Capture Greater Value

Increasing the economic return that the poor realize from naturebased products is an important element in any strategy to use nature for poverty reduction. Many of the goods that the poor produce or obtain from nature yield low prices relative to the labor involved. Changing this involves action at three different levels.

Improve Production and Processing

The first level of creating value is improving production or processing efficiency so that the same labor yields more or a higher-quality product. An important aspect of this is improving the storage and handling of products to reduce losses and improve quality. A high rate of post-harvest losses is typical for small producers. In Ethiopia, post-harvest grain losses from spoilage, insects, and rodents rob grain producers of 5-26 percent of their harvest (Gabriel and Hundie 2004:4). Losses of milk in Tanzania total some 60 million liters per year, worth over US$14 million (FAO 2005). Reducing losses involves a concerted effort to educate small-scale producers about good production hygiene and the use of low-cost technologies for storage and shipment. For example, FAO is currently helping to implement milk-hygiene programs for small producers in East Africa, and to explore the adoption of an inexpensive milk preservation system called the lacto-peroxidase system to extend shelf-life of smallproducer milk (ILRI 2003:6).

Paying more attention to factors like appearance, packaging, or labeling, particularly for export or tourist markets, can also raise the value of products. State extension agents or NGO technical assistance can frequently help. In one example, small farmer cooperatives in Nicaragua have worked with the U.S. Agency for International Development and the Thanksgiving Coffee Company to build “cupping labs” to taste their coffee after processing. Thanks to the labs, the Nicaraguan farmers have begun garnering international awards for coffee quality and are successfully reaching specialty markets in Europe and the United States (Bacon 2002:i-iii; USAID 2004:1).

Cooperatives Raise Marketing Power

The poor frequently capture only a small percentage of the value of the ecosystem products they sell, while middlemen and retailers higher up the commodity chain often capture a much greater share. Middlemen perform valuable services by transporting products to wider markets and tapping into distribution chains to which the poor have no access. But they are also key actors in keeping producer profits low. For example, small-scale coffee farmers capture, on average, only 4.5 percent of the retail price of coffee sold in U.S. supermarkets (Gresser and Tickell 2002:21). In Senegal, an analysis of the charcoal commodity chain likewise found that the profit of a typical woodcutter at the base of the chain is less than 4 percent of the profit that an urban charcoal wholesaler earns (Ribot 1998:318). (See Figure 4.4.)

A common way for rural producers to increase their market power and avoid middlemen is to form cooperatives or marketing groups. These groups can help poor producers receive better market information, increase their prices, and expand their markets. They also provide a natural forum for training, networking, and sometimes for management of the resource being marketed. In Nam Pheng village in northern Laos, villagers formed a marketing group in 1998 to coordinate their harvest of bitter bamboo and cardamom and to try to increase the price received at market. The marketing group collects the villagers’ individual harvests, sells them on a large scale to traders, and delivers 85-90 percent of the final sale price to villagers (Morris 2002:4-5).

The effectiveness of the group was immediately apparent when, shortly after forming, they were able to raise the local price of cardamom from 500 Lao Kip per kilogram to 35,000 Kip. Although the price has since dropped to 14,000 Kip, it is still well above what villagers got when they marketed on an individual basis. The 10-15 percent of the sale price that the marketing group keeps goes into a community investment fund that has supported a new school and an improved water supply, as well as providing loans for a number of households. The marketing group has ventured into management by setting regulations for when and how much to harvest, and also providing training in collection techniques. Decisions are made jointly by the marketing group members, which include virtually all households in the village (Morris 2002:4-5). (See Figure 4.5.)

In Mexico, the Union de Ejidos de la Selva, a peasant organization, has helped organize small coffee producers in Chiapas state into an effective marketing force. The union collaborates with 1,250 families in 42 communities to ensure the adoption of better soil-management and environmental practices, including certified organic techniques that limit erosion and water pollution. The union has partnered with a civil society organization called the Vinculo y Dessarrollo to create a chain of five up-scale coffee shops in Mexico City—the Café de la Selva—that serves the organic coffee produced by the Union de la Selva farmers. By controlling the entire vertical chain of coffee production, the Union de Ejidos de la Selva has been able to capture the full urban consumer value of coffee and use it to improve farmer income and self-sufficiency (Samperio 2002).

Use New Commercial Models

A third tactic for increasing commercial payoff is to make use of new models of commercialization, such as organic certification or the Fair Trade movement. These specialized markets, in which consumers purchase an item (often at a premium) in order to further social, environmental, and health goals, have continued to grow year by year. Although they do not account for a large percentage of total sales of any commodity, these markets can offer several advantages. The Fair Trade movement, for example, is targeted to support small rural producers, with the explicit goal of providing a fair wage for growing or crafting export items such as coffee, tea, bananas, or any of a number of handicrafts. It essentially amplifies the idea of a typical cooperative or marketing group to the global level, offering low-income producers a route to high-value international sales they would otherwise have little chance of obtaining. (See box 4.2)

The markets for certified organic food, sustainably harvested lumber, and sustainably caught seafood also offer potential for low-income rural producers. Certification offers consumers a guarantee—through inspections or other verification methods—that a given product has met certain standards in its growth, harvesting, or processing. The kinds of small-scale production that the poor engage in often lend themselves to organic or sustainable methods. Many small coffee producers, for example, follow organic practices by default.

But certification offers challenges to the poor. The most significant is meeting the cost and technical requirements of certification. For example, fishery certification by the Marine Stewardship Council requires a time-consuming and expensive evaluation of the harvest levels and equipment used by fishers; forest certification similarly requires a verified forest management plan. For the poor to be able to participate, their certification costs will need to be reduced or subsidized by donors, NGO partners, or the state. Innovations in the certification process to make it more inclusive can also help. One forest certification organization has experimented with videotaping community members as they describe their management and implementation plans, rather than making them submit a written plan (Shanley et al. 2002:296).

Another difficulty for the poor is that forest or organic certifications generally focus on the land where the timber or crop is grown, guaranteeing certain practices—such as absence of pesticide use for a specified number of years—on these lands. For those with secure ownership of land and resources, this may be fine. But many nontimber forest products are collected on common lands or by the landless, so guarantees about a given parcel of land cannot be made. In this case, certification may have to be modified so that it focuses on the training and practices of the harvesters themselves, with certification residing with a harvester association rather than with a land parcel (Shanley et al. 2002:296-298).