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Overview of the cashew industry in Benin African Cashew Alliance (ACA) Benin country meeting September 2006


Agenda

Production

• • • • • •

Volumes Farmers Farming practices Productivity / outturn Associations Pricing and trade of raw nuts • Quality

Processing

• • • • • •

Volumes Supply Main players Processing practices Productivity Pricing and trade of kernels

Logistics Financing Policy

Trade / Marketing

• • • • • • •

Volumes Geographies Main players Branding Pricing and trade Packaging Quality


Production /1 • Cashew production growth in the last 15 years: 40-50% a year (see chart)

Export of Raw Cashew from Benin (MT) 60 50

• Now the second largest agricultural export after cotton

40

• One of top 10 producers globally

20

chart, grayed areas)

• Over 30,000 farmers, or 90% of those in the producing areas

30

10 0

19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05

• Most of Benin apt for cultivation of cashew (see

Produced elsewhere Produced in Benin

• Small average farm size at 1-2ha • Low productivity per tree at 2-3 kilo/tree, vs. up to 10 in India, largely due to irregular spacing and young trees • Avg cashew-related income at approx. $180 yearly, sometimes up to half of the total net income for the farmer Source: ONS, Brook Adam (Peace Corps)

Atacora

Donga

Borgou Collines

Zou


Production /2 • Largely unmonitored and unplanned production; little or no inputs • Existing farmers associations, primarily led by NGOs; however, lacking resources and common strategies • Large networks of agents, sub-traders and speculators substituting officially registered Beninese agricultural traders as intermediaries; hence risk to leave raw cashew unsold (2,500MT in 2006) and no reward quality at farmgate • Highly reputed quality of the Beninese raw cashew, hence higher than average prices • Producers not benefiting fully from better quality as inflow from neighboring countries (10-20% of total) drags quality and prices down • Farmgate prices tend to be set globally, however they vary very significantly, ranging from 320 to 650 USD/MT in the last 3 years • Due global to production increasing faster than demand, esp. in Vietnam, this year prices are lower at 320/480 USD/MT • Minimal transparency of prices at farmgate • By products such as cashew apple and shells are not exploited Source: ONS; Brook Adam (Peace Corps)


Processing • Cashew processing in Benin (SEPT and SONAFEL) not capturing its potential • Processing still a marginal activity in Benin, with some 97% of raw cashew being exported • Benin as one of the most promising country for cashew processing globally, thanks to its high quality and generally low costs • New realities have started in the last 3-4 years (details below): • The Pride of Benin group sells directly to the end-consumer, currently mostly in Benin, while Afokantan will sell to Global Trading, its business partner, a Dutch trading company • Small semi-industrial activities also exist, such as Boulamb, selling locally Processor

Year Est.

Capacity (MT)

Processed (MT) 05 06

Location

Technology

Marketing Dest

Retail

Pride of Benin

2003

800

35

1040

Savalou, Glazoué, Bantè, Tcharou

Semi-Manuel

Export/Retail

100 % (Currently)

Afokantan Benin Cashews

2006

1500

0

700

Tcharou

Semi-Manuel

Export

None

Source: Brook Adam (Peace Corps), WATH cashew study


Trade / Marketing Raw nuts

Other 23%

NOMAX 26%

• 95-97% exported to India • 4 players leading the market (see chart) • Registered intermediaries negotiating both at local markets and at farmgate • Growing role of unregistered speculators, adding liquidity, but jeopardizing balances • Pre-financing is common place at all stages Cashew kernels • Afokantan to Global Trading • Members of Pride of Benin sell on the local market; umbrella brand targeted to international markets but never operating • Boulamb packages and distributes in Benin • Artisan / Women’s groups also active Source: Brook Adam (Peace Corps)

AgroBe nin 11% Sakson 16%

OLAM 24%


Logistics: flow of goods Farm Local end market

Processor

Local market

Trader

Distributor

Int’l trader

Foreign end market

• Complex, expensive, very mediated flows of goods, lacking transparency • Most of the volume as: farm > market > trader > international trader > distributor > foreign market • Producers and end users completely detached as a consequence


Financing Access to finance

Traditional banks

Microfinance

Producers

Only larger 510%

Farmer associations

Ad hoc / privileged funds

Need for credit

Need for new financial solutions

Mostly in urban No areas

Medium

High

Rarely

Growing

?

Low

Medium

Processors

Yes

No

No

High

High

Traders

Only larger, registered ones

Some

No

Medium

Medium

• Few financial solutions for industry players • Pre-financing as a common solution to spread risk, increasing financial complexity • Development of the industry requiring innovative credit opportunities, especially, but not only, for producers and processors • New solutions to be financially sustainable for lenders, but institutional incentives are possible


Policy /1: many institutional players • Research – INRAB-PRF: Institut national des recherches agricoles du Bénin - Programme de Recherches Forestières – PTAA: Programme Technologie Agricole et Alimentaire – PAPA: Programme Analyse de la Politique Agricole – PPAB: Programme de Professionnalisation de l’Agriculture au Bénin • Regulatory – DPQC: Directeur de la Promotion de la Qualité et du Conditionnement des Produits Agricoles – CIFP: Commission Interministériel de Fixation des Pris des produits agricoles et intrants – SONAPRA: Societe Nationale pour la Promotion Agricole – CNEX: Counsel Nationale pour l’Exportation – CARDER: Centre d’Action Régional pour le Développement Rural – DEDRAS: Département du Développement Rural et d’Assistance Sociale • Civil Society – PADSE: Programme d’Amélioration et de Diversification des Systèmes d’Exploitation – PAMRAD: Projet d'Appui au Monde Rural dans l'Atacora et la Donga – Oxfam Quebec – UEEB: Union des Eglises Evangéliques du Bénin – CASPA: Composante d’Appui au Secteur Privé Agricole – SNV: Netherlands Development Organisation – GTZ: Deutsche Gesellscraft für Technische Zusammenarbeit (German Development Agency)


Policy /2

Production

Processing

• No institutional incentives to create farmer associations

• No incentives • Industrial minimum wage

• Bottom price set by CIFP, in consultation with stakeholders

• Currently institutions intervene on the industry by: – Setting price – Limiting trading entities – Taxing exports and sales • No institutional incentives to operate or grow • SONAPRA to acquire significant role in the future

Trade / Marketing • Raw cashew traded only by registered Beninese traders (only country forbidding foreign traders buying directly from farmers) • Tax on export: 0.8% • Tax on sale: depending on volume


Conclusions • The cashew nut industry in Benin is growing fast and has many attractive features

• However, a number of problems remain, calling for a coordinated effort

• Some key themes: – Lack of transparency at farmgate / detachment of producers from end users – Role of informal trade / inflow of foreign nuts – Marginal role of farmers associations – Processing of raw nuts: marginal, but profitable and growing – Institutional incentives for production and processing – Lack of appropriate financial services – Need for an entity coordinating the industry (role of SONAPRA) – Little or no coordination with other African countries / the possible role of the African Cashew Alliance


Benin country overview cashews ENG