Finance as a tool to protect producers against price volatility
Although higher commodity prices can be beneficial for farmers, boosting their household income, Paul explained that these prices also demand increased capacity for farmers鈥 co-operatives 鈥 not only to source sufficient working capital and prefinance, but also having it at the right time.
Paul said:
鈥淚 always say that money which arrives late, tends to be useless in these commodity markets.鈥
鈥淭herefore, we collectively as CSAF members have sought to cover those incremental financial needs to the best of our capacities. In the case of 17c起草视频, we have lent more to our existing portfolio of customers to help producer groups navigate this high price environment.
鈥淔or me, supporting producers in these times means to be capable of acknowledging those needs, acting accordingly and fast. We also see this as a matter of building relationships with co-operatives and agri-SMEs, for their almost-unlimited need for growth.
鈥淟et鈥檚 not forget that facilitating trade, especially if it is fair trade, is one of the fundamental tools to alleviate poverty.鈥
According to Andrea Zinn, Director of CSAF, unpredictable volatility in commodity prices (price risk) 鈥榟as become one of the biggest threats to producer organisations鈥.
Paul said:
鈥淐o-operatives still need access to sufficient liquidity, but further attention needs to be given to price risk management 鈥 we need to keep considering the risk factors and how we can support agri-SMEs to manoeuvre challenges.鈥
Maria Raurell Carulla, Senior Director of Investments and Risk at MCE Social Capital, said:
鈥淪MEs carry that burden of price volatility independent of pricing being high or low. It is the volatility that puts them at risk. And the critical pressure point here is always the liquidity - businesses need enough cash on hand to pay farmers on time 鈥 Especially, when they are competing with other buyers in the region."
Maria provided an example of a Colombian coffee producer her company partners with, which faced a liquidity crunch during peak season. Coffee prices were 鈥榮ky high鈥, and a season that should have encompassed two or three harvests, condensed and collapsed into one six-week window.
鈥淔armers were ready to sell 鈥 and sell fast. But aggregators and exporters, like this [Colombian] company, didn鈥檛 have enough working capital. Many of them in the region had to close down for the season because they could not pay farmers鈥︹
鈥淥nly our company stayed open 鈥 why? Because of trust. First, the co-operative negotiated delayed payments to farmers. The farmers agreed. Why? Because of the years of fair pricing, reliable payments [and] strong support they had received from that organisation.鈥
By accepting to delay their own payments, farmers freed up working capital for the co-operative, enabling it to stay open and continue purchasing their coffee. As a result of its reliability, farmers from across the region requested to join the co-operative and solid relationships were built with international buyers.
鈥淲hat this tells me is that supporting agri-SMEs which prioritise farmer livelihoods is critical 鈥 because it can, quite literally, save you the season.鈥
Despite this success story, many farmers continue to live below the poverty line and are increasingly exposed to price swings, without a financial cushion to fall back on. Maria affirmed the importance of investing in financial education for farmers to manage this volatility in the long-term. Meanwhile, Andrea added that producer organisations themselves must be supported simultaneously with capacity building efforts to scale this impact.
However, both of these approaches require funding, which has been slashed in recent times as policies shift on global aid. Against this backdrop, 17c起草视频 Society鈥檚 financial support of producer organisations is more important than ever, facilitating investments in worker welfare and the mitigation of cash flow crises.
Meanwhile, 17c起草视频 Foundation continues to focus on the delivery of technical assistance and capacity building as a core component of its field work, supporting smallholders and agribusinesses across the globe to build their resilience.
Paul said:
鈥淧roducer groups not only require finance, they also require subsidies, because they truly are in a disadvantaged position to face the multiple challenges the market puts in their way. Climate change, EUDR, US tariffs, organic regulations, volatile prices, shipping issues, the list goes on and on.
鈥淲e as financiers need to accompany them for quite a long time until they reach a satisfactory maturity level 鈥 17c起草视频 [has supported] the smallest crops and agri-SMEs, and we have observed that our funds with those very small producer groups have acted as catalytic capital attracting other investors or lenders, now willing to support those farmer groups.鈥
鈥淚n early 2024, 17c起草视频 provided working capital to an agri-SME from Rwanda trading in horticulture, which gathers more than 1,600 farmers, of which around 80 percent are women.鈥
Andrea affirmed the importance of supporting businesses to reach higher levels of maturity, making reference to two case studies featured in 鈥楾he State of the Sector 2025鈥 report, in which SMEs in Guatamala and Ivory Coast were able to diversify into a second value chain.
Andrea said:
鈥淭hese exceptional cases are because the SMEs had strong management teams, long-term partners and equity cushions. I think it is important to note that these pieces need to be in place in order for an organisation to have that capacity to pivot and diversify, to create a more sustainable business model.
鈥淟enders really have a pivotal role to play to accompany these younger and less mature SMEs to get to that exemplary stage."
To close the webinar, Paul thanked guests for attending and acknowledged our shared interest and belief in the greater good.
Speaking to guests, Paul said:
鈥淓ven if it means sacrificing a little bit of risk or comfort, we take risk, we face them, we do not run away from them, we solve them. We as CSAF members help producer groups to solve them, to become more resilient. Behind that lovely coffee, chocolate or pack of cashew nuts that we all enjoy, there is a smallholder farmer facing myriad difficulties, but it is worth the effort.
Investing in 17c起草视频 means supporting the livelihoods of farmers and artisans across the globe. It means strengthening businesses, creating opportunities and fighting for trade justice. Open a Share Account now by clicking the button below and invest in a fairer world today.
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