With support from the Rockefeller Foundation, IDH, The Sustainable Trade Initiative reinvented the trajectory of the cassava sector in Nigeria to create sustainable food systems
Africa grows 61% of the world’s cassava, making it the number one producer globally. However, its industrial use is very low, with cassava grown across the continent principally for domestic consumption. While international trade in cassava grew by 10% between 2010 to 2014, reaching US$ 2.8 billion in 2014, no African countries participated in the trade.
Despite being the world’s largest cassava producing country, Nigeria imports derivatives that can be produced locally from cassava root. And while its cassava sector is the most commercialised within Africa, industrial demand still accounts for only a small fraction of total cassava output.
The country’s long-standing high-quality cassava root flour (HQCF) industry and recently emerged starch processing and ethanol factories, suggest strong potential for Nigeria to further industrialise its cassava production. So what’s stopping it from unlocking this potential?
Balancing supply and demand
With support from the Rockefeller Foundation, IDH, The Sustainable Trade Initiative reinvented the trajectory of the cassava sector in Nigeria, unlocking the industrial potential of the industry, solving the supply chain problems without any risk to its food security advantage.
A key challenge arises from an imbalanced supply-demand relationship between smallholder farmers, primary processors, and industrial food producers. Seasonal fluctuation in farm productivity means processing factories cannot rely on a sufficient, regular supply of cassava when there is demand, and so are forced to operate below capacity. In turn, industrial food producers cannot contract local processors given the inconsistency in the production of cassava derivatives. This creates a regular demand-supply deficit, which has resulted in the shutdown of several cassava processing factories in Nigeria and other parts of Africa.
IDH, The Sustainable Trade Initiative has developed the block farming model, rethinking the traditional supply-demand relationship to support more reliable sourcing of cassava roots to processing factories.
The model has since been adopted by ten organisations in Nigeria as an effective approach to improve livelihoods of smallholders while creating sustainable supply chains.
What is the block farming model?
The block farming model is a structure used to manage supply chains in an inclusive and sustainable way, with a block farm as the focal point of production. In the case of Nigeria’s cassava industry, it puts various complementary measures in place to ensure processing factories have a consistent supply of cassava to overcome the challenges in the supply chain.
It works by structuring the relationships between processing companies and smallholder farmers in a mutually beneficial way, in combination with the financial, educational and technical provisions necessary to kick-start effective production.
This forms a solid foundation on which to build an inclusive, long-term partnership with the shared goal of industrialising a particular crop without putting the food security needs of local communities at risk.
A well-implemented block farming model program has the potential to provide a sustainable supply of raw materials to the processor, improve income and livelihoods for smallholders, and support local economic growth through the promotion of small-scale sourcing among multinational food companies.
How does the block farming model work?
The block farm is a dedicated land under the control of the processor that achieves the goal of smallholder inclusiveness in supply chains. Each smallholder is allocated appropriate land area for cultivation and provided with a range of technical services including training, inputs and extension services. The range of services are to grant farmers access to credit, improve productivity and achieve food security. These range of services are a bouquet provided through a service delivery model.
What is Service Delivery Model?
The service delivery model (SDM) is a supply chain structure within the block farming model that provides various technical services including training and agricultural inputs. Its role is to improve farmers’ capacity, and therefore the effective growing and harvesting of sufficient crops to meet processors’ needs.
The SDM plays a central role, linking up other components:
The processor takes on the role of the off-taker, committing to buying the crops from the farmers. This commitment can take the form of a memorandum of understanding or purchase agreement. The terms of the purchase, including the price of the crop and costs involved in production, are agreed by all the parties before commencement.
The service provider delivers structured services within the supply chain including land preparation, inputs, training, transportation, mechanisation, logistics and management. The service provider may be part of the processing company directly, or as an independent entity, contracted to deliver selected services to the smallholders at agreed times and negotiated prices.
The development finance institution provides credit to smallholders by pre-financing the service provider’s services on agreed terms. While a commercial bank is used as an intermediary, a development bank provides options to de-risk investments. Service providers receive 50% of the costs at point of delivery, and the balance when the processor pays for the harvested raw materials. The bank then deducts cost of services and interest, and farmers are paid the balance.
In practice, the basic setup of a block farming model program begins with the processing company acquiring land on which it creates the block farm. The land is then shared out between local smallholder farmers who will manage a block of about two hectares each. The plots border one another, making assistance services, technology and training efficient to deliver.
The service providers oversee the management of the land, delivering certain services to the farmers on credit. On the sale of the crops to the processor, the costs of these services are deducted, and the farmers receive the balance. The terms of the projected costs and revenues are agreed between the parties at the beginning of each planting season.
What makes the IDH block farming model different to other outgrower schemes?
Generally speaking, outgrower schemes involve interdependent relationships through which processing companies offer technical services to farmers in return for guaranteed access to their produce – this is true of the block farming model.
However, most outgrower strategies rely on farmers managing their own land. This means processing companies lack full control of land management, and cannot guarantee food quality, safety standards or quantities.
IDH’s block farming model is unique in combining processors’ control over farming land with access to finance and agronomic training leading to community food security, reduction in side-selling and fewer postharvest losses.
This provides a win-win arrangement between processing companies and smallholder farmers that lacks in other outgrower schemes.
How IDH block farming model increases smallholders’ cassava production, improving their livelihoods?
Smallholders are key drivers of Nigeria’s economy, and an important source of income for local rural economies. But their cassava productivity is low, usually less than 15 metric tonnes per ha. This is due to a number of barriers that smallholder farmers face when it comes to increasing productivity and accessing high-value food markets. Barriers include poor soil quality, low level of agricultural and business capacity, lack of access to finance, climate vulnerability, food insecurity and low bargaining positions in agricultural price determination.
The block farming model is designed to tap into smallholders’ unused potential, removing the barriers that typically exclude them from accessing companies’ supply chains. It does so by providing a guaranteed market through an off-taking agreement, access to affordable finance, training on good agronomic practices, as well as opportunities to improve product quality.
The block farming model also reduces the percentage of post-harvest losses, as almost all the cassava yield is directly harvested and processed, rather than going to waste.
The model subsequently improve smallholders’ livelihoods, giving them a predictable source of income that offers financial security. It also provides an opportunity to build their credit history, in turn allowing them to access finance with which they can grow their business, offering food security to their households and communities.
The impact of the block farming model’s combined benefits has increased farmers’ productivity by 100% and income up to 300%, contributing to a reduction in both poverty and market uncertainty.
How the increased production for industrial use positively impact local communities?
In Nigeria where cassava is mainly consumed locally, increase in cassava production for industrial use can negatively affect local communities by both a shortage of food, and increased prices.
However, the IDH block farming model is designed to prevent such problems arising. The provision of training included in the service delivery model is provided both to farmers directly linked to the supply chain of the processing companies (block farmers) and to those outside the companies’ supply chains (community farmers). This means knowledge of good agronomic practices is shared widely via a farmer-to-farmer training approach. The training is disseminated to a large number of farmers who become equipped to improve both their productivity and income, which will stabilize prices and provide enough cassava to meet both local and industrial needs.
An improved cassava industry can equally encourage young people to stay within the community, sustaining the local economy rather than leaving for urban hubs.
What do processors need to drive a sustainable cassava industry in Nigeria?
The low productivity of smallholders can lead to crippling supply and demand imbalances for cassava processing companies.
And even when an agreement has been reached with a farmer to supply sufficient cassava, issues such as smallholders’ side-selling for a better price, or receiving produce that is below food safety standard, is still a risk.
Gaining more control over land management addresses processors’ major challenge of responding to market demand by being able to guarantee a certain quantity and quality of raw materials. A guarantee of smallholders’ access to finance through a third-party provision of affordable credit to run the service delivery model is pivotal for processors to drive a sustainable cassava industry in Nigeria.
The block farming model therefore benefits processors by removing much of the risk involved in working with smallholders. In addition, smallholders are less likely to engage in side-selling as the price has already been agreed, with a relationship structure designed to encourage loyalty.
Overall, the block farming model reduces marginal costs of production, while allowing for long-term planning based on the consistency in supply chain and price.
Can increased industrial cassava production in Nigeria contribute to greener food systems?
Cassava farmers’ productivity challenges are intensified by having to do most labour manually due to a lack of mechanisation in smallholder farming processes. Subsequently, the processes such as land preparation and harvesting are less efficient, and therefore less environmentally friendly.
Another environmental challenge is food waste. Once harvested, cassava root soon begins to decay and cannot be kept in storage for any more than two to three days. Losses are minimised by either consuming or processing it as soon as possible after harvesting. With various challenges facing the value chain, farmers often experience up to 30% losses in sub-Saharan Africa.
Apart from resulting in a loss of income and the waste of land, water, labour, energy and agricultural inputs, post-harvest losses are an obstacle for transforming cassava from subsistence to cash crop.
The fact that the majority of cassava grown in Africa is produced by smallholder farmers heightens the environmental impact of these issues and calls for a solution.
The block farm model has the potential to reduce post-harvest losses by 50% thanks to the guaranteed off-take arrangement between farmers and processors. In addition, the knowledge of good agronomic practice gained from working on block farms is applied to the farmers’ family farms in the villages, improving food security.
Furthermore, the compact nature of block farms, with plots bordering one another and shared resources, allows for the introduction of communal mechanical farming operations, from land preparation to harvesting. Mechanisation can increase land productivity by facilitating the timeliness and quality of cultivation, decreasing the environmental footprint of agriculture when combined with training on best agriculture practices to conserve landscapes.
