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July 30, 2008

Project attempts to reduce role of middle men by assisting farmers to value-add

The Common Fund for Commodities plans to spend more than $100 million over five years helping farmers in the developing world to process their crops for added-value exports.

The money is aimed at millions of small-scale farmers in mainly Africa, South America and Asia who often have no choice but to sell their crops for a steal to middlemen, who have connections to outside markets.

"Food security in poor nations is not just about growing food, it's also about generating income so you can have access to health care and education which healthy workers need," said Ali Mchumo, managing director of the Common Fund for Commodities (CFC).

The idea is to shorten the supply chain by removing brokers, enabling poor agricultural producers to sell directly to retailers and supermarkets for a higher price.

One initiative will enable Tanzanian and Ugandan coffee farmers to supplement their income by growing fruits that are used as ingredients in locally manufactured juices.

In Mali, Burkina Faso and Tanzania, another project will build world-class laboratories to test the quality of cotton produced in Africa.

Already underway in Tanzania’s eastern Tanga region is the first-ever, large-scale factory to convert sisal residue to biofuel, which is generating about 150 MW of electricity a day.

Tanzania is the world’s second-largest producer of sisal, a plant used to make rope, yarn and carpets among other manufactured items, behind Brazil and tied with China.

"The best help we can ask is that we utilize more of the plant for products of high value. Then we'll be able to increase the value of the plant," Salum Shamte, owner of Katani Ltd. which is operating the biofuel factory. "In that manner, the returns for the farmer will be higher."

The global food scare this year has thrown a spotlight on the plight of 450 million smallholder farmers and 850 million starving or malnourished people in developing nations. Sharp increases in food prices due to higher demand for biofuels and from rapid growth in places like China and India has hit the poorest nations the hardest, said Guy Sneyers, the CFC's chief operations officer.

The World Bank has warned the doubling of prices for wheat and corn over the past few years could mean another 100 million people may face hunger or starvation. In the midst of this crisis, the focus of international donors has finally shifted to boosting agriculture, a sector that has been neglected for decades, Sneyers said.

Ideally, poor nations will focus both on growing their own food to reduce the threat of hunger, as well as tapping into international markets to get much-needed export revenues from agriculture, he said.

"Farmers need to sell something with value addition to earn money," said Sneyers. "Cassava is a food crop but you can also use it to make cassava chips, animal pellets or ethanol."

Producers in Tanzania agree they are being denied higher profits by selling unprocessed commodities.

Cashew farmers want to export roasted nuts, not just the raw variety, and higher-value products like butters and chutneys, said Peter Masawe coordinator for the Regional Cashew Improvement Network for Eastern and Southern Africa based in Tanzania’s southern city of Mtwara.

"What our industry needs now is to concentrate on the value chain. If we don't process there is no way the cashew industry will ever change here," he said.

The story is the same for Tanzania’s cotton growers, says Elizabeth Kimambo, who helps run the Common Fund for Commodities’ Dar es Salaam, Tanzania-based office.

"Most farmers want their own ginnery to sell the end product for better prices and to process other things like cottonseed oil," she said.

The commodity boom is a golden opportunity for farmers, especially of cash crops such as coffee and tobacco, to boost production and improve their livelihoods, said Caleb Dengu, a project manager with the Fund.

"What we need is, for example, coffee farmers to continue to focus on their crop and not try and shift to food crops. Some will be tempted because of the global food shortage," he said "They should concentrate on making money through coffee and then they can still be able afford to buy food."


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