african coffee sector · coffee sector –executive summary • since 2001 coffee supply from cote...
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AFRICAN COFFEE SECTORaddressing national investment agendas on a continental scale
Cote d’Ivoire Case Study
1
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sector study conducted by Agri-Logic and Valued Chain by assignment of the Global Coffee PlatformContact: [email protected]
CHALLENGE:
• Currently Africa only supplies 10% of global
coffee volumes, while coffee was first
discovered in Ethiopia.
• In most African origins, yields are low, quality
is inconsistent, and supply chains are
inefficient.
OPPORTUNITIES:
• Buyers value certain coffees from Africa for
their quality, and there is a potential to
increase volumes to meet growing demand.
• Coffee may contribute to sustainable
development in Africa’s rural areas.
2
INTRODUCING NATIONAL COFFEE INVESTMENT AGENDAS FOR AFRICA
INVESTMENT AGENDAS:
• Greater understanding of challenges and
opportunities in mainstreaming sustainable
coffee production.
• Insight into required funding, return on
investment, and possible public and private
contributions.
• Insight into impact of investment based on
quantitative research and stakeholder
consultation. Benchmarks and analysis are
based on 2015 data.
• Full reports available on the GCP website for
Angola, Burundi, Cameroon, Côte d’Ivoire,
Ethiopia, Kenya, Rwanda, Tanzania and
Uganda.
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
• Executive summary
• Positioning of coffee from origin
• Production areas in origin
• Supply & demand trend and
• Market interest in sustainability
• Value chain structure
• Farm level production systems
• Supply chain efficiency
• Differential competitiveness
3
CONTENT OF THIS REPORT
• Cost of production
• Current farmer business case
• Production and price effects of investments
• Impact, cost and return per intervention
• Effect on farmer business case
• National sector business case
• Proposed public and private contributions
• Conclusion
INVESTMENT OPPORTUNITIES ANALYSIS
• The following slides describe the required investment (cost) and expected returns (revenue), as well
as the expected impact on price, volume, quality and livelihoods.
• Investments are analysed on a sector level: total increased revenue in relation to total additional cost.
On a sector level, all of these opportunities present a positive return on investment.
• Cost and benefits may not be attributed to the same actor in the value chain (e.g. government and
buyers pay for farmer training, while the farmer gains most of the additional revenue from yield
increase).
• Also, specific interventions may not lead to additional value creation, but to a redistribution of value
within the chain (e.g. farmer grouping can lead to higher farm gate price, while export price and GDP
contribution is not affected).
• Investment contributions are indicative based on stakeholder input. Investments and conditions to be
negotiated within national public private platforms taking into account amongst others international
competitiveness, governance, transparency and accountability assurance.
4
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
INVESTMENT AGENDA COTE D’IVOIRECOFFEE SECTOR – EXECUTIVE SUMMARY• Since 2001 coffee supply from Cote d’Ivoire has declined from 350,000MT to <100,000MT
currently. This is paired with a constant volume growth in cocoa, in times of low coffee prices other
crops receive more priority.
• Cote d’Ivoire has an estimated 100,000-150,000 coffee farmers. Cost of production is high,
specifically labour and supply chain cost. Coffee farms are generally not well maintained. To
enable additional investment in inputs and rejuvenation, supply chain efficiency needs to be
addressed. Differentials are average to low, and expected to decrease if volume increases.
• Farm sizes are medium to large, on average 2.5 ha but with low productivity. Paired with a cocoa
farm, household incomes hover around the poverty line.
• Whereas individual farmers are smallholders, aggregation is relatively large, with several
cooperatives and local buyers (pisteurs/traitants) who have set up strong networks and are often
willing to invest in quality and volumes. The bulk of Cote d’Ivoire exports go to markets that show
a low willingness to invest in sustainability. Two large international buyers active in the local
market invest in verification and quality.
5
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
• There is significant potential to increase the coffee sector value in Cote d’Ivoire through selective
investment in farmer training, farm rejuvenation, use of inputs, and in-country processing. Over a
period of 10 years a cumulative investment of ~184 million USD can create ~1 billion in
additional value over the same 10 year period at today’s coffee and input prices.
• Volumes could double. This requires large-scale investment in a combination of farmer training,
rejuvenating the tree stock and facilitating access to inputs.
• Much of the added value created through such investments flows into the rural economy.
• Income from coffee and other crops combined is sufficient to push farming households above the poverty line. Cote d’Ivoire can as such become an example of how smallholder farming can work.
• Grants are however needed to fill the funding gap. Investing in coffee in Cote d’Ivoire is less commercially driven, but can have significant impact and develop a replicable model for smallholder farming.
6
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
INVESTMENT AGENDA COTE D’IVOIRECOFFEE SECTOR – EXECUTIVE SUMMARY
COTE D’IVOIRECoffee to increase and diversify income of farmer, private sector and government
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SEPTEMBER 16AFRICAN COFFEE SECTOR: addressing national investment agendas on a continental scale
POSITIONING OF COTE D’IVOIRE
Item Value
Total volume (3 year average) 96,500 MT
% of global production 0,94%
% Arabica – Robusta 100% Robusta
% natural – semi-washed – fully washed 100% natural
Compound Annual Growth Rate of coffee production (2000-2015)
-8,4%
Main export markets Algeria, South Europe, Vietnam
Market segments Instant coffee and espresso blends
GDP 72.2 billion USD
GDP – agriculture 7.7 billion USD
GDP – coffee 0.14 billion USD (green coffee)
8
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
9
COFFEE PRODUCTION AREAS BY DISTRICT AND SUPPLY LEVELS
• Coffee production in the South of Cote d’Ivoire,
with hubs in the East and West.
• Around Man (East) there are some farmers
specialized in coffee.
• Coffee plantations have been largely abandoned.
In most areas, coffee is a secondary product for
farmers. Production areas compete with cocoa,
cashew and (previously) rubber.
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sources: CCC (BCC) map, interviews, AL and VC analysis
• The “coffee-crisis” reduced supply significantly as farmers neglected coffee. Currently, coffee prices are perceived as too low in comparison to cocoa and cashew which grow in the same areas.
• Private sector shows little interest in coffee, following the regulated pricing and controls that are considered too much effort in relation to smaller volumes. There are two large buyers active in coffee, and several cocoa cooperatives and traders doing some coffee on the side. Cleaning and grading facilities are currently degraded.
• Domestic roasting is relevant, mainly by one large factory who locally roasts coffee for export to the West-African region, and a few small roasters for local consumption.
• Strong ambition from Conseil Café Cacao to relaunch coffee production and exports, with focus on replanting.
10
COTE D’IVOIRE PRODUCTION HAS WITNESSED A STRONG DECLINE
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sources: USDA, interviews, AL and VC analysis
0
50
100
150
200
250
300
350
400
2000 2002 2004 2006 2008 2010 2012 2014
Vo
lum
e (
'00
0 M
t)
Production, exports and consumption (Mt)
Production Exports Domestic consumption
11
AFRICA LAGGING IN SHARE OF CERTIFIED SUSTAINABLE SUPPLY
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2000 2002 2004 2006 2008 2010 2012 2014
Vo
lum
e (
'00
0 b
ag
s o
f 6
0k
g)
Year
Global supply (‘000 bags)
Volume certified Volume conventional
Total volume
Sources: USDA, CTA, AL and VC analysis
0% 20% 40% 60% 80%
Africa
Latin america
Asia
Share of total supply and certified supply
Share of certified and verified supply Share of global supply
12
VERIFICATION USED IN SUPPLY CHAINS, NO MARKET DEMAND FOR CERTIFICATION
• 4C verification is taking place in the supply chains of two major international actors, one roaster and one trader.
• Collectively these two companies had 36,732 Mt of 4C verified coffee supply in 2015. The other standards, UTZ certified, Fairtrade and Rainforest Alliance do not have any coffee certified in the country.
• 4C sales data are proprietary at a country level, hence we do not know the volume sold as 4C verified.
• The regulated pricing in Cote d’Ivoire allows for payment of premiums under certain conditions. These premiums are the only form of price competition that is allowed.
• In this regulated market, premiums are generally paid for verified coffee and are a bit higher compared to other origins but also include quality or loyalty payments.
• Some cooperatives and traders that have experience in sustainability in cocoa have tried implementing coffee certification, but don’t complete the process or don’t renew certification due to lack of market demand.
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sources: Industry interviews, AL and VC analysis
13
LOW MARKET INTEREST IN SUSTAINABILITY,
BUT INVESTMENT IN QUALITY AND LOYALTY
• Main market is Africa (Algeria and domestic consumption). No market interest to invest in sustainability to be expected at this stage.
• Supply chain investments are possibly driven by quality and loyalty and not sustainable production. This is already visible with two large buyers investing in their own supply base.
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sources: , VC and AL analysis
0%
19%
81%
Cote d'Ivoire exports (% of total) and market interest to invest in
sustainability in destinations
Export to countries with high interest/investment insustainability (USA, UK, Switzerland, Germany,Netherlands)Export to countries with medium interest/investment insustainability (France, Belgium, Italy, Spain, Scandinavia)
Export to countries with low/no interest/investment insustainability (other markets)
14
REGULATED EXPORTS WITH VALUE CHAIN STRONGLY INTERLINKED WITH COCOA
• 3500 cooperatives generally trade in both cocoa
and coffee. Around 50% of farmers are member
of a cooperative (estimates range from 20-70%).
Remaining volume is bought by local traders. In
practice, local traders and cooperatives have
similar farmer networks, and access to market is
not significantly affected by either channel.
• One locally based factory roasting (mainly instant)
coffee for export in the region, with significant
addition to GDP.
• Farm gate and export prices are regulated by CCC
are almost constant. With some room to pay
premiums for sustainability, quality or loyalty.
Farmers sell as cherry or green coffee, with hulling
being contracted in the village or done by a
cooperative or trader. If farmer delivers cherry they
will get a lower (fixed) price.
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sources: CCC, , interviews, AL and VC analysis
Farmers -Cooperatives - Exporters
- Export market
Farmers -Cooperative
s - Local roasters -
Export market
Farmers -Traders -
Exporters -Export market
0.0 0.2 0.4 0.6 0.8 1.0
0
1000
2000
3000
4000
5000
6000
7000
8000
Fa
rm g
ate
pri
ce,
Au
ctio
n p
rice
an
d M
ark
et
pri
ce (
US
D/M
t )
Share of supply in value chain segment
Value chain structure Cote d'Ivoire Robusta 2015
Farm gate price Auction price Market price
15
COFFEE IS A SECONDARY FARMING ACTIVITY,
AVERAGE FARM SIZE STILL MEDIUM TO HIGH
• No plantations are reported, but smallholders
have larger farms compared to other origins, with
on average 2.5 ha under coffee.
• Furthermore, producers generally also plant other
crops, putting total farm size at >6ha on average.
• Whereas individual farmers are smallholders,
aggregation is relatively large, with several
cooperatives and local buyers (pisteurs/traitants)
who have set up strong networks.
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sources: PNIA, PSD, World Bank, interviews, AL and VC analysis
0% 20% 40% 60% 80% 100%
Nr of farmers
Acreage (ha)
Nr of farmers and acreage distribution
Small farmers( <0.5 ha) Medium farmers (>0.5<3 ha)
Large farmers (>3<10 ha) Very large farmers (>10 ha)
Plantations
0.00 1.00 2.00 3.00 4.00
Cote d'Ivoire
Cameroon
Uganda
Indonesia
Vietnam
Average productivity (Mt/ha)
Robusta productivity (Mt/ha)
16
PRODUCTIVITY VARIES WIDELY, IS LOW ON
AVERAGE, BUT SHOWS POTENTIAL
• Average yield is estimated at 300-350kg which is
low compared to other major Robusta origins.
• Coffee in Cote d’Ivoire tends to be on monoculture
plots. In periods of low markets, it is simply allowed
to become overgrown, which currently is the case
for a large part of coffee farms.
• Yield varies widely, ranging from less than a bag
per hectare to >1MT/ha.
• Different yields are explained by effort
(abandoned farms), number of trees, tree age
and variety, professionalism and use of inputs.
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sources: USDA, FAO, interviews, AL and VC analysis
17
FARMGATE PRICE IS AMONG LOWEST OBSERVED, HIGH TAXATION
• The Conseil Café Cacao (CCC) regulates the sector. The mechanism is used for coffee and cocoa. Export prices set at the start of the season based on forward auction, and allocated based on estimated cost (barème).
• Value chain actors are required to follow these fixed prices for the season. Small premiums are allowed to some extent for sustainability, quality or loyalty. Premiums are as such the only existing form of price competition. This is only allowed within limits.
• Supply chain actors can create additional profits by being more cost efficient compared to the barème. This can generally be achieved with economies of scale.
• Farmgate price is among lowest observed, and farmers show little interest in coffee currently.
• Taxes are moderate to high and aim to serve CCC investments in the sector.
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sources: Interviews, TNS, AL and VC analysis
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Coted'Ivoire
Cameroon Uganda Indonesia Vietnam
Value distribution Robusta (% of FOB price)
Farm gate Supply chain costs Export tax/Cess
18
LOW DIFFERENTIALS IN LINE WITH HIGH
VOLUME ORIGINS
• Cote d’Ivoire and Cameroon are considered
interchangeable by some buyers, and differentials
are in line with bulk volumes from Indonesia and
Vietnam.
• Because of specific flavour preferences from
buyers in mainly Algeria and North Africa there is
a consistent demand and currently scarce supply
keeping differentials on a medium level. It would
be expected that differentials will decrease if
supply is boosted without finding additional
markets.
• Depending on availability, differentials are
ranging between 50-100USD/Mt.
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sources: , USDA, AL and VC analysis
Cote d'Ivoire
Uganda
Indonesia
Vietnam
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7
0
50
100
150
200
250
300
Dif
fere
nti
al (
US
D/M
t)
Share of global supply
Robusta differentials (USD/Mt over ICE) and share of supply (%)
19
FARMING COST ARE LOW, BUT LIKELY TO INCREASE AND VALUE CHAIN IS INEFFICIENT
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
• Production cost are lower compared to increasing cost in Vietnam, but high value chain cost/margins exist which are
not competitive. Labour cost are high. Investment in planting and fertilizer is needed to revive the sector which will
increase cost and may put total cost at par with Vietnam.
• Supply chain cost include some hidden margins as they are included in the barème.
Sources: CCC, interviews, AL and VC analysis
0
200
400
600
800
1,000
1,200
2008 2009 2010 2011 2012 2013 2014 2015
Va
lue
(U
SD
/Mt)
Robusta cost of production (USD/Mt, ex household labour)
Cote d'Ivoire Vietnam
0200400600800
1,0001,200
2008 2015 2008 2015
Cote d'Ivoire Vietnam
Va
lue
(U
SD
/Mt)
Robusta cost breakdown (USD/Mt)
Robusta trade export cost
Robusta export processing cost
Robusta farm processing cost
Robusta labor cost
Robusta planting cost
Robusta fertiliser cost
3%
97%
Farmers' access to credit
Share of farmers LBA loan
Share of farmers bank loan
Share of farmers exporter loan
Share of farmers cooperative loan
No access to credit
20
LITTLE CREDIT PROVIDED IN COFFEE, BUT FARMERS HAVE COCOA PRE-FINANCE
• Almost no formal access to credit targeted at coffee, however, farmers are commonly also producing cocoa and will have access to credit for cocoa via the cooperative (usually provided by their buyer/exporter).
• Following a competitive cocoa market where price competition is not allowed, buyers aim to secure volumes with zero interest pre-finance.
• Value chain based pre-finance works well in Cote d’Ivoire, with good repayment rates.
• Loans are small in size <10% of crop value and only for the duration of the crop.
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sources: Interviews, USDA, AL and VC analysis
21
COFFEE IS A SECONDARY CROP, FARMER INCOMES AROUND POVERTY LINE
• Even though coffee alone is not very profitable for farming households, most farmers will have significant other revenue from cocoa and other crops. Cocoa often has more land allocated, higher yields and currently higher prices.
• Whereas in large polygamous families this is still just below the poverty line, the total household income is higher than in most African origins.
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Sources: Interviews, USDA, AL and VC analysis
3070814
507
1,4911,998
0
500
1,000
1,500
2,000
2,500
3,000
0
500
1,000
1,500
2,000
2,500
3,000
Po
ve
rty
lin
e (
US
D/h
ou
seh
old
)
US
D/y
ea
r
Average farmer business case for Robusta in comparison to poverty
line
Value
Cost
Poverty line (USD 1.9/day/person, PPP adjusted)
• Farmer training combined with rejuvenation and inputs use can allow for a significant yield increase, whereas local processing improves the cherry to green coffee ratio.
• There is an interaction between the interventions, with farmer training being a requirement to implement other investment opportunities.
• Investment in productivity can lead to doubling coffee production in Cote d’Ivoire in 10 years. CCC targets an annual volume of 200.000MT in 2020, and while the volume seems feasible, it may take more time to realize it.
• Whereas Cote d’Ivoire in the past produced up to 400.000MT annually, we are uncertain about market demand to accommodate this volume.
22
MODELLING INVESTMENT OPPORTUNITIES – PRODUCTION EFFECTS
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2017 2019 2021 2023 2025
Vo
lum
e (
Mt)
Production effect of investment opportunities
Local processing capacity - net production impact
Increase inputs application - net production impact
Rejuvenation/replanting - net production impact
Farmer training - net production impact
Base level
• Price effect of investments is limited.
• Local processing capacity may lead to a small increase of average export price / differential from quality improvement.
• Farm gate price is regulated and not affected by these interventions.
• Certification is not feasible given lack of market demand.
23
MODELLING INVESTMENT OPPORTUNITIES – PRICE EFFECTS
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
1,685
1,690
1,695
1,700
1,705
1,710
1,715
1,720
2017 2019 2021 2023 2025
Va
lue
(U
SD
/Mt)
Export price effect of investment opportunities
Certification/assurance - net price impact
Local processing capacity - net price impact
Base level
24
FARMER TRAINING INVESTMENT CAN GROW CURRENT SUPPLY BY >35%
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2017 2019 2021 2023 2025
Nu
mb
er
of
farm
ers
Number of farmers enrolled in training program
Annual nr farmers in training programme
Cumulative nr farmers trained -
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2017 2019 2021 2023 2025
Ad
dit
ion
al s
up
ply
(M
t)
Additional supply from farmer training programme (Mt)
• For training on Good Agricultural Practices to be effective it needs to be participatory, intensive and should run for at least 4 years.
• In a context where farmers have medium to large farms, are often organized formally in cooperatives and informally around local buyers, government extension services exist, and many farmers have received GAP and other training for their cocoa, a training program can focus on strengthening institutional capacity. There are concerns regarding the quality and capacity of existing extension networks, but the case of cocoa has indicated that this can be addressed.
• Building on the current level of farmer organization and existing extension services, using a training of trainers approach, this program has a quite low cost per farmer for a 4-year training program.
25
FARMER TRAINING CAN BE EMBEDDED INSTITUTIONALLY AT LOW COST
Indicator Value (10 years)
Cumulative nr of farmers reached 94,118
Additional volume coffee per annum in steady state (Mt)
36,860
Total investment $ 18,832,529
Total return $ 368,585,439
NPV (10%) $ 175,450,291
NPV (20%) $ 96,675,208
Investment per farmer $200
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
26
REJUVENATION INVESTMENT TAKES A WHILE TO SHOW EFFECTS
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2017 2019 2021 2023 2025
Vla
ue
(h
a)
Acreage rejuvenated (ha)
-
5,000
10,000
15,000
20,000
25,000
30,000
2017 2019 2021 2023 2025
Ad
dit
ion
al s
up
ply
(M
t)
Additional supply from rejuvenation (Mt)
• Rejuvenation is critical, with a large part of coffee farms currently old, abandoned and overgrown.
• The CCC relaunch program has installed nurseries in all districts, whereas two large buyers are setting up private nurseries for the same. Availability of seedlings is still tight but getting better.
• Farmers are currently getting seedlings for free, and financing mechanisms are required.
27
REJUVENATION IS CRITICAL TO RELAUNCH THE COFFEE SECTOR
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Indicator Value (10 years)
Cumulative acreage replanted (ha)
47,059
Additional volume coffee per annum in steady state (Mt)
28,084
Total investment $ 35,294,118
Total return $ 248,107,792
NPV (10%) $ 97,120,726
NPV (20%) $ 47,421,299
Investment per ha $ 750
28
INPUT SUPPLY INVESTMENT CAN HAVE A WIDE REACH AND YIELD IMPACT
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2017 2019 2021 2023 2025
vla
ue
(h
a)
Acreage with enhanced input use (ha)
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2017 2019 2021 2023 2025
Ad
dit
ion
al s
up
ply
(M
t)
Additional supply from input use (Mt)
• Fertilizer application has become more common in cocoa, and farmers would be interested in using inputs if they are indeed attracted back to coffee.
• Only farmers that are part of the training programme should make use of the additional input supply investment to ensure optimal use.
• Applicability of inputs for different crops needs to be considered.
29
INPUT USE STILL LOW, BUT COULD GROW AS FARMERS’ EQUITY INCREASES
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Indicator Value (10 years)
Acreage using additional inputs in steady state (ha)
176,471
Additional volume coffee per annum in steady state (Mt)
30,299
Total investment $ 127,941,176
Total return $ 337,752,432
NPV (10%) $ 105,863,826
NPV (20%) $ 58,217,812
Investment per ha per year $ 100
30
PROCESSING INVESTMENT REDUCES VOLUME LOSS AND IMPROVES PRICE
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2017 2019 2021 2023 2025
Va
lue
(M
t)
Volume with improved quality (Mt)
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
2017 2019 2021 2023 2025
Va
lue
(U
SD
)
Additional revenue from quality improvement (USD)
• Investment in hulling facilities for cooperatives and communities will increase green coffee yield from cherries. This his a significant impact on rural incomes.
• Processing will not directly affect price, as these are fixed in the barème. It is expected that FOB prices will increase over time, which can then be distributed to value chain actors in the barème.
• Improved and consistent quality will also re-open the European market for coffee from Cote d’Ivoire. This is needed to accommodate the additional volume that Cote d’Ivoire aims to produce.
31
PROCESSING INVESTMENT HAS GOOD RETURNS
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Indicator Value (10 years)
Volume of improved quality per annum in steady state (Mt)
42,000
Additional value of improved quality per annum in steady state
$ 10,226,822
Total investment $ 2,646,000
Total return $ 79,509,446
NPV (10%) $ 42,162,100
NPV (20%) $ 25,400,910
Investment per Mt $ 10
• Investments in productivity and quality will have a significant impact on coffee income, putting it on par with average cocoa or cashew income.
• Income from coffee and other crops combined is sufficient to push farming households above the poverty line. Cote d’Ivoire can as such become an example of how smallholder farming can work.
• Equal importance of two (or more) crops protects farmer incomes from market volatility in just one crop.
• Cost of external labour are included in the estimates. Increased productivity of farms could boost local labour markets and provide an income to another member of the household. This effect has not been modelled.
32
INCREASED COFFEE INCOME PUSHES FARMING HOUSEHOLDS OUT OF POVERTY
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
0
500
1,000
1,500
2,000
2,500
3,000
0
500
1,000
1,500
2,000
2,500
3,000
PP
P A
dju
ste
d P
ov
ert
y L
ine
(U
SD
/ye
ar/
hh
)
Va
lue
(U
SD
/ye
ar)
Improved farmer business case for Robusta in comparison to poverty
line
Programme effect
Income
Cost
Poverty line (USD1.9/day/person, PPP adjusted)
• Investment in coffee can significantly increase the
sector value for all actors in the value chain. The
majority of value flows into the rural economy.
• As productivity improves, local supply chains
benefit, primarily from additional supply.
• The market is expected to accommodate this
increased volume, with consistent quality re-
opening the (South) European market for Cote
d’Ivoire coffee.
33
NATIONAL BUSINESS CASE: SIGNIFICANT INCREASE IN SECTOR VALUE FOR ALL
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Summary USD over 10 years
Total investment $ 184,704,824
Total return $ 1,025,630,229
NPV (10%) $ 415,638,725
NPV (20%) $ 224,482,272
0
50
100
150
200
250
300
350
Baseline sector value Target sector value
Va
lue
(m
illio
n U
SD
)
Impact of investment on national sector value in steady state (M$)
Farmers Local supply chain Government tax revenue
• With farmers expecting free seedlings, inputs and loans, their willingness to invest is low. Also, low farm gate prices compared to other origins do not allow much room to invest.
• Private sector investments are limited to two large buyers, no others show market interest.
• Government (CCC) are however driven to support coffee and have already committed a budget. It is expected they would be willing to invest part of export tax into the program.
• Grants are needed to fill the funding gap. Investing in coffee in Cote d’Ivoire is less commercially driven, but can have significant impact and develop a replicable model for smallholder farming.
34
FUNDING THE INVESTMENT IS A CHALLENGE, GRANTS NEEDED
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
Summary Value
ACF revolving fund size $ 5,615,106
Required grant funding $ 105,622,701
Required grant funding % 57%
Required national budget (% export tax)
50%
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
2017 2019 2021 2023 2025
Vla
ue
(U
SD
)
Public and private programme contributions
Required seed funding grants
Export tax earmarked for programme
Private sector investment
Farmer investment via fund
Annual programme cost
Required cumulative grants
Required total revolving fund
Co
ntr
ibu
tion
s a
re in
dic
ativ
e b
ase
d o
n s
take
ho
lde
r in
pu
t. In
vest
me
nts
an
d c
on
diti
on
s to
be
n
eg
otia
ted
with
in n
atio
na
l pu
blic
priv
ate
pla
tfo
rms
taki
ng
into
acc
ou
nt a
mo
ng
st o
the
rs
inte
rna
tion
al c
om
pe
titiv
en
ess
, go
vern
an
ce, t
ran
spa
ren
cy a
nd
acc
ou
nta
bili
ty a
ssu
ran
ce.
CONCLUSIONS
• The coffee sector contributes a small part of GDP in Cote d’Ivoire, but there is a strong drive to diversify
from cocoa into other crops. This diversification would benefit farmers, the value chain and national
economy.
• There is potential to increase coffee sector value, but the implementation model needs to be tailored
to the local context, building more on institutional capacity as market interest to invest is low, and
commercial inputs supply and finance are not competitive currently.
• Farming households are hovering around the poverty line, and increased coffee income can take
them out of poverty as well as protect from shocks by diversification.
• Total programme investment amounts to an estimated 180 million USD over 10 years that would
generate a return across the sector of 1 billion USD.
• Grants are needed to fill the funding gap. Investing in coffee in Cote d’Ivoire is less commercially
driven, but can have significant impact and develop a replicable model for smallholder farming.
35
SEPTEMBER 16AFRICAN COFFEE SECTOR: ADDRESSING NATIONAL INVESTMENT AGENDAS ON A CONTINENTAL SCALE
36
SEPTEMBER 16AFRICAN COFFEE SECTOR: addressing national investment agendas on a continental scale
SourcesGlobal Coffee Platform, Sucafina, Olam, Hanns R. Neumann Stiftung, Café Africa, Conseil Café Cacao, Nestle, CABI, Sucden, Cocoanect, Sa2c, IVCAO
DataUS Department of Agriculture, Food and Agriculture Organisation, International Coffee Organisation, Conseil Café Cacao, 4C Association, UTZ Certified, Agri-Logic
About the Global Coffee PlatformThe GCP is a collaboration between the 4C Association and the Sustainable Coffee Program of IDH – The Sustainable Trade Initiative. The Global Coffee Platform is an inclusive multi-stakeholder sustainability platform aligning the activities of a diverse network of stakeholders to set into action the global commitments made through Vision 2020 and create a thriving and sustainable coffee sector.
About Agri-LogicAgri-Logic – management, consultancy and research - operates where agricultural production, development, international trade and consumer markets intersect. We combine a thorough understanding of farm level reality and commodity trade with scientific research skills and a track record in sustainability strategy design and implementation, to help clients deal with sustainability challenges and market requirements.
About Valued ChainValued Chain is an independent consultancy. We support organizations in understanding their value chain and stakeholders, identification and mitigation of risks, and realization of opportunities. We believe in integrating commercial objectives with sustainability of the business and its stakeholders. Working from Amsterdam and Lagos, we connect Europe and Africa.