{"id":23170,"date":"2017-11-15T00:13:45","date_gmt":"2017-11-15T05:13:45","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/when-climate-change-turns-fruit-processors-into-bankers-the-case-of-malis-mango-sector\/"},"modified":"2017-12-01T17:39:11","modified_gmt":"2017-12-01T22:39:11","slug":"cediam-a-fruit-processor-sees-its-future-in-banking","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/cediam-a-fruit-processor-sees-its-future-in-banking\/","title":{"rendered":"CEDIAM: a fruit processor sees its future in banking"},"content":{"rendered":"

In Mali, growing mango demand is incentivizing smallholder farmers to increase their yields \u00a0<\/strong><\/p>\n

Between 2008 and 2015, Mali\u2019s mango exports grew at an annual rate of 21%[1]<\/a> driven by increased mango consumption in Europe, where The Netherlands serve as the main import market and trading hub[2]<\/a>[3]<\/a>. At the same time, government incentives for export-oriented industrial investments[4]<\/a> have added more than 11,000 tons[5]<\/a> \u2013 equivalent to 28% of mango exports in 2015 \u2013 to domestic mango demand over the past five years.<\/p>\n

While demand continues to grow, mango yields in Mali are low[6]<\/a> compared to other producing countries. As an example, average yields in Mali are about 18% of the yield of the lowest-yielding mango cultivars produced in the United States[7]<\/a>. This is due to Malian farmers\u2019 limited access to best-in-class agricultural techniques and to bank financing. To seize current growth opportunities, mango farmers are faced with the challenge of increasing yields through high-impact shifts in their cultivation systems.<\/p>\n

Irrigation is a compelling yield improvement solution<\/strong><\/p>\n

As demonstrated by Project Unnati, an ongoing mango yield improvement initiative launched by Coca Cola and Jain Irrigation in India, irrigating mango orchards that previously depended on rainfall can result in significant yield improvements in the short term[8]<\/a>. Bringing irrigation technology to smallholder-managed orchards in Mali is thus a critical component of an effective yield improvement strategy. The need for mango farmers to adopt irrigation technology is reaffirmed by increased variations in the quantity and timing of rainfall due to climate change as Indian producers have experienced in the recent past[9]<\/a>.<\/p>\n

Climate change will limit irrigation technology options to the most water-efficient ones <\/strong><\/p>\n

Given its low cost and simplicity to implement, basin flooding \u2013 which consists in digging a basin around a mango tree and flooding it through a channel \u2013 is the irrigation method that appeals to smallholder farmers the most. However, due to climate change Malian populations, including those in mango-producing regions, are living in increasingly water-constrained environments in which there is a constant trade-off to be made between using water for human, livestock, and farming purposes. As such, mango farmers have a strong incentive to implement water-efficient irrigation solutions that will preserve social peace in their communities and make their activity sustainable in the long run.<\/p>\n

In that context drip irrigation, which uses up to 80% less water[10]<\/a> than basin flooding, stands to gain farmers\u2019 and public sector preference despite its higher upfront capital requirement that smallholder farmers will be unable to self-finance.<\/p>\n

Leading fruit offtakers such as CEDIAM may be the best positioned to finance drip irrigation infrastructure<\/strong><\/p>\n

Mali\u2019s banking penetration rate of 14.7% as of 2015[11]<\/a> indicates the limited availability of banking services in low income rural communities and reduces smallholder farmers\u2019 chances of qualifying for bank financing to support orchard improvement initiatives. Despite their growing availability, the high cost and short maturity of microfinance offerings is ill-suited for the financing of capital projects.<\/p>\n

While the solution is unlikely to come from traditional commercial banks and microfinance institutions, smallholder farmers could leverage their existing relationships with agro-industrial companies such as CEDIAM to fund yield improvement initiatives. Founded in 2012 and based in the south of Mali, CEDIAM produces and exports mango pulp and concentrate to Europe. In an increasingly competitive local mango market on the demand side, CEDIAM stands to directly benefit from the yield improvements achieved by wholesale farmers through a reduction in raw material price tensions and supply risk. There is thus an argument for CEDIAM and other fruit processing companies with strong balance sheets to fund smallholders\u2019 irrigation infrastructure as Coca Cola is doing with the Unnati project.<\/p>\n

While farm-level yields are problematic, fruit processors also experience fruit losses on purchases from farmers due to gaps in the cold chain between the farm and the plant. In that context, there is also an argument for CEDIAM to first focus on reducing fruit losses by investing in cold chain improvements since increased farm-level sourcing will also mean higher fruit losses in the current configuration. Assuming that CEDIAM considers farmers’ creditworthy and decides to pursue both capital projects, the author welcomes readers’ perspective on how the company should prioritize the investment decisions in order to balance short term supply security and financial goals with long term partnership building with suppliers.\u00a0 (707 words)<\/p>\n

 <\/p>\n

[1]<\/a> http:\/\/www.worldbank.org\/en\/news\/feature\/2016\/11\/28\/to-increase-exports-of-malis-mangoes-make-farmers-more-productive<\/a>, \u00b6 16, Line 4<\/p>\n

[2]<\/a> https:\/\/ www.intracen.org%2FuploadedFiles%2Fintracenorg%2FContent%2FAbout_ITC%2FWhere_are_we_working%2FMulti-country_programmes%2FPact_II%2FEtude%2520national%2520mangue%2520-%2520Mali.pdf&usg=AOvVaw3fAJy06vdWqPHBLqj5jLNs<\/a>, Page 9, Table 1, Line 3<\/p>\n

[3]<\/a> http:\/\/www.freshplaza.com\/article\/121462\/holland-is-centre-of-eu-mango-trade<\/a>, \u00b6 3<\/p>\n

[4]<\/a> https:\/\/ www.droit-afrique.com%2Fupload%2Fdoc%2Fmali%2FMali-Code-2012-investissements.pdf&usg=AOvVaw2NyIHzx-1kUN445MFm-NCt<\/a>, Page 3, Article 5, \u00b6 4<\/p>\n

[5]<\/a> http:\/\/www.worldbank.org\/en\/news\/feature\/2016\/11\/28\/to-increase-exports-of-malis-mangoes-make-farmers-more-productive<\/a>, \u00b6 3, Line 2<\/p>\n

[6]<\/a> http:\/\/www.maliweb.net\/economie\/agriculture\/pcda-remise-de-kits-aux-professionnels-filieres-2442132.html<\/a>, \u00b6 5, Line 10<\/p>\n

[7]<\/a> https:\/\/hort.purdue.edu\/newcrop\/morton\/mango_ars.html#Yield<\/a><\/p>\n

[8]<\/a> http:\/\/www.coca-colacompany.com\/stories\/how-mango-farmers-in-india-are-doubling-production<\/a><\/p>\n

[9]<\/a> http:\/\/www.thehindu.com\/news\/national\/kerala\/Climate-change-hits-mango-production\/article15606932.ece<\/a><\/p>\n

[10]<\/a> https:\/\/www.researchgate.net\/publication\/275272978_MANGO_PRODUCTION_AND_FRUIT_QUALITY_UNDER_PROPERLY_MANAGED_DRIP_IRRIGATION_SYSTEM<\/a>, \u00b6 5, Line 25<\/p>\n

[11]<\/a> https:\/\/www.bceao.int%2FIMG%2Fpdf%2Fnote_d_information_-_4e_trimestre_2015.pdf&usg=AOvVaw2a5JjPbNdRvuJTfSKzRgQY<\/a>, Page 16, \u00b6 2<\/p>\n","protected":false},"excerpt":{"rendered":"

This article provides an overview of how climate change may frame smallholder mango farmers\u2019 approach to irrigation technology selection in Mali and argues that leading mango off-takers such as CEDIAM, a privately-held fruit processing company, have an incentive to provide irrigation infrastructure financing to smallholder farmers in a context of limited farmer access to bank financing and increasing off taker competition for farmers\u2019 production. However, off takers are likely benchmark the expected yield improvements from irrigation against the benefits of investing in their own cold chains to reduce fruit losses across the supply chain. <\/p>\n","protected":false},"author":9959,"featured_media":23292,"comment_status":"open","ping_status":"closed","template":"","categories":[1218],"class_list":["post-23170","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-climate-change","hck-taxonomy-organization-cediam","hck-taxonomy-industry-agriculture-and-agribusiness","hck-taxonomy-country-mali"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nCEDIAM: a fruit processor sees its future in banking - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/cediam-a-fruit-processor-sees-its-future-in-banking\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"CEDIAM: a fruit processor sees its future in banking - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"This article provides an overview of how climate change may frame smallholder mango farmers\u2019 approach to irrigation technology selection in Mali and argues that leading mango off-takers such as CEDIAM, a privately-held fruit processing company, have an incentive to provide irrigation infrastructure financing to smallholder farmers in a context of limited farmer access to bank financing and increasing off taker competition for farmers\u2019 production. 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