Improving smallholder livelihoods and ecosystems through direct trade relations: High‐quality cocoa producers in Ecuador

• Published in: Business strategy & development Vol. 3; no. 2; pp. 165 - 184
• Main Authors: Middendorp, Romaike S., Boever, Olivia, Rueda, Ximena, Lambin, Eric F.
• Format: Journal Article
• Language: English
• Published: 01-06-2020
• Subjects: agroforestry; certification; direct trade; Ecuador; fine cacao
• ISSN: 2572-3170; 2572-3170
• DOI: 10.1002/bsd2.86

Global trade in niche commodities has increased the influence of consumers' choices on land use change and livelihoods in developing rural areas. New niche commodity markets for fine cocoa—produced by old tree varieties frequently grown in shaded agroforestry systems—create more direct linkages between producers and buyers. We explored the socioeconomic and environmental outcomes for cocoa smallholders that participated in direct trade relations compared with smallholders that sold through mainstream markets. Household interviews were conducted with cocoa smallholders in northern Ecuador. Biodiversity conditions at farm level were monitored for 75% of surveyed households. Using a counterfactual based on genetic matching, we found that smallholders engaged in direct trade (a) captured superior prices for cocoa sales; (b) had greater access to agricultural training, technical assistance, and improved social networks; and (b) applied more nature‐friendly management practices, compared with smallholders selling through mainstream markets. However, a strong overlap between direct trading practices and organic certification made attribution of environmental benefits difficult. This overlap likely explained why farmers engaged in direct trade used more organic fertilizers and less herbicide. Shade level and plant species richness and abundance in plantations were unrelated to market participation. Additional qualitative analyses suggest that certification facilitates engagement in direct trade and that some direct buyers request certification. This study provides insights on the potential of developing value chain innovations for high‐quality commodity trade. The success of value chain innovations hinges on the competitiveness of farmers' cooperatives and involvement of governments, nongovernmental organizations, and private actors.