Pre-financing fertilizers in Honduras
Starting in 2008, the project "Professionalizing the coffee supply chain in Honduras", jointly supported by SOGIMEX S.A. (ECOM) and DE Foundation has pre-financed fertilizers to 453 small coffee producers. An average increase of 30% in productivity was observed right after the first year. With time, productivity can be doubled or tripled by applying good agricultural practices and the right fertilizers.
Applying the right fertilizers, at the right time and with the right amount is crucial to improve productivity of the coffee and to maintain the trees' vigor in the long term. However, most of the producers in Honduras are applying too much fertilizer and often of the wrong type for coffee, which limits returns on investment and wastes resources. The fertilizer pre-financing program is designed to help the project farmers lower production costs and improve quality by applying the right fertilizers and best practices.
Soil analysis is the first step to find out if a producer could join the fertilizer pre-financing program. This is done to help identify types and volume of fertilizers needed for each farm. ECOM provides soil analysis service at the cost of 16USD per sample but producers can also use services of any other institutions. Soil sampling is then repeated annually to assess the fertilizer needs of each producer for each crop. Based on the sampling results from the selected producers, ECOM will create fertilizer formula contact fertilizer providers to buy the needed fertilizers and distribute it to the registered producers through its network of buying agencies. Number of fertilizer mixtures varies annually according to the soil analysis results, e.g. 27 mixtures were used in 2009 and 19 were used this year (2011). Fertilizers will be stored in bags at ECOM's network of buying agencies. All bags are marked with a number of the mixture. The pre-financed fertilizers are charged at cost price to the producers.
Picture: Fertilizers stored at ECOM's buying agency
Buying in bulk and the at-cost charge by the project makes the price of fertilizer significantly cheaper than what a producer can buy from the market. With an average acreage of 2-3 ha, the pre-finance for fertilizer to each producer is about 425 USD. The price at costs and interest rate is fixed at the time a producer receives his fertilizer from the company according to the local bank interest rates (normally around 11-17% per annum). This will be converted to coffee and subtracted in parts from each lot a producer sells to the companies at the market price of the coffee delivery time.
Normally, the repayment can be made in 3-4 installments depending on the selling time of the producer and the subtraction on top of about 20 coffee bags (sometimes up to 60 bags) is not much and easily accepted by any producers. Therefore, the repayment rate has consistently been 100% over the past three years. "This success rate is a result of the fact that we give producers exactly what they need and accept a flexible repayment schedule. More importantly, within the project a strong and trustful partnership has been created between the company and the producers." - said Mr. Daniel Gerber (General Manager - SOGIMEX S.A. - Honduras).
Picture: A project farmer happy with the improved productivity of his coffee
Thanks to the fertilizer pre-financing program, efficient use of fertilizers have contributed significantly to the production cost savings of the participating farmers. Apart from that, the improvement in terms of productivity is very impressive (from 552kg green bean per ha in the past to almost 1,610kg, even 2,300-2,760 kg for very good ones at present). "This is the biggest success of the project" - shared Gerber. As a result, most of the producers who have been with the project over the past 3 years have become much better off. They are happy and love to see the project going on. In the mean time, many non-participants want to join the project.
It always takes time to raise awareness and change cultivation culture of small producers towards better practices and the targeted number of 687 producers is very small among 100,000 producers over the country. There is still a lot to do for the scaling-up of this model sector-wide. However, the achievements so far have set a good basis for the successful continuation and expansion of the project in the coming two years.