GISCO Expert Workshop Attempts to calculate a Living Income in the Cocoa Sector and why we need this

Transcription

1 GISCO Expert Workshop Attempts to calculate a Living Income in the Cocoa Sector and why we need this Friedel Hütz-Adams, Antonie Fountain & Dr. Eberhard Krain Eschborn 28th of October 2014

2 Content 1 Introduction and Definitions 2 Methodological Steps 3 First Attempt to calculate Living Income 4 Measures & Activities towards a living income 5 Conclusion & Next steps

3 Introduction and Definitions Do we need this debate in the cocoa sector? YES! We need it to Define a sustainable income Have a benchmark for projects : Do they support farmers to reach a decent income? Is the income sufficient to invest in a better cocoa production? Do they generate enough income to attract young people?

4 Introduction and Definitions Living Wage: The remuneration (in cash and kind) received for a standard work week by a worker, sufficient to afford a decent standard of living for the worker and her or his family. Decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs including provision for unexpected events. Living Income: Income (in cash and kind) sufficient to afford a decent standard of living for the income earner and his family. Applies to entrepreneurs, and/or selfemployed people, such as small-holder farmers.

5 Factors Influencing Living Wage PRODUCTION Labour income = volume (amount of hours/days) x wage rate CONSUMPTION Number of consumption units of a household (HH) E.g. The Asian Floor Wage is based on 3 consumption units (2 adults and 2 young children) LEVERS Wage rate fixing (e.g. minimum wage regulation) Indirectly: Improving negotiation power of workers (e.g. through labour unions)

6 Factors Determining a Living Income PRODUCTION Volume and price of a range of agricultural products Available work force (labor units) and labor costs Available land Natural conditions: e.g. rain, soil fertility Socio-economic conditions: farmer s knowledge and skills; Infrastructure, access to inputs (costs!) and financial services CONSUMPTION Number of household members (consumption units) Availability core services (school, healthcare, water, etc) LEVERS Price = small (farmer is price-taker ); perhaps influenced through cooperatives: economies of scale, negotiation power Increased Volume and improved Quality = Main Lever Switching from one commodity to another (diversification) Regulation and infrastructure: government support

7 Methodological steps 1) Establishing the Living Income Line 2) Determining household & farm composition Number of consumption units, dependants & work force Resource base (farm size) & composition of typical crop areas 3) Calculating household income sources of income (both in cash and in kind) Gross margin calculation for typical selected crops, for focus crop & competitive crops for current & improved production level 4) Gap Analysis Calculating price and productivity increase necessary for attaining Living Income All this information can be used in negotiations between producers/ producer organisations and off-takers

8 Measures & Activities towards a Living Income Farmers Farmers Improve farm management and operations farm entrepreneurship Towards a and agronomy good agricultural practices Companies NGOs Diversification Living Income Increase in quality, productivity and scale Form producer groups Hope for a price that covers costs and Public allows a Standards Sector decent live

9 HH Income of diversified cocoa model farms (per person per day) Scenario 1 (with potential) 6 HH members 3.6 ha total farm size Scenario 2 (representative) 5 HH members 2.0 ha total farm size Current Improved Current Improved Production Production (constructed on WCF Study & SCB Programme data) (constructed on Harvard Study & SCB Programme data)

10 Measures & Activities towards a Living Income Farmer Revenue Of which Cocoa % Yield: per ha, kg Farm size (ha) gross Total Yield income, (t per farm) $2000 per ton Costs per ton Costs per farm Net Income from cocoa Income cocoa and others gross income, $1000 per ton Costs per farm Net Income from cocoa Income cocoa and others 100% 400 2,5 1 $2.000 $500 $500 $1.500 $1.500 $1.000 $500 $1.000 $ % $4.000 $500 $1.000 $3.000 $3.000 $2.000 $1.000 $1.000 $ % ,5 2,5 $5.000 $500 $1.250 $3.750 $3.750 $2.500 $1.250 $1.250 $ % $ $500 $2.500 $7.500 $7.500 $5.000 $2.500 $2.500 $ % ,5 2,5 $5.000 $1.000 $2.500 $2.500 $2.500 $2.500 $2.500 $0 $0 100% $ $1.000 $5.000 $5.000 $5.000 $5.000 $5.000 $0 $0 50% 500 2,5 1,25 $2.500 $750 $938 $1.562 $3.124 $1.250 $938 $312 $ % ,5 $5.000 $750 $1.875 $3.125 $6.250 $2.500 $1.875 $625 $3.750

11 Conclusions 1) We need model farm household income reference lines 2) We need capacity building towards GAP 3) We need companies willing to do pilots with this thinking Question: What are the experiences in the projects: Is there a way forward towards a decent income and sustainable farming?

12 Contacts Friedel Hütz-Adams Tel.: Thank you! Antonie Fountain Tel Dr. Eberhard Krain Tel

13 References Berenschot (May, 2012), Living Wage: Wages in International Supply Chains: An Inventory Report Cocoa Barometer (2012) Cocoa Barometer (2014 forthcoming) Cocoa Barometer Consortium (2014): Defining a Decent Living, Living Income for Smallholder Cocoa Farmers, Draft Ethical Tea Partnership & Oxfam (May, 2013), Understanding Wage Issues in the Tea Industry: Report from a multi-stakeholder project Findeisen, M-T et. al.: Getting an Understanding of Income and Activities towards a Living Income for Small-holder Farming Households.(Draft) (2014) Hanna, Noura (June 2014): Living Income Approach, Discussion Paper, UTZ on behalf of ISEAL ILO: Minimum wages: Wage-fixing machinery, application and supervision, Report III (Part 4 b) Sustainable Agricultural Network, (2013) Rainforest Alliance and Sustainable Agriculture Network Living Wage Workshop, January 30, 2013, Royal Tropical Institute Amsterdam, Report World Cocoa Foundation (April, 2013), WCF CLP 9th Steering Committee Pre-read