COMACO market interventions: addressing poverty and environmental risks

a) Business structure, commodity selection and product development

COMACO participants trained in conservation farming and/or alternative livelihoods are organized into producer groups around a local depot. Producer group status is maintained through adherence to by-laws that require members to abide by community land use plans and to comply with production practices that promote wildlife and watershed conservation. Transactions occur at the local depot, facilitating the return of money to families in the villages (as opposed to having payment centers in larger cities). In addition, moving transactions closer to families allows for participants to spend more time at home, affording opportunities for improving their household production and general well-being. Premiums paid to participants who are certified conservation farmers are made possible by the lowered transaction costs maintained by efficient collection, handling and bulking of commodities and by increased profit margins from value-added products generated at the CTCs (e.g. selling peanut butter instead of peanuts). Profits are therefore directed back to the community through incentives that are linked to sound natural resource management. Bulk storage facilities, radio communication between different facilities, and staff trained to use initiative to seek new market opportunities and coordinate transactions cost-effectively all improve profitability. It should be noted that the CTCs select commodities for product development only if there is strong consumer appeal and if the commercial success of such products contributes to improvements in:

local food security and household income,

soil, watershed or wildlife habitat, and

reduction of threats to wildlife and other natural resources.

COMACO initiated its market development at the first CTC (Lundazi) with rice, groundnuts, honey and poultry. Briefly, the environmental reasons for each were as follows:

• Rain-fed paddy rice: Unlike cotton, which requires pesticides, has a relatively high rate of soil nutrient depletion and imparts a high labour cost, rice farming allows food crop production with much less labour. Furthermore, once harvested, rice fields can revert back to wildlife habitat.
• Groundnuts: Provides nitrogen fixation for soil improvement and is therefore ideal for crop rotation. Provides farmers with income and a source of food while simultaneously improving soil nutrients for other crops.
• Honey: Produced only with bar hives or log hives, which are made from trees already dead. Reduces need to harvest wild honey, which due to local practice, often results in tree loss and uncontrolled bush fires. Provides good economic incentives to manage forest resources.
• Poultry: Increased market value provides incentives to improve husbandry, increase production and have sufficient surplus to meet both home consumption needs and provide a coping mechanism for periods of low rainfall, rather than relying on game meat.

Table 1 shows producer price trends for the commodities sold at the Lundazi CTC as COMACO has intensified efforts to improve product quality and market demand. These efforts include more automated and high-volume processing, attractive packaging (see peanut butter label sample below, Figure 4), uniform logo branding for all its products, and more aggressive product distribution to raise consumer interest in COMACO.

Results from these efforts reflect substantial increases in producer prices from 2002 (pre-COMACO) to 2005 that vary from 58% for groundnuts to 108% for honey. A rise in the value of the Zambian kwacha relative to the US dollar has reduced some prices slightly from 2005 to 2006, but commodity unit prices have continued to rise against the dollar, translating into improved real profits in terms of ?buying power.?

b) COMACO market results

Market results for 2006 are current up to September 2006 and a summary of total purchases from farmers for 2004 through 2006 are K172,228,116, K257,988,360, and K429,768,268, respectively. Summary of profit/loss projections for the 2006-2007 fiscal year based on current sales and inventories for 2006 are given in Table 2 and contrast with estimated profit/loss statements from 2004 and 2005. While there are assumptions that current 2006 inventories will be sold by April 2007, the projections are reasonable and suggest a likelihood that in the third year of operations, the Lundazi trading centre will likely make a modest net profit of about $55,000. Moreover, it illustrates the significant amount of money, approximately $110,000, that one COMACO trading center can return to low income farmers as part of the trade benefits that also help drive improved land management. Based on producer price increases attributed to COMACO, this represents an added cash flow into the producer communities of about $77,000.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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