Facilitating Smallholder Farmers’ Market Access

In the OIC Member Countries

restrictions on exports in 1994, it continued to protect the domestic processing sector by

introducing a graduated export tax, equivalent to about 30–32 percent of the FOB export

value. The export tax was reduced to 14 percent in 1996/97 and then raised to 18 percent

in 1999, where it has remained, effectively taxing farmers while significantly subsidizing

processors. The tax revenues go to INCAJU, which is now a semi-governmental

organization charged with using the revenues to benefit cashew farmers.

In 2001 global cashew prices collapsed and exports declined. The capital-intensive

processing sector practically ceased to operate in 2002. Between 2001 and 2008,

Mozambique’s cashew exports consisted mainly of raw cashews. The share of processed

cashews began to increase during the late 2000s with the entry of new, labor-intensive

processing factories that were more economically scaled. Most of the new factories are

located close to production centers to minimize transport costs.

Improved efficiency in the processing industry has not been complemented by an increase

in supply, however, largely because support to the smallholder sector—which produces

the bulk of the crop—has been so much lower than required. For the most part,

smallholders do not see cashews as a commercial crop, and husbandry practices are poor.

Almost 42 percent of farmers (about 1 million farmers) in Mozambique own cashew trees.

Small-scale farmers typically own about 20 trees,

which occupy marginal, unirrigated

land that is unsuitable for annual crops or other tree crops. Cashew trees survive dry

spells much better than other tree crops such as citrus, but most cashew trees are old and

diseased, so yields are low

(about 2–4 kilograms per tree) compared to the potential

yield of 8–10 kilograms. Smallholders cannot afford to buy seedlings to renew tree stocks,

and they lack family labor to replant and tend the trees properly.

The absence of an

effective extension service also contributes to smallholders’ lack of interest in replanting

aged trees to raise yields.

Smallholders sell small quantities of nuts and face uncompetitive marketing channels.

Farmers sell to small local traders, bigger trading companies, or directly to the factories,

but in most cases several intermediaries separate producers from processors or exporters,

which reduces profits for producers. No comprehensive quality system is in place.

Generally there is little differentiation between raw cashew nuts of good and poor quality,

although some factories are slowly starting to pay a premium for raw nuts of better

quality, graded at the farm level. Prices vary by season and not according to the quality of

the product.

Poorly maintained roads work to keep farm-gate prices low, especially in remote areas, by

making transportation costs very high for traders. In addition to these inefficiencies, the

export tax further reduces prices. Smallholders could potentially attain premium prices in

the world market by exploiting market niches (such as selling Fair Trade–certified nuts),

Aksoy and Yagci (2012).

World Bank (2006b).

On average, 10–35 percent of production is consumed at home, according to Aksoy and Yagci (2012).