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Of Milk And Money, Part Two:
Why Are Mars, Danone And Others Investing Millions In Small Farmers?

Steve Zwick

A dozen multinational companies are putting $160 million into programs that will help smallholder farmers improve the way they manage land, and not just for good press or corporate social responsibility, although that may play a part. Ultimately, they say, they’re doing it because it makes good business sense. Here’s how.

15 February 2017 | BUNGOMA | Kenya | You see their products on supermarkets shelves around the world: M&Ms, Dove Bars, and more than a dozen other global chocolates, as well as Uncle Ben’s rice, Whiskas cat food, and Wrigley’s chewing gum.

The company is Mars, a family-owned behemoth that buys tens of thousands of tons of chocolate, milk, rice, and other commodities from small farmers around the world and turns it into $33 billion worth of snacks and food per year.

“We have about a million farmers who supply us,” says Barry Parkin, the company’s chief sustainability officer. “Most of those are smallholder farmers, and many of them are struggling.”

And when those farmers struggle, he adds, so does Mars – which is one reason his company is one of 12 multinationals investing at total of $160 million in environmental NGOs like VI Agroforestry and farmers like Prisca Mayende, whose four-acre, tree-covered farm in the foothills of Kenya’s Mount Elgon stands out like an oasis among those of her neighbors.

“Before VI came, there was nothing here like a tree,” says Mayende, who we first met in “How Agroforestry Is Reshaping The Kenyan Countryside”, the first installment of this series.

“The production of milk was very low,” she continues. “But due to the fodder that I planted – [the tree species] sesbania and calliandra – the [milk] production of the farm increased.”

And that’s where Parkin comes in.

“We can’t become a sustainable business unless we drive change in smallholder farming,” he says. “But there is a huge challenge to reach these farmers, and frankly most development projects that have been done with smallholder farmers over the years haven’t been that successful.”

So Mars teamed up with yogurt giant Danone to launch an impact investment fund called the Livelihoods Fund for Family Farming along with the Livelihoods Carbon Fund that Danone had already spearheaded. The two funds are putting money into nine rural development programs around the world, and they aim to improve the lives of more than 2 million people by helping 200,000 farms replicate Mayende’s success.

“But this is not philanthropy,” says Bernard Giraud, Danone’s sustainability director and founder of the Livelihoods Venture. “We aim to make a return on our money.”

The Mount Elgon Project, where Mayende’s farm is located, aims to help 30,000 farms over the next five years, and Giraud says the return will come from two flows.

“First, through carbon credits,” he says. “And second because…the production of milk will be multiplied thirty times over the next five years.”

Story Continues Below

The Podcast

The series of articles has a companion series on the Bionic Planet podcast, also called “Of Milk and Money”. The podcasts echo the articles, but the two mediums are different, and they don’t always match up exactly. To get the full story, be sure to subscribe on iTunesTuneIn, or wherever you access podcasts – or click below to hear the first installment on this device:

What is Agroforestry?

VI Agroforestry has been active in Kenya for more than 30 years, and it’s helped more than 300,000 farmers implement sustainable agricultural land management (SALM), which is a combination of mulching and agroforestry – or blending trees with traditional crops to “fix” nitrogen out of the air and infuse it into the ground as fertilizer for other crops. VI developed the practice to help farmers conserve topsoil, but healthy topsoil teems with life, and that means carbon.

As farmers churn through topsoil, they not only extract the nutrients that support agriculture, but they release carbon into the air – lots of it: nearly 300 billion tons of carbon dioxide over the last 200 years, according to the Intergovernmental Panel on Climate Change.

SALM reverses this in two ways: first, by increasing yields, which captures carbon in plants; and second, by avoiding soil disruption, which keeps carbon locked in the soil. Rattan Lal, a professor of soil science at the Ohio State University, says we can pull about 10% of our greenhouse gasses out of the air and inject them into soils just by switching to climate-safe agriculture.

VI Agroforestry saw a funding opportunity, and in 2007 it calculated the amount of carbon its specific activities lock in the soil. Then it drew up a plan to finance its activities by selling carbon offsets, with 65% of the money going directly to farmers and 35% to cover VI operating expenses. In 2010, the World Bank decided to test the idea, and guaranteed VI Agroforestry $5 for every ton they could inject into trees and soil.

The Pitch: Crops or Carbon?

In theory, the prospect of carbon finance gave VI a new tool for recruiting farmers, but Amakanda Hissa wasn’t so sure. An agronomist by training, he knew what made plants grow – and what made farmers tick.

Ignatius Sifuna Rabutola feeds his dairy cow with silage from his farm

Ignatius Sifuna Rabutola feeds his dairy cow with silage from his farm

“All farmers want to increase their yields,” says Hissa, who goes by the name “Johnny” and spends most days bouncing around the countryside on his motorcycle, either looking for new recruits or checking in on farmers who’ve already joined the program.

“I look for those who are open-minded about planting trees on their farms and who are respected in the community,” he says, adding that early movers are critical to any project’s success.

“[Farmers] start adopting at different levels,” he says. “Some of them are early adopters; some of them come in the middle; and others are just laggards.”

If the early adopters succeed, he says, the fence-sitters will come more quickly, and the laggards might not lag as much; but early adopters won’t succeed if they don’t know what they’re getting into.

“Agroforestry is hard work, and I wanted early adopters who were serious,” says Hissa. “I didn’t want to build unrealistic expectations.”

The work involves more than just planting trees – it requires first breaking the farm into different fields through a process called “farm plan layout”, then determining how to allocate crops among those fields, then keeping records to see what works and what doesn’t, and finally tweaking the whole process – continuously over time.

Hissa could easily ratchet up the number of early adopters by sugar-coating the challenge they were undertaking, but he knew it could all go sideways of those early adopters got frustrated and dropped out. So he downplayed the carbon component but told potential recruits that a “carbon bonus” might come their way if they kept good records of their outputs and yields.

“Farmers need these inventories to monitor their farming,” says Carolyne Musee, who oversees VI’s monitoring and evaluation in Kenya. “But we use them to estimate the amount of carbon sequestration.”

The Carbon Farmer

Ignatius Sifuna Rabutola was one of the first farmers to join the program. A soft-spoken respected local chief, he keeps meticulous records in a black ledger filled with rows and rows of numbers and maps of his farm.

“Here’s where I started in 2010, when I just had maize and some fallow areas,” he says, pointing to a simple square.

“Here is 2015,” he continues, flipping to a mosaic reflecting the farm plan layout, which he says helped him tweak his activities in ways that have enabled him to increase his income roughly 30% per year.

“After you start planning, you know the inputs, outputs, risks, and challenges,” he says.

“And the carbon?” I ask.

He laughs.

Rabutola ratcheted up yields by keeping meticulous records and tweaking his farm accordingly.

Rabutola ratcheted up yields by keeping meticulous records and tweaking his farm accordingly.

“Well, as the name says, it’s just a bonus,” he answers. “The last one we had was in 2011, and it was like 2,000 [Kenyan shillings].”

That’s just $20, which won’t entice any farmer to keep the kind of exhaustive records that Rabutola keeps – let alone change his entire farm around.

It could, however, generate $600,000 for administering VI if multiplied by 30,000 farmers, and that’s just for one year at $5 per ton, which is well below the $40 per ton that even some US Republicans say is needed to slow climate change.

VI could, in theory, scale up its operations now in the hope of sustaining itself on carbon markets tomorrow, but there is no gurantee those markets will materiaize, as the election of Donald Trump as President of the United States made clear.

If the organization scaled up and failed, decades of meticulous progress could evaporate.

And that’s where Livelihoods comes in.

“The solution of Livelihoods is simple,” says Danone’s Giraud. “First, we need to invest up-front, because if we don’t take any risk, there is no way that small farmers can pre-invest by themselves.”

Coming up in the series:

  • The Livelihoods Gamble,
  • How Prisca Mayende Built up Her Farm,
  • The Mechanics of Milk

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