An optimal phased replanting approach for cocoa trees with application to Ghana

Mahrizal  ¹,  L. Lanier Nalley^2,*,  Bruce L. Dixon³ and Jennie S. Popp⁴

http://onlinelibrary.wiley.com/doi/10.1111/agec.12065/abstract

Issue

Keywords:

Q01; Q15; Q32; Cocoa; Optimal phased replacement rate; Net present value

This study solves for the optimum replacement rate (ORR) and initial replacement year (IRY) of cocoa trees (Theobroma cacao) in Ghana to maximize net present value and achieve steady state by employing a phased replanting approach. The annual ORR is 5%–7% across the three production systems studied: Low Input, Landrace Cocoa, High Input, No Shade Amazon Cocoa, and High Input, Medium Shade Cocoa. The optimal IRY ranges from year 5 to year 9 as a function of cocoa prices, fertilizer prices, labor prices, and percentage yield loss due to disease outbreaks. Deterministic results project economic gains that exceed currently practiced replacement approaches by 5.57%–14.67% across production systems with reduced, annual income volatility. The method applied in this study can be used to increase cocoa yields and stabilize income over time, and facilitate substantial quality of life improvements for many subsistence cocoa farmers in Ghana and around the world.

Merajut harapan di Sulawesi tenggara melalui budi daya karet: pengalaman berharga dari kelompok tani cahaya gemilang dan tiga roda jaya di kabupaten konawe; Southeast Asia

Oleh: Mahrizal dan Heru T. Maulana

Summary:
Artikel ini membahas semangat petani di Sulawesi Tenggara merajut harapan untuk mendapatkan masa depan yang lebih baik melalui budidaya tanaman karet.

http://outputs.worldagroforestry.org/record/6405/files/ICRAF-2014-249.pdf

Panduan Budidaya Kakao (Cokelat) untuk Petani Skala Kecil

(Mahrizal, Muhammad Syahrir, Suharman, Praktiknyo Purnomosidhi, James M. Roshetko, 2013)

Summary: 

Lembar informasi yang berisikan tentang cara membudidayakan kakao pada kebun campur,
teknik perbanyakan dan pembibitan, persiapan lahan dan penanaman, pemeliharaan dan
peremajaan tanaman, penanggulangan hama dan penyakit, penanganan panen dan pasca panen,
serta aspek pemasaran.

http://outputs.worldagroforestry.org/record/6411/files/ICRAF-2014-255.pdf

Culling the tree that feeds you: An optimal phased replanting approach for cocoa trees in Ghana

http://blog.worldagroforestry.org/index.php/2013/12/04/culling-the-tree-that-feeds-you-an-optimal-phased-replanting-approach-for-cocoa-trees-in-ghana/

BY REBECCA SELVARAJAH · DECEMBER 4, 2013

For maximum orchard productivity over time, culling and replanting of cocoa trees should start between 5 and 9 years from planting. This is according to a study by Mahrizal et al, published in ‘Agricultural Economics’, which compared  various cocoa production systems in Ghana over a period of 25 years. Producers in low-income countries often watch helplessly as their yields, and subsequently incomes, decrease as cocoa trees age. Now, however, extension personnel in have access to a simple yet powerful tool to demonstrate to producers how timely, phased replanting of their trees can maximise productivity.

Photo by Claude Adjehi/ICRAF

Ghana was the world’s largest cocoa producer in the early 1960s but experienced a significant decrease in yields in the 1990s, partially due to aging tree stocks. Low productivity results in low income for cocoa farming households in Ghana, and aging tree stocks are such a serious problem that the government is subsidizing the planting of new trees to increase national production.

Retaining cocoa trees beyond their economically productive life is considered to be one of the largest contributors to diminishing cocoa yields. Most cocoa trees in many parts of West Africa are abandoned when they get old, and subsequently not replanted or replaced. Unlike most conventional annual crops, cocoa producers have to weigh the benefits and costs of replacing assets whose productivity is plateauing or diminishing over time. Cocoa trees can yield fruit for up to 50 years but peak at a much earlier age, so culling and replanting are necessary to maintain maximum orchard profitability over time. Most impoverished cocoa producers, however, find it difficult to forgo immediate income to enhance long-run revenue potential.

Various replanting models have been applied in cocoa production: complete replanting (the removal all cocoa and shade trees), partial replanting (the removal all poor yielding trees over several years) and phased replanting. There is a void in literature on the optimal phased replanting of cocoa, and this study addresses that by examining the costs and returns of current Ghanaian production practices with that of phased replanting.

Data on yield, cocoa price, production costs, inflation, and discount rates for the three most prevalent productions systems in Ghana and West Africa—Low Input, Landrace Cocoa (LILC), High Input, No Shade Amazon Cocoa (HINSC), and High Input, Medium Shade Cocoa (HIMSC)—were compared over a 25-year period. It was found that the Optimal Replacement Rate (ORR) for all scenarios for the three production systems ranges from 5% to 7%, whereas the optimal Initial Replacement Year (IRY) varies from years 5–9.

Over 78% of Ghanaians live on less than $2 per day (USD) and the majority of the poor in Ghana are small-scale, semi-subsistence farmers. This study shows that substantial improvements in yield and income can be achieved by using the optimal replacement method, regardless of production system used. For instance, estimated income increases 14.67% per hectare per year when an optimal replacement method is adopted for the HIMSC system. There is the added advantage of decreased yield variability and, subsequently, decreased income variability. This benefits both producers and consumers by reducing price instability; making steady income streams possible for cocoa farmers; and encouraging producers to increase investments in new technologies that could, in turn, increase overall productivity.

These findings can be used to increase cocoa yields and stabilize income over time, and facilitate a substantial improvement in quality of life for many subsistence cocoa farmers in Ghana and around the world. By illustrating the benefits of steady yields and revenue generation, the study has valuable lessons for producers who are typically hesitant to cull productive assets.

Read the full paper.

Mahrizal; Nalley, L L; Dixon, B L; Popp, J. 2013. An optimal phased replanting approach for cocoa trees with application to Ghana. Agricultural Economics 45 p1–12. [2013231]

Smallholder production systems and markets; boosting the productivity and sustainability of forestry and agroforestry; and increasing incomes in forested areas are all key focuses of the CGIAR Collaborative Research Programme on Trees, Forests and Agroforestry of which the World Agroforestry Centre is a key partner.

MS Graduate Mahrizal Working for World Agroforestry Centre in Indonesia

http://agribus.uark.edu/8077.php

Mahrizal, who received his M. S. in agricultural economics from the Agricultural Economics & Agribusiness Department in 2011, is currently working for World Agroforestry Centre (ICRAF) as a provincial coordinator in Southeast Sulawesi, Indonesia. Mahrizal manages and implements the AgFor Project (Agroforestry and Forestry in Sulawesi: Linking knowledge with action) – a 5 year project funded by Foreign Affair, Trade and Development (FATD) formerly known as CIDA (Canadian International Development Agency). The main goal of the project is to increase equitable and sustainable forestry and agroforestry-based incomes among the poor in Sulawesi.

Aside from managing and monitoring all project activities, Mahrizal also designs and implements research, development and improvement of agroforestry, forestry and nursery systems. He also serves as a technical resource person during training activities and farmers’ group visits, and supervises the organization and strengthening of farmers’ groups and community organizations. Mahrizal works closely with more than 1,500 farmers and stakeholders at the field level.

His career path is closely connected to the U of A. “The AgEcon department at UofA has helped me to achieve my goal and pursue my career in the international research and development organization. I was taught, mentored, and inspired by wonderful professors at UofA, especially by Dr. Lanier Nalley, who then became my thesis adviser and role model.  His lecture in Agriculture and Rural Development class has inspired me to work closely with farmers and engage with livelihood improvement programs for the unfortunate people,” said Mahrizal.

Cacao Agroforestry System (CAS) improving productivity and profitability of smallholder cacao in Sulawesi

Cacao Agroforestry System (CAS) improving productivity and profitability of smallholder cacao in Sulawesi

wca2014-1645Janudianto Janudianto 1,*James M. Roshetko 1Mahrizal Mahrizal 1 1Trees, Agroforestry Management and Markets Unit (TAMMU) of ICRAF Southeast Asia, World Agroforestry Centre (ICRAF), BOGOR, Indonesia

Indonesia is the third largest producer of cacao in the world after Côte d’Ivoire and Ghana. Cacao production began in Sulawesi in the 1980s. It is now a major crop on the island, covering over 950 thousand ha, equaling 59% of Indonesia’s cacao growing area. By 2010 Sulawesi accounted for 67% of Indonesia cacao production.  As in other countries, smallholder production is the norm in Indonesia.  Approximately 2.2 million smallholder farmers cultivate 1.5 million ha of cacao, supplying 92% of the national production.  A study was conducted in Sulawesi to understand smallholder cacao systems and the importance of cacao to smallholder livelihoods.  The study identified the range of productivity, agro-biodiversity and economic profitability associated with smallholder systems.  A typology of four smallholder cacao systems was identified: monocultures, cacao integrated with shade trees, cacao integrated with fruit and timber trees, and homegardens.  Cacao is the dominant species in all systems, except homegardens where it is a minor component.  In South Sulawesi and Southeast Sulawesi farmers earn IDR 5.0 million (14% of total household income) and IDR 14.5 million (52% of total household income), respectively.  The productivity and profitability of smallholder cacao systems has been decreasing over the last 10 years. Yields have plummeted from 1000-1500 kg/ha to 500-700 kg/ha.  Discouraged, many farmers want to switch to other commodities, which could have devastating effect on the cacao industry. Key problems with smallholder production are the high incidence of pests and disease, limited access to quality planting material, and the low level farm management.   The paper provides analysis and recommendations based on the results of a scoping survey, garden inventory, and group discussion with farmers regarding how to improve the productivity and profitability of smallholder cacao livelihood systems, while maintaining sustainable environmental management. http://wca2014.org/abstract/cacao-agroforestry-system-cas-improving-productivity-and-profitability-of-smallholder-cacao-in-sulawesi/ 
http://www.slideshare.net/agroforestry/session-31-cacao-agroforestry-system-sulawesi-janudianto 

Necessary Price Premiums to Incentivize Ghanaian Organic Cocoa Production: A Phased, Orchard Management Approach

1. Mahrizal1, 
2. L. Lanier Nalley2,4, 
3. Bruce L. Dixon3 and 
4. Jennie Popp3
5. http://hortsci.ashspublications.org/content/47/11/1617.full

+Author Affiliations

1. Department of Agricultural Economics and Agribusiness, University of Arkansas, Fayetteville, 217 Agriculture Building, Fayetteville, AR 72702

Next Section

Abstract

Price premiums necessary to incentivize switching from conventional (inorganic) to organic cocoa (Theobroma cacao) production in Ghana are identified. Optimal, phased-replacement models for orchard management are used to determine when switching from conventional to organic is profitable. The decision is a function of orchard growth stage, price premiums, and yield loss. Results indicate that the net present value (NPV) of organic production under current market conditions is 21% lower than the NPV of conventional production. Analysis shows that, generally, the minimum price premium to convert to organic is just slightly lower, in percentage terms, than the yield reduction caused by growing organically.

What price organic cocoa in Ghana?

BY REBECCA SELVARAJAH · APRIL 22, 2013
http://blog.worldagroforestry.org/index.php/2013/04/22/what-price-organic-cocoa/

A price premium between 28% and 30% would have to be offered to entice cocoa producers in Ghana to grow cocoa organically. This is according to a study by Mahrizal et al published in Horticultural Science. Credit to purchase inorganic inputs is becoming more accessible to Ghanaian cocoa producers, who now have the choice to produce either organically or conventionally. That makes the results of this study more pertinent to their decision making process.

Mounting concerns about food safety, health, environmental and social welfare issues have increased demand for organic cocoa. Worldwide sales of organic chocolate increased to $304 million in 2005 from $171 million in 2002. However, the total market share of organic cocoa accounted for less than 0.5% of total cocoa production in the same period, possibly because conventional cocoa yields more and is more profitable than organic cocoa.

When a conventional producer converts to organic production, there is an immediate yield loss. Organic cocoa production has an estimated 30% lower yield than inorganic production. Additionally, a producer must wait three years for the organic certification that will allow him or her to be compensated with an organic price premium. A sufficient and stable organic price premium is, therefore, needed to encourage producers to continue growing cocoa organically. Issues of profitability, productivity and sustainability of forestry and agroforestry, are a key focus of the CGIAR’s Collaborative Research Project 6 on Trees, Forests and Agroforestry—of which the World Agroforestry Centre is a key partner.

Key questions producers ask themselves when considering a switch from conventional to organic production are: is switching from conventional to organic profitable? If so, when to switch given that the productivity of cocoa trees plateaus and then diminishes over time? The decision of when to switch is a function of orchard growth stage, price premiums and yield loss. This study provides a tool for producers to determine ‘if’ and ‘when’ it would be optimal to produce organic cocoa; and an estimated organic premium that bulk, organic cocoa purchasers must pay to incentivize cocoa producers to continually produce organic cocoa.

The study indicates that as yields decline, the profitability of converting from conventional to organic cocoa declines. Second, as price premiums rise, conversion becomes more profitable and the incentive to switch to organic production increases. Given a yield loss and price premium, this study investigates whether the age of the orchard influences when a conventional producer can profitably switch to organic production, and concludes that tree age is not a major determinant of when to switch.

The study also estimates the yield loss and premium price trade-off for organic cocoa, revealing that a price premium between 28% and 30% should be offered to entice cocoa producers to grow cocoa organically. The current premium price of organic cocoa is far below the estimated premium needed to entice producers to switch to organic production. Information on yield loss and price premium trade-off is very important to cocoa producers to determine whether organic production is sufficiently profitable to be adopted. For manufacturers, the information indicates the price premium necessary to secure a reliable supply of organic cocoa.

The obvious challenge for producers to produce conventionally is to obtain credit up front to purchase inorganic inputs. Given the advent of organizations like the Cocoa Abrabopa Association (CAA) established in 1998 in Ghana, credit is becoming more accessible to producers. The CAA works with input suppliers such as Ghana COCOBOD and Wienco Ghana Ltd. to supply agricultural inputs to producers. They extend credit in the form of inputs such as fertilizer, insecticide, and fungicide. As a result, producers now have the choice to produce either organically or conventionally making the results from this study more pertinent to their decision making process.