Interview with Eduardo Tugendhat on sustainable farming solutions
Jason Howell of Just Means discusses achieving sustainable farming solutions by building supply chains in developing markets with Palladium's Director of Thought Leadership.
Palladium is improving farming and attempting to alleviate poverty in developing markets by building sustainable supply chains from the producer to the consumer. In a recently published blog, “The Paradox of the Starving Farmer,” Palladium highlights the fact that approximately 75% of the poorest and most undernourished people in the world live in rural areas, trying to survive on tiny farms or as landless laborers. The report also asked the question, “How can agriculture be sustainable if the farmers can barely survive”? Palladium, a global leader in the design, development, and delivery of Positive Impact strategies and solution implementation, illustrates their approach to this paradox by understanding that the solution must provide a pathway out of poverty for the farmers, only achievable if farm families are assured of an income level that attracts young entrepreneurs to remain or return to farming, meets the nutritional, educational and health needs of their family, and applies environmentally responsible practices where agriculture can be considered sustainable. A key challenge facing the developing farming industry is how to create enough value within the system that will connect farmers to markets, technology, and finance, enabling producers and the entire system to be economically, socially and environmentally sustainable. By re-aligning and building key components of the sustainable farming supply chain (incentive investment in productivity, post-harvest handling and traceability), additional quality, output, and income increases can be realized.
[Jason Howell] spoke with Eduardo Tugendhat, a Senior Executive with Palladium, co-founder and CEO of CARANA Corporation (now part of Palladium), and a recognized expert in the areas of inclusive supply chain solutions and public-private alliances about “The Paradox of the Starving Farmer”, farming challenges in developing countries, Palladium’s role in providing supply-chain solutions, and the future of farming.
Farming- Current State and Challenges
"Farming has to be built and treated as a complete business from producer to distributor. Currently, Palladium is working with micro-farmers in developing economies; people who are impoverished, barely surviving, and living off the land because they have no choice. The challenge we are working with is how to revamp the whole supply chain, as there are spectacular inefficiencies from farmer to end-user. How we can move from a broken/inefficient model to something fairly modern—that is the big question and process. Structure and organizational models are needed, similar to putting the pieces of a puzzle together. Building the agricultural industry can’t be done at the individual farm level—it’s too dispersed and small, as many are farming only an acre or two. We must be able to start with end buyers (food companies) and work backwards. Contracts from the end buyers filter all the way back to the farmer as financing and technology will then fall into place.
Technology currently exists: how do we use it? We are working with micro-farmers with no collateral—having buyers with contracts in place provides a guaranteed market for crops and provides an organized framework for financing of projects as, in order for financing to occur, lenders need assurances of a return on investment and a demonstrated ability for loans being paid off in the future. Building a structure and improving the process is a good business proposition for all members of the supply chain (farmers, ag tech, storage facilities, buyers).
Ensuring that agricultural products are truly sustainable is also a challenge. Many food companies want sustainable sourcing but really don’t know what they mean by sustainable. For instance, cocoa is produced by micro-farmers in developing economies and consumers will pay extra for certified products (organic, local sourcing). While producers promise sustainable sourcing and the final product is that, child labor is a problem in the industry. Hence, only part of the process is truly sustainable. That doesn’t mean the whole company or product is."
Palladium’s Role in Providing Solutions
"Palladium provides global, top to bottom solutions, and project management is our core business. Additionally, we work with corporations on strategy/consulting and also help to raise money and obtain donors for projects. One example would be Palladium’s work with cocoa farmers in Peru. Currently we have 20,000 farmers involved, and we have helped them to move from farming one hectare on average to five hectares. For financing, we partnered with the private sector and USAID. The Peruvian government helped finance the building of roads, with our involvement. This collaborative partnership has increased production and income and as an added benefit, the growing of cocoa has supplanted the growing of coca, the plant used to produce cocaine.
When undertaking a project, Palladium seeks full transparency in the supply chain and develops an understanding of the whole history of product. Palladium structures an eco-system of long term buyers guaranteeing purchase, investment in agricultural technology across the chain, and works with the post-harvest process of aggregating—all with local people. The individual farmers we focus on are those who want to farm and build as a sustaining business, not just to survive. We use local people on the ground to work with them, help the farmers establish relationships with end buyers, and potentially increase acreage through finding unused land or purchasing additional farmland. We are also heavily involved in building relationships with ag tech companies who previously ignored small farms due to scale. As a result, the ag tech industry is starting to notice and viewing sustainable farming in developing economies as an opportunity.
Once there is proof of concept we are able secure financing to increase scale. The end result is an increase in yields (they can double or triple), risk reduction (improving farming methods such as using drip irrigation to eliminate the uncertainty of weather), and a potential for increased incomes and sustainability for impoverished farmers hoping to better their future."
Future of Farming in Developing Economies
"Currently, there isn’t a concept of a family farming business similar to what we have in the United States as producers aren’t encouraging their children to enter into the industry due to extremely low income levels. We are starting to see the next generation go to the cities for work and come back to the rural areas with capital. Building sustainable farming is less about educating the farmers and more about making a transformative change in income levels. To get future generations involved in farming more revenue and higher profitability is needed. People need assurances of a brighter future.
Farmers need to be as directly connected to end suppliers as possible. Buyers need assurances on crop quality and quantity and farmers must know who they are selling to and have confidence that there will be a market for their crops. Building a sustainable supply chain addresses many of these challenges and helps to ensure future growth and income for agriculture in developing industries.
Building a sustainable agricultural industry is a complex, global issue. Palladium is continually looking at future opportunities and where/how best to allocate our resources. Local markets play a key role: does one exist that we can help improve or if not can one be created and a process built through supply chain management? Given the scope of agricultural products and a global need to improve farming in developing countries, we must focus on areas/projects where there can be a transformative impact. This all must be done in phases and all facets of the supply chain must be addressed and improved."
Please click here to read more about the "Paradox of the Starving Farmer".