PHOENIX FUND FINAL REPORT

Transcription

1 PHOENIX FUND FINAL REPORT Reporting Period: Entire Project (May 2008-May 2009) Plus Activities for April and May 2009 Title of Project: Spicing Up the Deal - Ginger Location of Project: Nepal, Eastern Region, Ilam and Paanchthar Districts FIELD/COUNTRY CONTACT Communication, Monitoring and Evaluation Manager: Jarrod Fath jfath@np.mercycorps.org HEADQUARTERS CONTACT PROJECT SUMMARY Start Date May 1 st, 2008 Program Officer: Charlotte Block End Date May 31 st, 2009 cblock@mercycorps.org Report Date June 30 th, 2009 Country Director: Josh DeWald jdewald@np.mercycorps.org Grant Amount Additional Funding: Small Change Grant $43,000 $15,000 Farmer Planting Ginger Ginger After Harvest Mercy Corps - Nepal

2 1. PROJECT OVERVIEW The Spicing Up the Deal-Ginger project sought to raise the incomes of poor, marginalized smallholder farmers in the Eastern hills of Nepal by helping farmers, collectors, processors and exporters increase their profitability by doing business in high-grade, low-fiber ginger. The project applied a model of working with multiple actors in a value chain- including farmers, collectors, traders and exporters. This process was implemented in partnership with trade associations, cooperatives, finance companies, and government agencies. The original project proposal specified two different market solutions: 1. Demonstrating the profit potential of improved production and innovative terms of trade with buyers of low-fiber ginger. 2. Improving market competitiveness by piloting improved processing, grading, and trading practices with farmers and end buyers. To facilitate the first market solution, the project team pursued several opportunities to increase the income of farmers, including better quality seeds, cultivation practices, business training, harvest techniques, storage and marketing. To facilitate improving market competitiveness, Mercy Corps worked with the Nepal Ginger Producers and Traders Association (NGPTA) to improve value chain governance. Farmers, traders and exporters were exposed to new processing technologies, but processing within the Eastern hills did not gain traction within the project period. High quality fresh ginger proved itself to be a very competitive product with high demand and a good price, providing farmers ample potential to make profit without the additional costs or efforts of processing. This report will describe activities during the last two months of the project (April and May 2009), summarize the activities throughout the entire project and their accomplishments, and report on the indicators and targets laid out in the original proposal. 2. ACTIVITIES A). Activities for the Last Two Months of the Project 1. Low-Cost Ginger Storage Ginger that had been stored in underground low-cost storage was uncovered and sold during the last quarter. The stored ginger can be sold a few months after harvest, when the price generally increases, or can be used as seed for the following planting season. The ginger was stored for four months, from December 2008 until March During that time, the stored ginger lost 4.8% of its weight from moisture loss, while the price increased 50% from 30 rupees to 45 rupees per kilo. (See below for more about Low-cost Storage). 2. Seed exchange and distribution After last years harvest, recipients of the original low-fiber seed distribution deposited the same amount that they had received into a revolving seed bank that will be managed by a local business cooperative. The cooperative and farmers groups jointly created criteria and terms for future seed distributions. In April, the seed cooperative distributed all 12,000 kg of improved seeds to around 100 farmers for the 2009 season. (See below for more about Seed Bank Formation). 3. Technical Services Many farmers were seeking technical information before planting their fields in late April and early May. The team provided information on where to find inputs such as bio-fungicides and improved seeds (for those that the seed bank did not cover). Field demonstrations were also conducted to teach land preparation, pre-treatment of seeds, and planting and mulching techniques. 4. Financial Services Ginger farmers often need to take out loans at very high interest rates during the lean season before the harvest. Another Mercy Corps project, Expanding Access to Finance, is working in the same project area to improve access of rural farmers to formal financial services. Two farmers groups were recognized by Nirdhan Utthan Bank as Self Reliant Groups, and are now able to access savings and Mercy Corps - Nepal - 1-

3 loans products. Nirdhan has set up a flexible repayment that meets the needs of the ginger farmers, who will be able to repay the loan after ginger is harvested. (See more on Linkages to Finance below). 5. End-line data collection The project team conducted an end-line survey, which included surveys with farmers, traders and exporters. This data (which is included throughout this report) allows Mercy Corps to calculate the impact of many specific interventions, and is a core part of the learning from this pilot that will allow successful intervention to be replicated in future projects. B.) Summary of Activities over the Project This project worked with 17 farmers groups, reaching a total of 206 farming households in Ilam and Panchthar districts in Eastern Nepal. 1. Seed Bank Formation Local seed stocks were of poor quality before the project started; the ginger was small, had a lot of fiber, low productivity, and was highly susceptible to disease. Central Nepal is known for growing high quality ginger, which is larger, has lower fiber, and has a higher rate of productivity. It was important to buy and distribute the seed by April, before farmers planted for the season. Using funding from a Small Change grant, the project team procured 12 metric tons of high quality ginger from Hetauda in Central Nepal. At the time of seed distribution, each beneficiary farmer signed a receipt acknowledging the amount of ginger they received and an agreement with Mercy Corps saying that they would deposit the same quantity of seed into a collective seed bank after harvest. For every kilogram of seed planted, the farmer is able to harvest and sell the one kilogram bruni, mother seed, and harvest up to five kilograms of fresh, new ginger. The farmer is able to return the original quantity of seed, save some seed for their own use in the next season, and still sell a large quantity on the local market. The presence of the seed bank will increase the amount of improved seed in the Mechi hills, not just among farmers that were beneficiaries of this project. A local business cooperative will distribute the seeds this year to new farmers, who will return the same amount that they received at the end of the year to the cooperative. This initiative was taken by the farmers themselves so that the seed banking system will continue to run independently. After witnessing the differences in production and quality this year due to higher quality low-fiber seeds, farmers in Ilam and Paanchthar are eager to change their old seed stocks. Figures from the endline survey show that the higher quality, low fiber seeds were 30% more productive than the local seeds, producing 1,220 kg per ropani 1 (see annex 1). The higher quality also received a higher price: Low fiber ginger received 6% more (an average of rupees per kg vs 28.73) for the first harvest of the bruni, and 18% more during the main harvest (35.94 vs 30.44). 2. Improved Cultivation Skills The project team worked with farmers groups to increase productivity through demonstrations on improved planting, mulching and disease management. A demonstration of improved cultivation techniques for easier harvesting and increased production was conducted while the seeds were being distributed. Demonstrated techniques included planting in ridged rows to create proper drainage and sun exposure, and to allow for harvesting with less breakage; and, mulching with locally available resources to decrease erosion in times of heavy rain and maintain soil moisture in dry, hot times. A disease awareness and management training was conducted after rhizome rot was discovered in fields adjacent to the low-fiber ginger fields. The training demonstrated to use of biological methods to manage insect and fungal threats. The training and following treatments prevented the spread of the disease into the low-fiber ginger fields and was done in time to save most of the affected plants. Both of these trainings drew the attention of non-beneficiary farmers as well, extending the reach of the trainings. 1 Ropani is a commonly used measurement of area in Nepal, and is roughly equivalent to 22m x 23m. Mercy Corps - Nepal - 2-

4 Results show that these techniques have led to a 36% increase in production (Annex 1). Before the project activities, farmers produced an average of 687 kg of ginger per ropani with local seeds. Farmers who used these techniques were able to harvest an average of 935 kg per ropani with local seeds and 1,220 kg per ropani with the low fiber seeds. The difference in productivity between the low fiber and local seeds most likely resulted from the quality of the seeds. However, the fact that both local seeds as well as low-fiber seeds saw such a drastic increase in yield demonstrates the effectiveness of the introduced agricultural techniques. 3. Business Training Business trainings were conducted to make the farmers aware of the different aspects of their business operations, while improving their capacity to assess the costs and benefits of different actions that they take. The training went into detail about the use of resources, identifying opportunities, selecting target markets, methods of distribution and the positives and negatives of competition. Farmers also completed some basic record keeping and financial training so they know more about the financial structure of ginger cultivation. Interestingly, for many farmers, this training represented the first time that they had ever fully taken account of all costs associated with ginger production, and as such represents a significant step towards improved efficiency, profitability and planning. 4. Improved Harvesting Techniques Discussions with market stakeholders identified breakage during and after harvest as a major factor in decreasing the quality of ginger. Most breakage occurs in the field or between the field and exporters. Farmers were shown harvesting techniques to reduce breakage as the ginger came out of the ground, and were also shown ways to pack and transport their ginger to reduce breakage. Due to Nepal s mountainous terrain, the ginger must be carried from the field to a local collection center on foot. Even after that collection center, the roads are often rough and the ginger must be packed carefully to reduce breakage along the route. Mercy Corps introduced stackable plastic crates that allowed farmers to pack and transport their ginger with greatly reduced breakage. Farmers were able to receive an average of 13.6 rupees more per kg for the 2008 crop versus the 2007 crop, a 76% increase. We do not have enough data to isolate how much of this price increase comes from reduced breakage and how much comes from other factors like collective marketing and fluctuation in market prices. We do know that exporters and traders who had the ginger delivered to them in crates as part of a forward contract were very happy with the size and quality of ginger that they received. 5. Low-Cost Storage A lack of storage facilities means that farmers must sell at harvest time, when more ginger is on the market and prices are low. Four demonstration low-cost storage sites were built using local materials so that farmers can store ginger for sale at a later time or to use as seed. The storage units consist of a one cubic meter hole that is lined with sand and straw, filled with ginger, covered and fitted with ventilation and protection from rain or water runoff. Stored in this way, the ginger can be kept for several months with a small reduction in weight (about 4.8%) due to minimal moisture loss. The farmers who stored their ginger for four months were able to sell their ginger for 48% more than had they sold directly after harvest. After including the costs of construction, farmers saw a 22% increase in profit (see Annex 2). Future seasons will see a minimal cost for maintenance and most of the increase in sales will be pure profit. 6. Improved Marketing Mercy Corps has facilitated discussions and trade negotiations between farmers groups and buyers. This has allowed farmers groups to negotiate with and understand the requirements of traders, which has led to higher prices and agreements on terms and condition of sale through forward contracts. The contracts provided incentives and benefits to both parties: Farmers took greater care in harvesting and transporting their crop because they knew they would receive a higher price for large, unbroken ginger, while exporters knew that they would get a large quantity of high quality, unbroken ginger delivered to them if they kept their end of the bargain. Farmers commented that they felt more secure that they were getting a fair price because they knew the price that other farmers were getting due to the increased transparency of the collective marketing process. This transparency also allowed Mercy Corps - Nepal - 3-

5 non-participating or skeptical farmers to see the benefits of improved seeds, improved production techniques and collective marketing. Before collective marketing, the farmers received a farm gate price that was 4.8 rupees below the market price in Birtamod (a major market center south of the project area). Collective marketing allowed farmers to decrease this differential, receiving an average farm-gate price that was only 2 rupees less than the Birtamod market price (see Annex 4). 7. Value Chain Governance Mercy Corps has supported revitalization of the Nepal Ginger Producers and Traders Association (NGPTA). NGPTA was formed in 2005 and has advocated for changes to export regulations in the past, but has never included farmers or acted outside of a small area. The association was formed by a group of exporters who were facing specific export related problems. After tackling those problems, the association became inactive and was not addressing other pressing issues in the ginger value chain. With Mercy Corps support, NGPTA has become more active, advocating for tax relief, reaching out to new stakeholders, and improving its internal management capacity. NGPTA actively negotiated with the district government and local identity-based groups to reduce the formal and informal taxation of ginger along key transportation routes. These discussions resulted in a 75% reduction in taxes paid while transporting ginger to market. While this tax was in place, it was farmers and that had to bear the brunt; traders still had to compete with the price of Chinese and Indian ginger and could not pass the extra tax on to the end consumer through a higher price, so had to give farmers a lower price. 8. Cross Visits to China and Palpa Eastern Nepal has a favorable climate to grow high quality ginger, but almost no value addition processing is practiced in the region. Two trips were conducted with ginger farmers and traders to increase awareness of processing technologies and promote new product development. As Chinese ginger dominates the market, a visit to Sichuan Province, China was conducted on a cost sharing basis with Nepali traders and exporters. They learned about the waxing of ginger with a food grade wax which allows the product to be stored longer and gives it a shine that is attractive to consumers. A cross-visit was also conducted to Palpa in West Nepal. Farmers in Palpa have been practicing improved production, processing and marketing of ginger for years and have been successful in increasing export because of these practices. It was hoped that these visits would occur during the second quarter of the project so they would have an impact on this years harvest. Unfortunately, they were postponed twice because of damage to the East-West highway from the disastrous Koshi river flood, and because of increased political instability and resultant strikes; for these reasons, the cross-visits occurred after the harvest had been sold. Farmers and traders realized the profit potential of the techniques witnessed during these cross-visits, however, and will hopefully begin to employ the techniques after the next harvest season. 9. Linkages to Finance In the remote hilly areas where many poor, smallholder ginger farmers live, the well known Grameen model of group lending, with regular monitoring visits and monthly repayments, will not work due to the seasonal (rather than monthly) inflows of income, and due to low population density (which precludes regular interaction between loan officers and clients). Therefore, Mercy Corps is working with Nirdhan Utthan Bank, Ltd. to extend its Self-Reliant Group (SRG) model to remote areas, and to structure loans to meet the needs of farmers who rely on annual crops such as ginger for a large part of their cash income. 3. MONITORING AND EVALUATION In addition to piloting value chain development activities, this project further refined an M&E tool to measure profit. Using the enterprise budget, a format used in business for calculating profit and loss, the project has collected data on production, amount of land cultivated, sales, prices, and costs. Using these five variables, we have been able to capture costs and isolate changes such as fluctuation in market prices or increased land cultivation. Mercy Corps - Nepal - 4-

6 The baseline survey was conducted in June 2008 and collected data for the period between October 2007 and Mar 2008, which corresponds to the time when farmers were selling the 2007 crop. The end-line survey was conducted in May 2009 and collected data for the period between Oct 2008 and Mar 2009, which corresponds to the 2008 selling season. Performance Indicators Results Household level % change in profit per unit of production. Target: 15% 60 to 231% Market level % change in earnings from low-fiber ginger sales. Target: 15% 5% # of new off-farm jobs created. Target: to 22 Social level % beneficiaries that belong to either Dalits or ethnic group. Target: 75% 73% Environmental level # of farmers adopting improved soil conservation and crop rotation techniques. Target: The 231% increase in profit per unit of production far exceeded the original target (see annex 3). As described in the activities section above, there were increases in productivity from high quality seed, better cultivation practices and decreased disease. Those increases were multiplied by the higher price farmers received through low-fiber ginger, reduced breakage and collective marketing. Farmers received an astonishing 362% increase in profit for the 61 metric tons of low- fiber harvested from 50 ropani of land. Farmers also saw a 209% increase in profit for the 300 ropani planted with local seeds. Some of that increase in profit was due to fluctuations in market prices. There was a 7 to 10 rupee per kg increase in the market price of ginger from the time when farmers sold their 2007 crop (Oct March 2008) to the time when farmers sold their 2008 crop (Oct 2008-March 2009) 2. Even after crediting the market with the maximum 10 rupee increase in price, farmers still saw a 60% increase in profit. However, this price increase should not be overly emphasized as a contributor to increased farmer profits for two reasons: 1) the October 2007 March 2008 price figures are in question, since the Federation of Nepalese Chambers of Commerce and Industry data differs considerably from Ministry of Agriculture and Cooperatives data, which in turn means that the actual price fluctuation between selling seasons may have been less than 7 10 rupees/ kg.; and, 2) without the project s interventions, farmers would not necessarily have received higher farm gate prices in the face of market price increases, since many traders would likely have increased their own profit margins without passing higher prices on to farmers. As a result of the factors described above, and because it is not possible to determine the exact contribution of price fluctuations to farmer profit levels, the project impact is listed as a range of 60% - 231%. Ginger sales at the market level increased by 5%. This reflects a 1.4% increase in sales volume and a 3.6% increase in average end sales price received by traders and exporters (see annex 5). Interestingly, while the price for exporters went up 3.6% (1.4 rupees per kg), their mark-up went down by 8.6% (-0.70 rupees/kg). Ten new full time off-farm jobs were created at the trader and exporter level. Employment numbers showed employment fluctuated seasonally by about 20 persons for the traders and exporters surveyed, with more people hired around harvest to help clean the ginger. 22 new employees were employed during the harvest peak, but only 10 can be considered full time. The original target of 60 new jobs was based on job creation from localized processing, such as slicing and drying. These activities were not emphasized because the demand for high quality fresh ginger proved to be enough to significantly increase farmer s income. 2 Data from the Ministry of Agriculture (MoA) shows different market prices for late 2007 crop when compared with data from the FNCCI-AEC market information system. Our own data also shows a large difference in 2007 between the price the farmers said they received (which matches the AEC numbers) and the prices traders said they gave (which is higher than the MoA s figures). We know there is a difference between farm-gate price and market price, but do not know at which point the MoA or AEC collected their data. In the comparison, we used the AEC data, which gave the largest variation in price. This allows for a full range, from the lowest possible increase in income from the project (high market swing) to the maximum (not controlling for price). Mercy Corps - Nepal - 5-

7 73% percent of the participating farmers are from under-privileged social groups, including 65% from indigenous groups ( Janjatis, or people of Tibeto-Burmese origin) and 8% from the Dalit (so called untouchable ) caste. 21% percent of farmers group members were women. By the end of the project, all 206 farmers were using mulching and crop rotation techniques that improve soil quality and decrease the spread of rhizome rot. 4. CHALLENGES The beginning of the project coincided with a national standstill due to the Constituent Assembly Election in April These were Nepal s the first elections in over a decade, and come after the civil war and re-establishment of the monarchy. This severely affected the procurement and transportation of the seeds, which needed to be in the area before farmers planted their fields with the local seeds available. There was also an increase in political unrest and strikes by different group throughout the project life cycle. The strikes, which are intended to draw the attention of the government to the issues faced by various pressure groups, blocked transportation completely, with threats of violence for anyone not abiding by the road closures. The project team was forced to stay wherever it was when the strikes happened. The project area was completely cut off from the rest of Nepal for about half of the project because of the Koshi river flooding that destroyed parts of the East-West highway. The Koshi flood was the worst flood to hit Nepal in 50 years, and displaced hundreds of thousands of people in Nepal and India. Fortunately, the project team and beneficiary communities were out of harm s way. The flood also destroyed much of the telecommunications and electricity infrastructure that services Eastern Nepal, limiting phone coverage and internet connectivity and power supply during the project period. The dry season during fall and winter was especially long, impacting the farming communities with whom Mercy Corps works. This led to difficulties in organizing meetings and project activities. The long dry spell has also decreased power generation in Nepal (most of Nepal s power is hydroelectric), leading to extensive scheduled power outages throughout the country (including the project area). 5. CONCLUSION Ginger has proven to be a powerful income generator for rural, smallholder farmers. With improved seeds and production techniques, farmers are able to double their productivity. On top of that, reduced breakage and higher quality ginger have allowed farmers to increase their market-share while obtaining higher farm gate prices. There was a good return on investment per beneficiary for the project, with every $1 invested resulting in farmer-level revenue increases of over $1.5; in other words, beneficiary farmers generated over $85,600 in increased revenue as a result of the $58,000 invested by Phoenix Fund and Small Change. Farmers increased the profit earned per ropani by $50 - $190, from approximately $83/ ropani to $123 $273/ ropani, depending on the type of ginger grown and the presumed influence of price fluctuations on profit. These benefits will continue and are likely to increase year after year. This project has allowed Mercy Corps to further improve on the value chain model first piloted under the Phoenix Fund supported Paanchthar Premium Cardamom Project. The combination of working at the production, marketing and commodity sub-sector levels has the power to create scalable, market based change. At the production level, improving input supply, cultivation techniques, harvesting, cleaning, and grading can increase the quantity and quality of ginger produced. At the same time, assistance with business planning and marketing techniques give farmers decision making tools and increased leverage in the market. Farmers supported under the project will be integrated into a two year Spicing up the Deal-Cardamom project that is operating in the same project areas. Mercy Corps has already mobilized an additional 16 farmers groups for a total of 403 ginger farming households. These additional farmers have already participated in the seed distribution and cultivation demonstrations conducted during this quarter, and will participate in business training and marketing with the new project. Mercy Corps - Nepal - 6-

8 Annex 1: Productivity increases Baseline- Endline- Local Endline- Lowfiber Seeds Endline Total Unit Local Seeds Seeds A. Total Area Planted Ropani B. Total Production (Bruni + Main KG 223, ,435 61, ,473 harvest) Productivity (Yield) KG/Ropani % Change in Productivity: Vs. Baseline % Change in Productivity: Local and Low-fiber Seeds Formula for % change = (Endline-Baseline) /Baseline n/a 36.10% 74.67% 42.07% n/a n/a 30.48% n/a Annex 2: Cold Storage Weight (Kg) Price (Rs) Value (Rs) Before Storage ,388 After Storage ,405 Change ,018 % Change -4.8% 50.0% 42.8% Construction Cost (870 Rs per unit) 3480 Profit 3,538 % change of original value 21.59% Annex 3: Farmer Level Profit Baseline-Endline Comparison Baseline- Endline- Deducting Endline- Unit Local Local Change in Low-fiber Seeds Seeds Price* Seeds A. Total area planted Deducting Change in Price* Endline Total Ropani B. Bruni Harvest KG 48,619 52,680 8,968 61,648 Deducting Change in Price* C. Bruni Price NRs D. Bruni Revenue (B*C) NRs 960,358 1,513, , , ,653 1,786,366 1,118,706 E. Main Harvest KG 174, ,755 52, ,825 F. Main Price NRs G. Main Revenue (E*F) NRs 3,116,771 6,841,410 4,406,696 1,871,470 1,307,304 8,712,880 5,712,745 H. Total Revenue (D+G) NRs 4,077,129 8,354,935 5,349,493 2,144,311 1,482,957 10,499,246 6,831,451 I. Cost NRs 2,062,703 2,671, ,568 3,382,218 J. Profit (H-I) NRs 2,014,426 5,683,285 2,677,843 1,433, ,389 7,117,028 3,449,233 K. Profit/ Ropani NRs/ Ropani 6,206 19,145 9,016 28,652 15,448 20,517 9,940 % Change in n/a 209% 45% 362% 149% 231% 60% Profit per Ropani * rupees, the maximum price variation, has been deducted from the price to take account of market fluctuations in prices and isolate the impacts that our interventions have had. The first number, which reflects the price received, is the actual increase the farmers saw. Mercy Corps - Nepal - 7-

9 Annex 4: Monthly Price of Ginger in Birtamod- East Nepal Oct Nov Dec Jan Feb Mar Six-Month Farmer Average Difference Average (Main Harvest) Data from Agro-Enterprise Center, FNCCI This data represents the maximum possible market variation of rupees per kg. See footnote two for more information. Annex 5: Exporter level baseline-endline comparison Unit 2007 Crop (Oct 07-Mar 08) 2008 Crop (Oct 08-Mar 09) Amount Increase % Increase Amount Purchased KG 2,647,717 2,684,535 36, % Avg Purchased Price NRs % Value of Purchase NRs 83,959,106 90,817,819 6,858, % Amount Sold KG 2,590,793 2,627,690 36, % Avg Selling Price NRs % Value of Sales NRS 103,320, ,523,587 5,202, % Mark-up NRS % Employees May Employees November Annex 6: Ethnic and Gender make-up of groups Brahmin /Chettri Janjati (Ethnic) Dalit Total Total DAG* Groups Coop. Female Kolbung Kanyam Godak Paanchthar TOTAL % 27% 65% 8% 73% * Disadvantaged Groups, which include ethnic minorities (Janjati) and Dalit (the so-called untouchable caste) Annex 7: Summary of Project Expenditures Budget Head Total Budget Project Expenses a. Personnel 18,828 15, b. Fringe Benefits 4,916 6,498 c. Travel 2,475 3,761 d. Program Activities 13,200 13,244 e. Supplies 1, f. Other 2,581 3,504 g. Total Direct Charges 43,000 43,000 Mercy Corps - Nepal - 8-