(Microsoft PowerPoint - Stefan Cognigni - Building Coffee ... - EAFCA

Building Coffee Farmers’ Alliances
Supporting the establishment of Farmer Organization
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EAFCA 2011, Arusha
Stefan Cognigni

1. Quality Issue – green immature coffee dried directly on the ground
2. Why did the farmer pick his coffee green, instead of waiting until fully
mature?
How much did the farmer earn for his green coffee? How much value did he
loose?
2

Main challenges faced by smallholders with
regards to business development and marketing
Knowledge
� Lack of a clear understanding of the value chain
� Lack of market information
� Lack of business, marketing and technical skills
Size
� Individually they are too small to access / attract the important
services that are critical for developing their enterprises
� Low volume of produce results in very weak bargaining position
� Their most likely “business” partners are middlemen. This has
created a very strong dependency on middlemen (market access,
finance, etc.)
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Objective of the Alliance Model
To create an environment and infrastructure
which enables smallholder farmers to develop
their agricultural potential and to increase
their competitiveness by releasing ownership
of their produce at a much higher value point.
� The development of efficient and transparent
farmer organizations with technical,
managerial and entrepreneurial capacity, has
proven very effective in achieving this.
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What are the key areas of focus?
� Establishment of Farmer Organizations
� Capacity Building
�� Business Training
� Technical Training
� Access to Services
� Improved Production
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Benefits of Organizational Development
� To empower farmers to create economic opportunities
� To provide farmers ownership and decision-making
� To enable market access and participation in the value chain
�� To enhance bargaining power and achievement of economies of scale
� To make smallholders attractive to service providers
� To encourage “farmer to farmer” learning
� To give farmers a voice - to engage in dialogue with other
stakeholders
� To strengthen the self help potential of coffee communities
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Organizational Development Levels
Producer Depot Committee Uganda Coffee
Organization (PO) (DC) Farmers Alliance
25 - 35 Farmers Approx. 20 POs Association of DCs
Area Village Level Parish Level National Level
Key Mobilization Coordination of PO activities Coordination of DC activities
Functions Extension Bulking Market access
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Collection of Coffee Value addition Link to service providers
Entry point for new Farmers → Coffee logistics → Capacity building
Quality control Strategic partnerships
Marketing Representation
Code of conduct
Key Roles Executive Committee Executive Committee Board of Directors
Lead Farmer Control Committees Executive Manager
Demo Holder Marketing manager Support staff
FFS Host DC Extensionist
FFS Facilitator

Demonstration plots
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Extension Tools
Farmer Field Schools

Depot Committee establishment steps
� Appointing Control Committees
� Business & Marketing Committee
� Finance Committee
� Disciplinary Committee
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Approximately 600 farmers per
DC
� Identifying a number (20-25) of
POs that are willing to come
together
�� Electing an executive
committee
� Drafting a constitution
� Setting up an office/store for
administration and collection of
coffee
� Appointing a Marketing
Manager and an Extensionist

11 � Auditing
Depot Committee Training
� Financial management, accounting
and banking
� Election of leaders
� Professional conduct and
good business practices
� Administration -
documentation and record
keeping
� Logistics of bulking and
marketing coffee
� Post harvest coffee
handling and quality
control

Elements for Successful Farmer Organizations
� Committed and respected leadership able to mobilize and influence
community members
� Efficient, transparent and accountable management team, focused
on improving commercial performance and returns to members
�� The above 2 points lead to TRUST (critical)
Other Criteria
� Distance from towns/centers/markets
� Uniformity in terms of enterprises – common issues and problems
� Understanding of members’ marketing behavior and requirements
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Survey on Farmers’ Marketing Behavior
(A) 20%
(B) 55%
Highest Price Payment on Delivery
(C) 10%
Attachment to Traders
(D) 15%
Convenience

How to enhance trust among members
Control Committees
� Business & Marketing Committee
� Finance Committee
�� Disciplinary Committee
• Participate in the development of business and marketing plans
• Carry out a supervisory role to ensure that plans are followed and
that good business practices are employed
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How to enhance trust among members
Community Participatory Auditing
� To ensure transparency and
accountability
�� To assess the performance
and efficiency of leadership
and management.
� To assess the status of group
assets
Audit results are discussed in
general meetings which are open
for participation by any member
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Group
D
Group
A
Audit
Team
Group
Group
• Audit team composed of one
member from each group
• Audit team replaced every year
C
B

Achievements in the Mityana/Mubende Coffee
Farmers Alliance Project (15,000 farmers)
� 24 Depot Committees have been registered as Companies.
� DC Companies carry out primary processing and deliver hulled green
coffee (FAQ) directly to exporters in Kampala.
�� Through this new marketing opportunity farmers have achieved a 23%
higher price for their coffee (net of processing and marketing costs).
� DC Companies have access to marketing loans from financial
institutions. A model for input finance is currently being tested.
� Farmer organizations have implemented a quality control system to
ensure that only good quality coffee will be marketed through the
organizations.
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Quality Control
Testing coffee quality
• Moisture content
• FAQ outturn
• Screen size

Yield Achievements
� Adoption levels of good
agricultural practices have
more than trebled; this has led
to an increase in the average
farmers’ production from about
600 Kg green coffee per Ha to
about 1.3 MT/Ha.
� Average production on demo
plots has reached about 2.7
MT/Ha. Similar production
levels have also been
achieved by some of the most
improved farmers.
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Uganda Coffee Farmers Alliance
Registered in May 2010 – Launched in November 2010
The Uganda Coffee
Farmers Alliance
(UCFA) is a farmer
owned Apex
Organization. Its role is
to provide marketing
and other support
services to its member
organizations.
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DC Companies delivering hulled
coffee (FAQ) to Kampala

Value Addition for the Farmers
Uganda Coffee Farmers Alliance Members – Main Crop 10/11
Buyer FAQ Price
USD/Kg
Dry Cherry
Middlemen
(outside project
area)
Dry Cherry
Middleman (inside
project area)
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DC
Deduction
USD/Kg
Net FAQ
price for
Farmers
Net price Dry
Cherry*
equivalent
Total Value
Addition
USD/Kg Dry
Cherry
- - - 0.68 0
- - - 0.75 0.07 (10%)
FAQ Trader
Hulling Factory 1.69 0.21 1.48 0.81 0.13 (19%)
Exporter Kampala 1.78 0.25 1.53 0.84 0.16 (23%)
* Dry cherry equivalent at 55% outturn

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Value of coffee in its different stages
(USD/Kg Dry Cherry equivalent)
Green Cherry
Farm Gate
Red Cherry
Farm Gate
Dry Cherry
Farm Gate
FAQ Hulling
Factory
FAQ
Kampala
Mkt. Value 0.37 0.53 0.75 0.93 0.98
Mkt. Cost - - - 0.12 0.14
Net Value 0.37 0.53 0.75 0.81 0.84
Value Loss 56% 37% 11% 4%

Combined impact of value addition and yield
improvement on net income – 300 coffee trees
Selling point
Production (Kg dry
cherry per tree)
Production Cost (USD
per tree)
Net farmer price
(USD/Kg)
Total Production Cost
(USD)
Non
Member
low yield
Farm
Gate
Alliance
Member
low yield
Farm
Gate
Alliance
Member
low yield
Exporter
Kampala
Alliance
Member
average yield
Exporter
Kampala
Demo Plot
(full GAP)
high yield
Exporter
Kampala
1 1 1 2.2 4.5
0.20 0.20 0.20 0.46 0.78
0.68 0.75 0.84 0.84 0.84
60 60 60 138 234
Total Income (USD) 204 225 252 554 1,134
Net Income (USD) 144 165 192 416 900
% Increase 23 in Income 15% 33% 289% 625%

Adding further value?
� Further improve the performance and efficiency of
farmer organizations to reduce costs and overheads
� Conventional value chain � grading
� Non-conventional value chain � certification
With such a foundation in place, how much more sustainable
would the certification process be, especially if farmer groups
became certificate holders?
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Final Considerations
� Incremental flow of funds into rural areas
At the current Alliance production levels, if all 15,000 project
farmers sold their coffee through their organization directly to
exporters in Kampala, an additional USD 3 M in income would be
flowing into the project area on an annual basis.
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This would promote investments in rural areas which would lead
to growth and economic development
Therefore the benefit of organizational development and value
addition goes beyond the direct beneficiaries. The community will
also profit from it.
� Farmer organizations can also focus on other value
chains such as beans, maize, etc.

Thank you for your attention
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