Comprising millions of smallholder farmers, the global cashew supply chain is incredibly complex and faces various sustainability challenges. As a cash crop, cashews are highly important to farmers. They also provide further opportunities to local processing and to keep the potential added value in the country.
Companies in the nuts sector are recognising that improving the cashew supply chain can have positive effects on the livelihood of farmers, processers and rural communities, and are becoming more aware of their responsibility to improve the production supply chain and source more locally. Many do this through the Sustainable Nut Initiative (SNI) and as individual corporates. We talked to Olam, a leading player in the global cashew sector and a participant of the SNI, about the importance of shortening the supply chain and buying directly from farmers.
The complex cashew supply chain
In Africa, millions of smallholder cashew farmers are selling Raw Cashew Nuts (RCN) via a complex network of local traders who often take advantage of the farmers’ lack of access to reliable information such as farmgate prices and understanding of market dynamics. As such, farmers receiving low prices for their crops and have little incentive to reinvest in their farms.
“If you look at the cashew supply chain here in Côte d’Ivoire years ago, no one was able to tell where the cashew was coming from and what the issues were in the supply chain,”Mallikarjuna Kumaraswamy, Head of Operational Excellence for Edible Nuts explains.
“There is now increasing consumer demand for sustainability and traceability. In particular, the demand for cashews has grown in line with the rising consumption of vegan products and healthy on-the-go concepts. We see it as our responsibility to bring awareness to our customers about where these products are coming from,” he added.
The importance of local processing
Despite being one of the largest producers of cashews globally, most of Africa’s cashews are exported raw to countries such as Vietnam and India, which are ahead in terms of mechanised processing capabilities. It is often cheaper to export RCN to these countries for processing than to do so in Africa, resulting in the likes of Côte d’Ivoire losing out on the potential added value.
Mallikarjuna: “We need to invest in our processing facilities to keep additional value in the country. A different way of organising the supply chain is required to facilitate the supply of RCN to the processing plants and mitigate the sustainability issues in the supply chain along the way”.
“At Olam, we are on a journey to establish a truly traceable cashew supply chain and have invested more into local processing. This included opening a new processing plant in Bouaké where we process both organic and standard cashews. The modern facility has a capacity of 35,000 Mt of RCN. Although modern machinery was installed to mechanise operations, the processing plant has created more than 2,000 direct jobs and catalysed more employment opportunities indirectly for the city.”
Direct sourcing from local farmers
In order to secure a consistent supply of cashews to its Bouaké plant while positively impacting rural communities, Olam wanted to source more directly from local farmers. Initially, this seemed almost impossible as the cashew supply chain in the country was dominated by intermediaries and many cashew farmers were abandoning their farms due to low prices and market volatility.
“Direct sourcing sounds straightforward but is highly complex. A local buying structure needed to be set up in which roles and responsibilities had to be clearly defined,” said Mallikarjuna. “Establishing this relationship with farmers was not done overnight. Our staff had gone to the various villages surrounding Bouaké to inform the farmers about our plans to buy directly from them and to support them in the creation of farmer groups. As many had long-term relationships with the middlemen and obtained certain services such as access to credit, it took time and effort to convince the farmers to join.
“We invited farmers to the Bouaké processing plant to show them that the company was serious. It was only when the farmers started to interact with Olam staff year-round, including outside of the procurement season, that they became enthusiastic to join”.
The farmers who decided to join this direct sourcing relationship became part of the Sustainable Cashew Growers Programme (SCGP). The main idea behind this programme is to allow farmers to be confident and enthusiastic in committing to working directly with Olam in the mid to long term and seek to continually improve their farming practices to be more sustainable.
One important outcome of having a direct sourcing relationship with farmers and their communities has been the opportunity to discuss difficult but important topics such as eliminating child labor and burning practices. While these issues are extremely important for downstream market players and consumers, they have different meanings and implications in the local context. It is only when there is trust between a company and the community that these topics can be addressed, and long-term solutions can be found and implemented together.
Farmers under SCGP receive year-round support from Olam’s field staff including to set up and strengthen farmer groups as well as training on good agricultural practices to improve the harvest and quality of their nuts. Farmers have also learned how to take care of trees by pruning and using compost, store cashews in jute bags instead of plastic, and how to build structures to manage humidity and effectively dry cashews. Through “train-the-trainer” modules and the continued presence of Olam’s field staff, the farmers have raised their production levels and become self-aware agents in the supply chain.
“We noticed that when we improve farmer yields, we improve farmer livelihoods, and if we improve the livelihoods of farmers then they are able to reinvest in their farm. It becomes a virtuous cycle. It is also important to show farmers that they can improve the quality of their products and that they will receive a fair price as a result,” said Mallikarjuna.
Sustainable Nut Initative
The Sustainable Nut Initiative (SNI) is a pre-competitive, collaboration platform for the nut sector. SNI brings all actors of the international nut supply chain together. The nut sector is characterized by complex supply chains with continuous changing market dynamics and limited transparency. Participants of SNI are collaborating to drive positive change towards sustainable production and transparency along the entire chain. A common agenda has been developed, addressing current and future sustainability issues at sector level, taking into account the sustainability challenges of the different nut categories. SNI develops strategies and tools to address industry bottlenecks, share and act on lessons learned, bundle resources and scale up impact.