From small beginnings operating a single grain elevator in Iowa, Cargill has grown into a global player. Its team of 150,000 professionals working in 70 countries draws together the worlds of food, agriculture, nutrition, and risk management. Cargill is one of the ‘big three’ cocoa processors (alongside Olam and Barry Callebaut): together these companies are responsible for around 60 % of global cocoa processing
Early on, Cargill saw co-ops as the solution to successfully going beyond certification and reaching the farmer. The company believed that creating strong, professional organizations that could deliver farm services was the best vehicle to empower large numbers of farmers in a sustainable way.
Cargill has been operational in Côte d’Ivoire for 20 years: working through co-ops to source directly ‘from the farm gates’. At a time when co-ops comprised just 10 % of the supply chain, Cargill sourced almost 50 % of its beans through the co-op model.
Under CPQP, Cargill approached the multiple challenges of improving productivity and profitability in the cocoa sector by developing a gradual and sequential system of changes to the farming system. The aim of this approach was to ensure that farmers always achieved a positive return of investment on any activity on the farm, and to enable them to see the positive impact of each step.
In 2012, Cargill’s sustainability program, the Cargill Cocoa Promise, was launched to unify and expand the sustainability activities that contribute to the company’s goal of a thriving cocoa sector for cocoa farmers and their communities. CPQP was an integral part of this strategy.
Cargill began with basic training on Good Agricultural Practices (GAP). Then, in 2013, the company launched its Co-op Academy (see The Cargill Co-op Academy: strengthening farmer organizations, in this chapter): an industry-first mini-MBA program tailored for farmers, aimed at helping them develop the financial and management knowledge and skills required to improve the daily running of their businesses and support the long-term success of their co-ops. As part of the Co-op Academy’s curriculum, Cargill introduced work on crop protection and regeneration. More recently, fertilizer has also been included.
During the five years of CPQP, Cargill rose to the challenges posed by IDH—creating scalable mechanisms that strengthened farmer organizations. Two seasonal business models for fertilizer purchase were identified and successfully trialled. A system of coaching was scaled to 80,000 farmers. And a risk-sharing facility has been set up between Cargill and the International Finance Corporation (IFC) to offer medium-scale finance to co-ops for the purchase of trucks.
Discover the stories behind five years of partnership with CPQP
- The Cargill Co-op Academy: strengthening farmer organizations
- Service at scale: Cargill’s Service Delivery Model
- Fertilizer: from training to tree
- The shift to coaching: Cargill rises to the challenge
The Cargill Co-op Academy: strengthening farmer organizations
Under the Cocoa Promise, Cargill wanted to reinforce its work with co-ops at a time when other cocoa-sector players were working more with ‘traitants’ (contractors) and middlemen. The challenge was how to formalize the training of co-op management at scale, including harmonization of messaging across co-ops.
The Co-op Academy was launched in 2013, after a long period of consultation with partners such as TechnoServe The impact of Academy training was significant. Co-ops trained by the Academy have been able to scale up their activities. Leadership and human resources training—including modules on governance and diversity—have given co-ops the knowledge they need to create and maintain strong management structures as they scale. As a result, Cargill has increased its sourcing from co-ops to 95 %, (the increase in sourcing from its 100 Cocoa Promise co-ops is 70 %).
Through the Co-op Academy, Cargill has focused on supporting the transition of co-ops from buying stations into strong service providers for farmers. This approach has not only led to the professionalization of 100 co-ops: there is now also wide acceptance in the cocoa sector that working through co-ops is a successful strategy.
For Cargill, the biggest impact of the Co-op Academy has been the recent risk-sharing facility set up between Cargill and IFC, in order to offer medium-scale finance to co-ops to purchase trucks for cocoa bean transport. During the initial pilot year (2015), financing was secured for over 78 new trucks destined for 43 co-ops to a total value of EUR 3.5 million.
The key to success around financing co-ops has been the long relationship that Cargill has built with each organization over many years: and the high degree of control and good management that has been put in place to protect co-ops from unnecessary risk. These lessons have been recognized by IDH and incorporated into the design of the Cocoa Learning and Innovation Program (CLIP).
Service at scale: Cargill’s Service Delivery Model
Cargill has developed service-delivery partnerships with various companies. Each service can be delivered immediately at scale and without additional cost, because of the investment already made in training and professionalizing the system of co-ops.
The first partnership was with Syngenta, which delivered the biggest crop protection program in Côte d’Ivoire without any additional investment from Cargill. Cargill designed the program: Syngenta provided financing, trained farmers, and set up demonstration sites to prove the quality of their products. Cargill used the large scale of the operation to negotiate an attractive price for the co-ops.
The high level of professionalism amongst Cargill’s Academy-trained co-ops—and the fact that costs decrease as farmer numbers increase—has allowed Cargill’s Service Delivery Model (SDM) to scale to all of its co-ops. In risk terms, most risk is to be found at co-op level (if farmers do not pay back, it is the co-op that carries the risk). To address the risk issue, the next question faced by Cargill is how co-ops can manage financial transactions with farmers. One possibility under discussion is the introduction of an information tool to help co-ops better track financial flows with farmers.
IDH carried out an analysis of Cargill’s SDM in 2015. The study showed that the Co-op Academy was a strong enabling environment for SDMs, encouraging the company to invest for further improvement.
The emphasis for Cargill is now on developing knowledge to accurately evaluate yield and farmer revenue. Demonstration farms have been used to analyze the investment costs of each service against the impact on revenue. For instance, at the start of the Syngenta partnership, 100 demo farms were used to measure the potential return on investment of crop protection with a positive result for all farms, even those with aging trees and poor soil condition. A similar test with fertilizer indicated that 50 % of farms may not generate a positive return on investment, confirming the need for a more cautious approach.
Cargill is currently developing a monitoring and evaluation system for capturing and reporting this kind of data.
See also: Service Delivery Models
Fertilizer: from training to tree
Cargill’s fertilizer program was set up with Louis Dreyfus (LDC). The program is designed with two key aims: first to build the capacity of farmers and co-op managers to effectively use fertilizer, and then to offer an additional income stream for co-ops whereby access to high-quality fertilizer is gained at a competitive price through a direct link with LDC.
The complex agronomy of cocoa requires significant knowledge on the part of the fertilizer user. Tree placement, shade management, and existing soil quality all impact heavily on the efficiency of the fertilizer. By coaching farmers and co-op managers, Cargill is able to practise a form of farmer selection: ensuring each recipient of fertilizer is likely to use the input at the right times and in the right way. Positive returns on fertilizer investment are therefore more probable.
Farmers purchase fertilizer from co-ops through two different, seasonal business models:
- Farmers are encouraged to progressively save money through their co-op from October to January, when they have access to cash from the sale of their production. This reduces the financial risk to the co-op.
- A limited amount of fertilizer is made available to co-ops on 30-day credit and sold directly to farmers.
Repayment for the LDC fertilizer is made through the delivery of cocoa to Cargill (or via direct payment to LDC). Cargill provides some risk sharing to LDC in the event that co-ops default on their payments. Payback from farmers to co-ops is being assessed to find ways to help cooperatives reduce their risk further.
In 2016, 1,600 MT of fertilizer were sold through both business models, with limited risk to the input supplier and to Cargill.
A cautious approach, combined with targeted coaching, has allowed Cargill to develop an access-to-fertilizer model that has paid off. Key to the success of this model has been Cargill’s insistence on paying specific attention to the timing and sequencing of the application of fertilizer to farms. The shift from training to coaching (The shift to coaching: Cargill rises to the challenge, in this chapter) facilitated by IDH has empowered farmers to identify when their farm is fertilizer-ready: and also, perhaps even more importantly for de-risking the fertilizer investment, when it is not.
See also: Fertilizer
The shift to coaching: Cargill rises to the challenge
Coaching—which delivers targeted training to selected groups of farmers—was a challenging concept for Cargill, where the philosophy was to operate at scale. The mission: to develop a coaching approach capable of reaching the 80,000 farmers under Cargill’s purview. This has been achieved in a twofold manner: by building a network of Lead Farmers (through the Co-op Academy) trained on agronomic skills, and by embedding coaching in the co-op model. In Farmer Field Schools (FFS), basic GAP training gives farmers the knowledge they need to practise better cocoa farming: the coaching process augments GAP, assessing on-farm conditions that will drive application of GAP and improvement of the farm.
Coaching was introduced in 2015: 1,600 Lead Farmers have now been selected by co-ops and received high-quality training from the World Agroforestry Centre (ICRAF). The Lead Farmers will visit all 80,000 farmers on a twice-yearly basis. The on-farm assessment is carried out during the first visit and is intended to help the farmer to understand the condition of the farm. A Farm Development Plan is also drawn up during this first visit: the second visit is a check on whether the farmer has been able to implement the necessary changes.
The coaching approach is also expected to provide more support to farmers around replanting. The farm assessment will include the age of the farm and recommendations will be made to regenerate at least 3 % of the trees annually: thereby avoiding the costs associated with a full replanting approach. Farmers will be encouraged to save for these gradual regeneration activities, and Cargill is facilitating access to seedlings at competitive prices.
See also: Training