A Candid Conversation on Living Income

We often under-estimate the power of in-person meetings to make things happen. After two years of pandemic precautions and virtual meetings, I had the opportunity for in-person engagement with stakeholders working to close living income gaps. The first was a visit with partners and producers working in cocoa in Cote d’Ivoire, the second was the Living Income Summit in Amsterdam.

These long-overdue interactions were grounding and energizing. But they also reinforced how important in-person meetings are for building trust, empathy and deepening our mutual understanding. When we can truly interact – not just listen and see each other – we uncover a new level of candidness and vulnerability around the realities we face and our plans for the future. In both locations, I was struck by common themes that emerged across multiple stakeholders, and the resolve to devise new ways for closing income gaps.

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Moussa Sawadogo – President of the Association of Presidents of the Boards of Cocoa and Coffee Cooperatives in Cote d’Ivoire (ASPCACC), asking panelists a question during the Living Income Summit in Amsterdam in June 2022

1. The need for action on living income is now

There is greater urgency for action on living income. Costs of living are on the rise across the globe, including among smallholder farming households, many of whom have been dealing with large living income gaps for generations. The current climate makes them even more vulnerable to shocks.

Considering COVID-19, climate change, and the Russia invasion of Ukraine, these shocks are transforming into crises that have led to the doubling and tripling of the costs of food and production. The ripple effects will be felt in subsequent seasons as today’s low-input season becomes tomorrow’s low-output harvest.

2. The importance of producer groups and local actors

Among stakeholders I met with, nearly all agreed that achieving better incomes with and for farming households requires the participation and direct influence of those who would benefit. This means that households must be included in creating, prioritizing and delivering solutions that are desirable and sustainable.

There is also wide acknowledgement that strong producer groups, whether cooperatives, associations or otherwise, are essential for well-functioning value chains. Producer groups are the lynchpin between farming households and companies trading and processing products, though they are more than simple intermediaries. Producer groups often provide essential services and benefits to their members and the communities where they are based, and they understand their members’ needs because they are in community together. We continue to hear that we all need to do more to ensure that producers have a seat at the table, that their voices are adequately heard, and that these groups have the resources needed to fulfil their role as respected decision-makers and supply chain actors.

3. Reconsidering how value is distributed

The third common thread is the distribution of value within and beyond the value chain. Like never before, we are seeing widespread acknowledgement that farming households and producer groups retain too little of the value generated from their work. This is coming from all sides and demands immediate action.

There are any number of ways that value can be more equitably distributed to ensure that smallholder farmers at the beginning of the supply chain receive their due:

·      Increases in FOB or farmgate prices,

·      Paying (higher) cooperative fees,

·      Direct cash transfers (with few to no strings attached),

·      Co-investing in services, traceability, and equipment,

·      Group purchases of inputs to reduce farmers’ costs.

Across the range of stakeholders we work with, we see these approaches applied to varying degrees, which results in wide variation in impact. The next step is collaboration and coordination with everyone contributing to achieving living incomes on a much wider scale.

Action AND collaboration

Though IDH offers a Living Income Roadmap to guide stakeholders on closing living income gaps, and we are co-creating a multistakeholder framework for action to clarify roles of different actors, immediate action can be taken to respond to the crisis at hand. We cannot let collaboration or potential largescale initiatives hold us back from walking the talk on farmer inclusion in our solution-designs, and equitable value distribution. Individual and coordinated action are possible at the same time.

1. Raise prices: Supply chain actors and governments have access to sufficient data on costs of production and living income gaps to immediately increase prices in trade agreements and/or pricing policy. Relying on volatile market prices for price discovery and price-setting is a choice, not an inevitability. Different households will benefit in different ways, but this action is directly within the sphere of control of companies and governments. It will have an immediate and direct impact on producer households.

2. Introduce cash transfers: Higher prices will only have an effect during a few periods throughout the year and won’t solve immediate cash flow constraints due to rising prices. Supply chain actors, governments, and NGOs can act independently and/or pool resources to utilize digital and non-digital payment channels to ensure farming households can sustain themselves.

3. Pay (higher) fees to producer groups: Like any business, producer groups need resources to fulfil their critical role in the value chain, from delivering member services to managing stocks to sharing traceability and production data with their buyers. Given the volume of requests for data, information and raw product made by buyers, we must ensure adequate financial and in-kind resources for producer groups to realize their potential.

4. Invest directly or through in-kind services for household and production needs: Depending on the context, some households are unable to cover costs of food, production inputs or other needs. Traders, with co-investment from buyers, can utilize the supply chain infrastructure, assets and relationships to meet households’ urgent needs to assure their human rights and mitigate future ripple effects.

Being able to meet face-to-face and connect with so many different stakeholders from all parts of the value chain, I’ve realized that we have the capacity and ability to catalyze action on living income. As you plan your next steps for improving incomes among smallholders, I invite you to reflect on the longer-term multi-stakeholder strategies and actions we as a community are developing by read our working paper on A Multistakeholder Framework for Action.