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Smallholder farmers are the mainstay of agricultural production in the developing world. It is estimated that over 2 billion people in the developing world depend on smallholder farms for their livelhoods.

However, smallholders face several barriers and challenges both for domestic production and production for export. Access to credit is just one of these and has long been a key barrier to production for smallholders, undermining smallholders’ abilities to invest in their farms and production, often leading to declining levels of productivity. In cocoa and coffee production – an important source of foreign exchange and income for many developing country governments and farmers –  a lack of access to credit (or at considerable expense) has meant that farmers have been unable to invest in new trees and have relied on older trees which have declining yields and, therefore, diminishing returns.

The UN has argued that access to credit and financial services is ever more important in the context of the financial crisis and declining levels of remittances, which serve as an important safety net for much of the world’s poor.

In April this year, the first ever meeting of G8 Agricultural Ministers took place. Kanayo Nwanze President of the International Fund for Agricultural Development (IFAD) said at the meeting that:

“Protecting and increasing the access of poor rural people to financial services is even more vital now…the well-being of 2 billion poor people who depend on smallholder farms in developing countries hinges on it…that is why we are encouraging ministers to return home and make sure that in all countries, rich and poor, we work together to keep agriculture at the top of their national agendas”.

IFAD argues that private sector involvement in agriculture is more important than ever, particularly with regard to the provision of services such as finance and marketing. 

For many large businesses who source from smallholders in the developing world, sustainability concerns (related in particular to climate change) are driving projects to ensure that smallholder production is economically, socially and environmentally sustainable. An example of this growing trend is the shift of two major confectionery brands – Mars and Cadbury’s – to using certification (in these cases, Rainforest Alliance and Fairtrade) as a means to bring about sustainable production. As part of these transformations, support services are also provided to the smallholders involved, a gap that developing world governments have often been unable to fill. For example Cadbury’s is implementing farmer education programmes that explore best cocoa management practices leading to improved quality cocoa and increased yields and offering enterprise loans to start up farming or small businesses. Several examples  have shown that investing in services for smallholders can be a win-win for businesses.

Let’s hope these trends continue and the recession provides ample evidence of the importance of private sector investment in agriculture.

Whilst the ‘Dairy Milk goes Fairtrade’ story has been around since early this year, it has now become a reality, despite a wider context of financial crises and a stagnation and decline in sales of some certified produce such as Organic.

On Monday the Bournville factory in the West Midlands, churned out its first line of Fairtrade Dairy Milk bars. A first in the world of ‘mainstream’ chocolate. Fairtrade has existed on the ‘fringes’ of most commodity sales (1-20% of all commodity sales in Europe and the US, Fairtrade’s biggest markets), albeit with growing sales, with most Fairtrade cocoa traditionally associated with niche or gourmet chocolate. It has now been propelled firmly into the mainstream. 

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The Fairtrade certification of Dairy Milk is expected to increase UK Fairtrade sales by 25%, after they reached £712.6m last year. Cadbury’s adoption of Fairtrade for its largest brand, Dairy Milk, is the sign of a big commitment. Cadbury’s claims that other varieties such as Fruit & Nut and Wholenut will follow once Fairtrade sources for ingredients such as hazelnuts and raisins are established (The Guardian).

And despite now being a time of financial difficulties for many companies, for Dairy Milk the transition to Fairtrade in the midst of a recession, should not be too finanically taxing. Cocoa is currently trading at $2,000 on the open market — well above the  minimum floor price of $1,750 a tonne for cocoa set by Fairtrade. This will mean no impact on purchase prices in the short term. However, the Fairtrade commitment does means the company is now locked in to paying higher prices than that on the open market if prices fall. Cadbury’s biggest driver for certification is thought to be that of securing supply and guaranteeing the sustainability of supply. This they regard as a necessary investment, rather than a cost.  

Cadbury’s may well be on to something here, as prices for cocoa rise due to shortages in supply, and as they have the added benefit of reduced reputational risk and increased shareholder value. This can only be a positive thing as the recession has severely undermined our faith in big businesses. Undoubtedly the commitment of a brand like Cadbury’s will only encourage others to follow suit and this trend is already emerging. Mars has pledged to buy 100% of its cocoa from sustainable sources by 2020,  working with the Rainforest Alliance. Nestlé, meanwhile, is working with the International and World Cocoa foundations.

Contradiction exists over just how the recession is affecting how and what Western consumers buy. Whilst one study shows that 66% of consumers are still buying ‘green’ despite the recession, others show a fall in sales of organic produce, which has led to some organic farmers in the UK leaving the Organic certification scheme and which will inevitably have negative knock-on effects for small farmers in the developing world who benefit from the low-input, high premiums, organic production and sales can entail.

YouGov surveyed 2,000 UK adults in February 2009 on behalf of the Carbon Trust Standard and found that 66% say ‘it’s important to buy from environmentally responsible companies‘. Just over a quarter argued that environmental concerns affect them even more than a year ago.  In theory this can only be good for certification schemes that are perceived as more environmentally sustainable, such as Organic and Rainforest Alliance certified, but is what people say and do, two very different things?

The latest figures from TNS, market retail analysts, as quoted by the Guardian, show that there has been a 19% fall in sales of Organic produce in the 12 week period leading up to March 2009, when compared to the previous year. Are shoppers showing caution towards spending on more expensive food products?

As consumers, we have significant power in determining the fates of people and environments outside our own.

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For many small farmers in the developing world, participation in Fairtrade certification schemes, with its associated minimum market price and social premiums act as important safety nets when commodity prices fall and recognises the added costs for producers in participating in this certification scheme. Schemes like Fairtrade will become increasingly important in the economic downturn and should not necessarily be dismissed as unnecessary ‘luxuries’.

Reports about trends in ethical consumerism since the advent of the economic crisis are contradictory, to say the least.

Market research carried out by retail analyst TNS demonstrated that after a tenfold increase in sales over the past decade (peaking at £100 million in February 2008) sales are now falling – most notably in eggs, but also in chicken, dairy, fresh fruit and vegetables. However, research by Organic Monitor shows that consumer demand for fair-trade products continues to strengthen despite the recession, and with the mainstreaming of Faitrade – such as Cadbury’s recent revelation that all Dairy Milk will become Fairtrade certified – this strong growth may be set to continue.

ethical-consumerism-report-2007Experts have warned that consumers under economic pressure tend to concentrate on self-preservation and less about others. However, the Co-operative Bank’s Ethical Consumerism Report 2008 argues that ‘despite the first tremors of the downturn being felt towards the end of last year, the overall ethical market in the UK was worth £35.5 billion in 2007, up 15 per cent from £31 billion in the previous 12 months.’ The Co-operative attributes the growth in ethical consumerism to the impact of Government green legislation and ‘choice editing’. These factors are likely to continue past growth trends.

The exact impact of the recession on ethical consumerism will not be fully evident until the recession subsides, but if fairtrade, organic and other ethically certified food can ride the economic storm, the potential devestating impacts of the recession on small farmers and labourers in the developing world, and indeed the environment, may be somewhat attenuated.