Cocoa Growing as a Profitable Family Business

Aim of this chapter: 

To present the background ideas that will help farmers to see cocoa as a profitable family business (as described in the training carried out by the PNG University of Natural Resources and Environment IATP Kairak Training Centre, Vudal in the Sustainable Livelihood Module)

Introduction – a change in thinking is needed to improve cocoa farming

·     The problem of degeneration of cocoa plantings

General observation and surveys (e.g. Nelson PA, Webb MJ, Berthelsen S, Curry G, Yinil D and Fidelis C 2011 Nutritional status of cocoa in Papua New Guinea, ACIAR Technical Reports 76, Australian Centre for International Agricultural Research, Canberra, 67pp.) have shown that smallholder cocoa plantings usually go through three stages of management and productivity:

o   Stage 1.  High level of management during establishment when the young cocoa plants are growing along with food crops leading up to first pod bearing

o   Stage 2. Moderate level of management for the initial 2 – 8 years of highest pod bearing when the trees are young and healthy  

o   Stage 3. Low level of management and very low productivity when the cocoa and shade trees have become too big and overgrown, and pests and diseases have built up as a result of neglect of management during Stage 2

o   Since the spread of Cocoa Pod Borer, the decline in productivity and management attention has occurred even earlier, during Stage 2.

o   The aim of this manual is to promote a new way of thinking about and managing cocoa to prevent this decline. 

·     To be profitable, cocoa growing has to be changed from foraging of pods on ‘bush’ trees into a more intensive, productive family business. 

·     Nearly all pods in overgrown and over-shaded cocoa will be destroyed by either Phytophthora Pod Rot (Black Pod) or Cocoa Pod Borer; in their presence it is not possible to make much income from occasionally collecting a few pods from neglected, overgrown trees (Figures 1.1, 1.2). 

Figure 1.3 - Small, well-managed clonal cocoa trees         

Figure 1.4 - Pods within easy reach on a small, about twice human height well-pruned, clonal cocoa tree

·     Using the most recently developed cocoa types and management methods, aimed at growing smaller, more open and accessible trees (Figures 1.3, 1.4, 1.5) with light shade, the present unproductive cocoa can be changed into a highly profitable family business.

·     In a well-managed cocoa block, where the trees are kept small and given regular attention, the workload is not heavy compared with a neglected ‘bush’ plantation.  By keeping cocoa trees small, most of the work needed is ‘light’ work (removing sick pods, cutting of shoots beginning to grow in the wrong places) that can be done also by women and youth as part of whole family involvement in cocoa growing (Figure 1.6), in the same way that whole families are involved in food crop production.  On small trees, the most important tool is a secateur, not a bush knife or bow saw or cocoa hook on a long stick.

·     To be profitable, with the current pest and disease problems, cocoa has to be grown with the same constant attention as food crops - a cocoa block must be worked on for a few days every week (e.g. pruning shade trees to maintain only light shade, pruning of cocoa to keep the trees small, harvesting all sick pods, hand picking Pantorhytes weevils, weeding, burying organic waste).  In the past, cocoa trees have been managed with minimal effort like the more traditional tree crops (e.g. coconut, breadfruit, galip nut, taun, pau nut, aila, betel nut) or fruit trees (e.g. mango, rambutan) but this doesn’t work for cocoa because of its pests and diseases.

·     Much of the regular day-by-day work in food gardens is done by women, following on from the heavy work done by men in clearing land and planting crops.  Women know that constant day-by-day management is needed to grow food crops successfully.  If women are involved more in cocoa farming they will apply the same skills and constant attention to cocoa as to their food crops – therefore cocoa farming is best thought of as a ‘family business’.

·     It is better to integrate cocoa with food crops and fruit and nut trees, as is now done on many farms, rather than treating it as a separate ‘plantation’ crop.

o   This will maximise the use of land and increase the number of food producing and cash earning crops that can be attended at the same time.

o   It gives more reasons for farmers to be in the field every day - if people are visiting their food gardens every day they are likely to also tend their cocoa every day.

o   The cultivation of food crops in this “cocoa –food crops mix” should begin immediately after planting cocoa as has been traditionally done by smallholders, but can extend beyond the sixth year or the peak cocoa production period.

o   Adopting a long term cocoa-food crops mixed cropping system will mean that farms may have fewer trees than in cocoa plantations, but because the trees will be well managed, yield per ha should be greater than in a bigger block of poorly managed cocoa.

o   This system of farming also provides food security for communities and avoids the problem of displacement of food crops by an export commodity crop.

o   At present, unproductive large cocoa trees and neglected shade trees over-shade everything else and make the land unproductive.

·     Use of high value trees such as coconut, betel nut, galip nut or fruit trees as shade for cocoa can give an added income and also reduces the labour needed to prune shade trees like the fast growing Gliricidia.                                                          

·     The breeding of smaller trees and the use of improved pruning methods to keep trees small (less than twice human height), as recently developed at CCIL, should help farmers to treat them more like garden trees than ‘bush’ or ‘plantation’ trees. 

·     The serious pest and disease problems that have greatly discouraged farmers (Cocoa Pod Borer, Pantorhytes and Longicorn Stem Borers, Phytophthora Pod Rot or Black Pod and Bark Canker, and Vascular Streak Dieback) can all be controlled by good farming practice and regular tending of cocoa.

A business-like approach to cocoa growing involves the same way of thinking as for any town work or profession:

·         Young people can grow cocoa (along with other crops) as a good business and earn an income equal to or better than a town job.  Good cocoa farming uses complex knowledge and skills and deserves as much respect as any town job and can provide as much personal satisfaction (farmers are their own boss and remain part of their traditional community).

·         Farming cocoa as a business involves giving consistent attention to a manageable number of trees in the block – observing and working on the cocoa several days every week.  It involves paying attention to detail - learning the skills of every aspect of growing the trees and producing a good product, and giving attention to every tree on a farm.  It involves thinking and planning ahead - understanding the longer-term effects of the things done on the farm today (e.g. leaving sick pods hanging in the tree, neglecting formation pruning of young clones, leaving cocoa and shade overgrown – all these things will result in more work in the future).

·         It involves understanding the finances of the business – the amount of money expended and the amount of income earned from selling the cocoa beans, the difference being the farmer’s profit or pay (see the Book Keeping Module of the University of Natural Resources and Environment IATP Kairak Training Centre, Vudal).  It involves understanding the value of time and work, as in a town job.

·         It involves being able to think up better ways of doing things to cut costs, reduce labour, increase production, increase cocoa quality and increase profit.

·         It means being passionate about your work, taking care with everything you do, and doing a job to the best of your ability.

Learning about cocoa

·         A cocoa extension specialist or farmer has to learn about the structure and growth of the cocoa tree and its flowers, fruits (pods) and seeds, and the methods of managing the crop.

·         This should begin in primary and secondary schools in the cocoa growing regions because many young people who become cocoa farmers will not do any formal study beyond their schooling.  This is supported by the new Cocoa Curriculum prepared by CCIL.

·         For young people likely to return to village life, learning about cocoa (and other crops the students encounter in daily life) can be a stimulating way of learning other important skills such as literacy, numeracy and science.

o   The best way to learn is to closely observe growing plants, from germination of the seed (or growth of a budded seedling) through to flowering, pod production and harvest, and then fermentation, drying and sale of beans; students can be shown plants in all these various stages or can plant seeds and observe their development.

o   Students can also be introduced to the production of chocolate and the economic supply chain of which Papua New Guinea farmers are the first step – they will then understand the importance of cocoa growing and feel that they play an important part.

o   In cocoa growing regions, cocoa is often growing near the schools and so it should be possible to teach the basic growth and production of cocoa and simple management methods in a very practical way.

·       This manual is intended as a support for teaching and learning about cocoa in schools as well as through the provision of extension services on farms.

Income that can be obtained from a cocoa business   

·         An important thing a person asks when thinking about taking up a job or starting a business is “what is my take-home pay?”

·         For a cocoa business this can be estimated from what we know about cocoa growing and the current price of cocoa.

·         You can look up the current world price of cocoa on-line (www.icco.org/statistics/cocoa-prices.html).

·         You can find the current buying price of cocoa in Papua New Guinea at enquiries@agmark.com.pg or by enquiring at the Economics Section of the Cocoa Board of Papua New Guinea who monitor cocoa prices every day

·         Below  (Tables 1.1, 1.2) are calculations to estimate the money that can be made from a cocoa growing business, with various levels of input:

 Table 1.1 - Cost of production and profit to be made from cocoa growing

 Table 1.2 - Cost of establishing a cocoa block (development costs) per ha in one year.

Note: Cost is based on current minimum labour wage but is variable depending on land slope (flat, rolling to hilly site),

road accessibility, land form, types of trees present, options for weed control methods and type of shade trees as

permanent shade.

 Business opportunities linked to cocoa production

·       In addition to the business of cocoa growing, there are many other businesses that can be developed to service cocoa farming or that can grow out of the skills learned by being a good cocoa farmer - some businesses could be conducted by farmers as well as running their own farms.  They could include any aspect of cocoa farming that requires special knowledge and skill (such as block rehabilitation; establishment pruning; production of planting material in a nursery; seedling budding, chupon budding or side-grafting; cocoa fermenting and drying), or specialised and expensive equipment such as fermentaries, driers, chain saws or trucks.

·       Worldwide, farming is tending to use contractors to do specialised jobs with expensive, labour-saving equipment.  The business model is based on investment in expensive equipment which is beyond the purchasing power of an individual farmer, and which would be a poor investment for a single farmer because it would not be used regularly.

·       These businesses also usually require specialised knowledge and training, especially in the safe use of equipment like chainsaws (occupational health and safety), or specialised business knowledge to borrow money from a bank to buy equipment, and to keep it running profitably to repay the bank loan.

·       An example is the use of small tractors for cultivating rice fields in Indonesia, replacing the use of water buffalo or cattle -  

o   A person with a small amount of money to invest (borrowed from a bank or accumulated from other work) can buy a small tractor and then run it as a business contracting it out to cultivate farmers’ fields

o   The business model is that the payment from the farmer for the work is divided three ways (1/3 goes to the person operating the tractor on the farms, 1/3 goes to maintaining the tractor and for fuel, and 1/3 goes to the person who owns the tractor and runs the business – i.e. the profit on the investment and repayment of the bank loan).

·       The business skills developed for cocoa can also be applied to other crops such as coconut (e.g. for selling dry nuts), galip nut or food crops.

Cocoa tree pruning, rehabilitation or replanting business (Chapters 4, 5)

Such a business would be based on the special knowledge described in Chapter 4 and use of chain saws or hydraulic pruning shears.  Mechanical mulching machines could be used to chip the tree waste and speed up its recycling as compost.  The business would require the training of operators in safe use of dangerous equipment such as chain saws and in safe felling of trees – cutting down big trees or cutting off large branches is dangerous work.  The contractors would be paid by farmers to rehabilitate overgrown cocoa.

Clone garden and nursery supplying superior cocoa clones (Chapter 3)

Such a business can be based on the specialised knowledge and equipment described in Chapter 3.  It would involve registering, establishing and maintaining a garden of the clones currently recommended by CCIL and a nursery for growing seedlings, budding and supplying clonal plants; it could also involve investment in a truck to distribute plants to customers.

Field budding and grafting business (Chapter 3)

A farmer who has become very skilled at budding seedlings, top grafting chupons or side grafting mature trees in the field could establish a business to do this for other farmers and be paid for each successfully established grafted plant.

Extension and research business

Extension workers, researchers and farmers who have built up a lot of knowledge about growing cocoa well can develop a business based on providing that knowledge to farmers.  This is now the main way in which farming knowledge is passed on to farmers worldwide.  Groups of farmers often band together to employ an extension worker or agronomist to advise them on all the specialist knowledge needed to farm successfully (e.g. to advise on how to get produce like cocoa certified, or certified as ‘organic’).

Accounting businesses advising farmers on finances, book keeping and record keeping for the purposes of certification of cocoa

For example someone in a community who has completed the Book Keeping Module of the University of Natural Resources and Environment IATP Kairak Training Centre, Vudal, or training through a business college can apply this knowledge to help cocoa farmers and other cocoa-related businesses run successfully and be paid a fee-for-service.

Labour supply business

Lack of labour is often seen as a reason why cocoa plantings are poorly maintained, and this is a particular problem as farmers become older.  A labour supply business may enable the knowledge and skills accumulated by older farmers to continue to be useful into old age by employing the labour of younger people.  For example, sporting clubs are currently adopting this business approach by organising for club members to provide labour to farmers as a way of raising money for the club.  Groups of youths could form a business like this to assist older farmers, on a fee-for-service basis.

Cocoa fermentation and drying business (Chapter 12)

Fermentation and drying, as emphasised in Chapter 12, are highly specialised operations, involving registration with the Cocoa Board of Papua New Guinea, much compliance with regulations, and substantial investment in buildings, fermentation boxes and driers.  At present Papua New Guinea’s reputation for high quality cocoa in the world market is being affected by poor fermentation and drying of the cocoa, especially by smoking of the beans because of leaky wood-fired kiln pipes.  This is because farmers often do not understand the specialised skills needed for good fermentation and drying of cocoa. A central or village-cluster based fermentary and drier, processing wet beans bought from farmers, would make an ideal business, relieving individual farmers of the responsibility to produce a high quality product to satisfy all the export requirements.

Cocoa buying or trading business (Chapter 12)

This could be done as an agent for an established larger cocoa exporting business by obtaining a dry bean dealer’s licence from the Cocoa Board of Papua New Guinea or, at a lower level, a wet bean dealer’s licence for farmers who own fermentaries.  It would involve specialised knowledge to advise farmers of the quality requirements for export cocoa beans.

Trade store to provide farming inputs

A community-based business could act as an agency for a larger business to supply all the inputs (e.g. tools, fertilisers, pesticides, safety equipment) for cocoa and other farming, along with agronomic advice, on the same business model as a trade store.

Compost and fertiliser production (Chapter 6)

A profitable business could be developed from the collection and composting of organic waste to produce a valuable local fertiliser.  The business can receive payment for collecting organic waste (e.g. pod husks, or organic waste from markets or town garbage collection) and also through selling the final product.  This requires special equipment such as trucks and tractors to handle large quantities of waste and compost, and specialised knowledge about how to make compost and health and safety aspects.

Wood production and sale

Prunings and thinnings from cocoa and shade trees can be bundled up and sold for firewood in towns as a small, value-adding business linked to cocoa farming.

Pest and disease control (Chapters 7, 10, Appendix 7, 8)

Spraying to control outbreaks of particular pests and diseases is a specialised job that can use motorised equipment that is normally beyond the purchasing power of an individual farmer.  It also requires special knowledge about where to get the chemicals, how to mix them to give the right concentrations, special safety equipment and attention to detail for the safe use of toxic chemicals.  At present, very few farmers apply pesticides in a safe manner and this is a job that, worldwide, is increasingly being done by specialists who have received special training and certification.

The key actors and their roles in cocoa production in Papua New Guinea

There are many actors involved in the cocoa industry and all play important roles, building on and supporting the work of the cocoa growers (Table 1.3).  The industry supports employment in all of these varied roles.  It is important for cocoa growers to understand these various activities that support them  

Table 1.3 - Actors and their roles in cocoa production and export

 The key extension services in Papua New Guinea

·       CCIL has a key role in extension services in Papua New Guinea because it undertakes research and development to provide the latest knowledge of cocoa growing technologies, accumulating knowledge from their own research conducted in Papua New Guinea but also keeping themselves aware of knowledge from throughout the cocoa growing world.  CCIL has extension officers based in nearly all of the cocoa and coconut growing provinces.

·       CCIL’s extension partners include Provincial and District government DPI officers in most of these provinces, officers in the Cocoa Board and KIK, and those working in a number of NGOs.  

·       Most recently, CCI has commenced working closely with organisations from the private sector as partners in service delivery

·       Many other organisations including all three levels of government, statutory agencies, the private sector and some NGOs are involved in service delivery of cocoa and coconut technologies.

·       Expertise on how to grow cocoa is available and is not a problem. There is, however, a need to improve the education of farmers in these methods and to increase their application by farmers.

·       To improve service delivery, a number of strategies need to be incorporated into the current cocoa and coconut extension system. These include:

• • Strengthening partnerships with provincial governments and private industry stakeholders.
  • Strengthening partnerships with farmers and working towards adoption of a participatory extension approach.
  • Facilitating delivery of extension advice through more networking with private companies, NGOs, DPIs, churches etc.
  • Developing a business model to support extension workers based in villages and linked to CCIL, DPIs and private cocoa companies.