Non Contracted Farmers) Actual Surveyed HORTICULTURE Goromonzi Mutasa Nyanga ANIMAL BREEDING Guruve 2,3,5,15,16, Bindura,11,15, 1, 6, 17 18, 19, 1, 11, 15, Mutoko Chiredzi 1, 2, 20, 23, 24, Chipinge 11, 16, 20, 21, Gokwe South 2, 3, 21, 17, 25 2, Table 2: Sample Size Contract Farming Post-Harvest Study 09

11 4.0 Major Findings 4.1 Demographic Data A total of 158 farmers participated in the survey (62 non-contracted and 94 contracted farmers). The majority 69% were males while females accounted for 31% of the participants. The average age of the participants was 53 years (range 24-91). The majority were married, have completed secondary education and 22.8% underwent vocational training. The following graphs (Figures 2a to 2d) illustrate the findings. 2a 2b 2c 2d Figures 2a-2d: Demographic Data Contract Farming Post-Harvest Study

12 4.2 Household Livelihood Strategies The surveyed households are involved in 8 livelihood strategies. Agriculture was the major livelihood strategy. The following graph, Figure 3 illustrates the findings. 95% Percentage % Households & Livelihood Strategy 4.3 Contract Farming Arrangements The survey interviewed 96 farmers who were in a contract farming arrangement with either of the 8 companies. The following graphs, Figures 4a and 4b, shows the farmers who were interviewed by company. 4a 45% 55% 8% 17% 2% 0% 4% 0% 14% Field Crop Livestock Gardening Formal Informal Formal Formal Employment Employment Employment Mining Informal Mining Petty Trading Small Business Figure 3: Livelihood Strategies The average income from household s livelihood strategies is $2,225.. The major income earner is formal employment followed by field crop production. The following table below, Table 3, illustrates the findings. 4b District N Minimum Maximum Mean Std Deviation Field Crop 137 $80 $8,468 $1, $1, Livestock 65 $0 $6,000 $ $1, Gardening 79 $20 $6,000 $ $ Formal Employment 11 $180 $6,000 $2,589. $1, Informal Employment 24 $70 $8,000 $1, $1, Figures 4a & 4b: Farmers interviewed by company Fishing Formal Mining Informal Mining Petty Trade Small Business Total HH Income $250 $300 $135 $35 $1,680 $5,000 $5,000 $9,520 Table 3: Major Household Income Sources $ $1, $1, $2,225. $ $1, $1, $2, The study noted that 76% of the farmers had a signed contract with the contracting company. This is a huge improvement from the 2012 Post harvest survey, before the RARP-CFS programme, when only 23.8% of the farmers had a signed contract. The following graphs, Figure 5, illustrate the findings. Contract Farming Post-Harvest Study 11

13 4.3.2 Input Credit Figure 5: Contracting Arrangements The study showed that 83.6% of the farmers who bought input on credit had fully repaid their loan. This is significantly more than in 2012 where 67.3% farmers fully repaid their loans. However, more needs to be done to achieve a default rate of less than 5%. When the findings are compared to 2012, it appears like there has been a significant improvement in the contract farming arrangements. More farmers are repaying their loans (16.8% increase in 2015). However increasing number of farmers are opting out of loan (20% increase in 2015) Input Supply The survey found that 36.8% of farmers were in a contract farming and they did not receive inputs. In such cases, they were in a supply arrangement. 34.4% of the contracted farmers bought additional inputs. This is because they wanted to plant more than what was permissible under the contract, or they chose what they wanted to take from the contract farming company s package and the rest the bought on their own because of the issues of price and quality. Figure 7: Input Loan Repayment Figure 6: Forms of Contract Farming Figure 8: Input Loan Repayment Comparison 12 Contract Farming Post-Harvest Study

14 4.3.3 Production Costs The viability of any agricultural enterprise depends on its ability to handle costs. The survey assumes that the main contract farming cost centres around inputs, labour and transactional costs. The survey found that very few contracted farmers are hiring labour. Most of the labour hired was during harvesting while labour was seldom hired for pest control or packaging and grading. Figure 9 illustrates the findings. Inputs are the largest cost driver at $97.80 followed by labour cost for land preparation. As transports are arranged by companies, logistics costs are negligible under contract farming. Table 4 illustrates the findings. Figure 9: Labour Hiring Practices District N Minimum Maximum Mean Land Preparation Labour Planting Labour $ $0 $300 $300 $83.60 $64.70 Std Deviation Table 4: Cost Of Labour Fertilizers Application Labour 6 $15 $0 $ Herbicides Application Labour 9 $0 $0 $ Persticides Application Labour 49 $ $360 $ Grading and Packaging Labour 8 $3 $240 $ Input Costs 44 $4 $660 $ Input Transporting Costs 154 $0 $400 $ Produce Transporting Costs 156 $0 $720 $ Other Related Cost? $0 $525 $ Contract Farming Post-Harvest Study 13

15 5.0 Productivity The study tried to compare the RARP-CSF farmers and a control group. The control group comprised of those farmers who were not working with SNV but were producing the same crop in the same area. The study acknowledges that there could be exchange of information (contamination) between the groups especially on knowledge and skills but not on price and market information. It was found that on average the contracted farmers plant less hectares than the control group mainly because the cultivated area was already decided in the contract. However, it is apparent that income is higher for contracted farmers because of better prices. District N Minimum Maximum Mean Land Preparation Labour Planting Labour Fertilizers Application Labour Herbicides Application Labour Persticides Application Labour Grading and Packaging Labour Input Costs Input Transporting Costs Produce Transporting Costs Other Related Cost? Table 5: Crop Production $ $0 $15 $0 $ $3 $4 $0 $0 $0 $300 $300 $0 $0 $360 $240 $660 $400 $720 $525 $83.60 $64.70 $60.80 $45.90 $77.00 $47.60 $97.80 $4.60 $25.30 $61.00 Std Deviation The study showed that there has been a general positive change in yields for farmers from baseline. More than 63% of farmers in contract farming increased their production above 5% while 66% of farmers were obtaining yields above the national average. The following table summarizes the findings. Cherry Pepper Soya Beans* Baseline 2015 Average Average Yield for Yield for Project Project Beneficiaries Beneficiaries (kg/ha) (kg/ha) Yield National Average² (kg/ha) % of Contracted Farmers Obtaining Above National Average Yields , % % of Small Scale with 5% Increase in Yields (for Promoted Crops) 40% Income from Contract Farming The following table shows the average incomes from the various crops. Farmers make more income from soya beans followed by tea and groundnuts. The study realized that contract farming contributes less than a quarter of Ground Nuts* Green Leafy Vegetables Sesame % ³ % Tea 2, , , % Tabasco Chillies , % 85.7% 60% 67% 2 ZIMDAT Zimbabwe Statistical Agency 2011 Agriculture & Livestock Survey Communal Lands Inclusive Business Baseline Commercial production figure Table 6: Yields 14 Contract Farming Post-Harvest Study

16 household s annual income. Its impact still is significant and can definitely make a difference especially if done efficiently. Crop Cherry Pepper Green Leafy Vegetables Ground Nuts Sesame Soya Beans Tabasco Chillies Tea Average Income $ Contracted Farmers $ $ $ $ $1, $ $ Gross margins were higher for contracted farmers than for non-contracted farmers. An exception was found for those who produced green leafy vegetables and ground nuts. Table 8 illustrate the findings. Crop Soya Beans Ground Nuts Green Leafy Vegetables Sesame Cherry Pepper Tea Gross Margin ($/kg) Contracted Farmers Control Group Table 7: Income from Crops Table 9: Gross Margins Crop Soya Beans Sesame Cherry Pepper Tea Ground Nuts Green Leafy Vegetables % Contribution of Crop to Household Income Contracted Farmers 23.17% 5.60% 5.43% 24.69% 2.75% 5.53% Non-Contracted Farmers 20.63% 13.90% 6.90% 0.00% 14.45% 17.57% Table 8: Contribution of Crop to Household Income Contract Farming Post-Harvest Study 15

17 6.0 Conclusion and Recommendations Contract mentoring and capacity building activities provided by SNV seem to be successful because contracted farmers were getting better yields and gross margins. However, there is need to lower the costs for contracted farmers to improve their incomes. It was also good to note that a higher proportion of farmers now have signed contracts than in This attests to the effectiveness of the FaaB trainings and the mentoring of contract farming companies. The flexibilities in the contract farming models responded to the needs of the parties involved. The changes in models reflected the changing realities in the agriculture sector. Efforts should be made that contract farming do not become a straight-jacket and one size fit all affair. However, sufficient business advice should be given to farmers so that they can make informed choices. Further, contract farming should be integrated with the agro-dealer input distribution network model so that those farmers wishing to procure input for themselves can buy at competitive rates Contract farming yield rates were above national average compared to the baseline which attested to the effectiveness of the SNV approaches. However, they can be improved to match commercial levels. It was noted that crops under contract farming were doing much better than those not contracted. There are several reasons for this including the intense attention given to contracted crops and that contracted crops almost always have sufficient inputs and better management. Therefore the study recommends that: Flexible contract farming models must be developed and a study of the effectiveness of each be done. SNV should find a model that integrate contract farming with the agro dealer model since a sizeable number of farmers are opting to buy additional inputs and some not willing to get inputs from the contracting company. Loan defaults are still high despite an improvement from This makes contract farming very costly for the contracting companies. Credit guarantee schemes and insurance against default should continue to be integrated in each scheme to cushion contract farming companies. 16 Contract Farming Post-Harvest Study

18 Project Goal Qty Required per ha Baseline Target Milestone Jan-Dec 2015 Target Milestone Jan-Dec 2015 Description / Comment Source / Means Verification Impact 1.0 To reduce poverty for 280,000 commercially oriented smallholder farmer houesholds through the promotion of agricultural production, business growth, job creation and access to finance 1.1 Number of Smallholder houesholds earning 200 United States Dollars net income from agricultural production 35,000 (June 2013) 35,000 (June 2013) 35,000 (June 2013) The survey is derived from the 2015 Post Harvest Survey. However the final estimate will be derived from the Sentinel Survey which is currently underway. 89.6% of contracted HHS are earning above $200 per annum. Sentinel Site Survey 1.2 Percentage of People linked to the project, living on less than $2 per day 46.1% (August 2013) 20% 27.1% The result is derived from the 2015 Post-Harvest Survey. However the Sentinel survey which is currently underway will provide the final estimate. See Figure below Sentinel Site Survey Outcome 2 Small holder farmers realizing increased agriculture productivity 1.1 Number of Small-scale farmers with 5% increase in yields (for promoted crops) 75,000 (June 2013) 225, , % of the contracted farmers had increased their yields by at least 5% above the baseline average. The final estimate will come from the RARP-CSF evaluation report which is due in October 2015 Post Harvest Survey Report Final Evaluation Report Table : 2015 Achievements against Key RARP-CSF Indicators Figure : Percentage of people linked to the project, living on less than $2 per day by crop Contract Farming Post-Harvest Study 17

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22 Copyright SNV Zimbabwe 2016 SNV Country Office 14 Natal Road, Belgravia P.O. Box CY156, Causeway, Harare, Zimbabwe Telephone: +263 (4) /65/66/69 Mobile: +263 (772) /2, , Bulawayo Office First Floor East Wing, Forestry Commission Building, Fife Street/Leopold Takawira Avenue P.O. Box 2264, Bulawayo Telephone: +263 (9) /6-7 Mutare Office 1 St. Helen s Drive, Nyakamete Industrial Area, Mutare Telephone: +263 (8644) zimbabwe@snvworld.org