Pathways to Sustainable Agricultural Trade: Insights from the MATS Project

Ariane Voglhuber-Slavinsky, Ewa Dönitz, Anna Kirstgen, Fraunhofer ISI | 15 November 2024

In our quest for a sustainable future, the MATS (Making Agricultural Trade Sustainable) project stands out as a pioneering multistakeholder initiative that aims to provide novel policy-relevant insights to enable the sustainability transition of agricultural trade by 2035 and beyond. The role of Fraunhofer ISI in the project is to employ a participative foresight process that engages multiple actors, each bringing unique research backgrounds and expertise to the table.

A Collaborative Methodology

Methodologies applied were: visioning and roadmapping. The visioning module focuses on crafting a cohesive, shared vision for sustainable trade, while the roadmapping phase outlines actionable pathways to achieve this vision.

The visioning process began with online consultations, followed by a pivotal co-creation workshop in Moshi, Tanzania, where participants—including policymakers, civil society actors, and industry representatives—collaborated to identify key vision statements.

Transition Pathways for Sustainable Trade

Agricultural trade and global food systems are influenced by complex factors, including multi-level policies, globally operating businesses, and the consumption choices we make. To address these challenges, MATS has engaged Sub-Saharan Africa (SSA) country organizations, and regions in 15 case studies with 14 project partners from Africa, Europe, and South America. This approach was accompanied by a multi-actor foresight process, led by Fraunhofer ISI, to jointly develop transition pathways for sustainable agricultural trade.

The foresight process used the four dimensions critical for achieving sustainability (previously defined within the project): “policy, governance and regulation,” “social and human dimensions,” “natural capital,” and “economy and markets.” These dimensions are the foundation for the proposed actions that aim to enhance agricultural trade sustainability.

34 Actions for Sustainability

The culmination of these efforts is a comprehensive set of 34 actions designed to enhance the sustainability of agricultural trade. Presented in a brochure, these actions serve as a guide for policy makers, industry representatives, researchers, and NGOs among others, illustrating how they interlink with the vision statements and providing a clear timeline for implementation.

Deep Dives into Implementation

To enrich the understanding of these actions, MATS includes 14 selected deep dives, offering detailed insights and strategies for their implementation. “These deep dives, such as ‘Enhance interconnectivity of food system initiatives,’ ‘Introduce legislation to transform business models,’ ‘Facilitate dialogues with large agricultural traders,’ or ‘Promote customer awareness of fair trade and the livelihoods of producers,’ offer detailed insights in addition to further information, including facts and figures as well as implications for agricultural trade.”

Policy Recommendations and Future Directions

The roadmap not only outlines actions but also sets the stage for formulating policy recommendations aimed at transforming food trade into a more sustainable practice. The proposed actions are crafted to achieve the desired vision while influencing future policies that comprehensively address sustainability challenges.

Conclusion: Join Us on This Journey

As we navigate the complexities of the global agri-food value chains, it is crucial that value chain actors and policymakers have access to actionable and transparent information. This report aims to contribute to a transformation agenda that helps global agri-food value chains become more sustainable.

The MATS transition pathways guide the reader from visioning to actionable steps that will steer agricultural trade toward a more sustainable future. Together, we can realize the vision of a more sustainable agricultural trade by 2035 and beyond. Join us on this journey, and let’s work collaboratively to embrace sustainable practices that will benefit our planet and future generations!

The Fraunhofer Institute for Systems and Innovation Research ISI analyzes the origins and impacts of innovations. We research the short- and long-term developments of innovation processes and the impacts of new technologies and services on society. On this basis, we are able to provide our clients from industry, politics and science with recommendations for action and perspectives for key decisions. Our expertise is founded on our scientific competence as well as an interdisciplinary and systemic research approach.

Link to the brochure here

Is state-led investment in agricultural research and extension still the answer to raising smallholder farm productivity for export crops in Sub-Saharan Africa?

Hoseana Bohela Lunogelo and Maximillan Yanda, ESRF | 4 November 2024

What more needs to be done for smallholders to thrive independently in SSA? Most of the exported agricultural commodities from Sub-Saharan African (SSA) countries have historically been produced by smallholder farmers (Golin, Douglas, 2014[i]; Kamala, Alie, et.al, 2019[ii]), including cocoa, banana, cassava and goats, which were the focus of Case Study 04 in the MATS project. Recognizing that smallholder farmers, as opposed to commercial large-scale farmers, lack the requisite capital and knowledge to engage in profitable agricultural production, many support programs have been implemented over the past 60 years to aid them (Maryono, et.al., 2024[iii]; Agrictoday, 2023[iv]). Most of such programmes have been through grants and loans provided by bilateral (mostly by European states and the USA) and multilateral development partners (e.g., World Bank, IFAD, AGRA, FAO), who are coordinated through the Agricultural Sector Working Group (ASWG) (World Bank, 2017[v]; OECD,2023[vi]; Southern Voice, 2020[vii]).

To complement efforts by Development Partners, African countries, under the African Union, adopted the Maputo Declaration in 2003 (NEPAD, 2003)[viii] (and later reinforced by the Malabo Declaration in 2014 (MAAIF,2014)[ix] to set aside at least 10 percent of annual government budgets for the agricultural sector so that they can produce more commodities for both the domestic (Oxfam,2024)[x] and export markets (OEC, 2023).  None of the four countries in our Case Study 04 have ever reached that target (AU-NEPAD, 2022[xi]). Tanzania, for example, has for many years prior to fiscal year 2023/24, been giving between 4 and 5 percent of its budget to the agricultural sector (AU-NEPAD, 2022).

Although SSA countries agreed to increase their budgetary allocation for agriculture to 10 percent of total budget, about 26 countries spent under five percent of their annual budget on agriculture between 2019 and 2021 (Oxfam, 2024: ibid; AU-NEPAD, 2022[xii]) 

The 2022 NEPAD Biennial review report noted that Ethiopia and Uganda were urged to increase their spending on agricultural research of 0.2 percent of agriculture GDP, towards the agreed target of 1 percent. Uganda and Ghana were also alerted on the need to give more than the current 3.1 percent and 4.4 percent of public agriculture expenditure, respectively, as a share of agriculture value added.

On the other hand, Tanzania was censured for having a low proportion of farm households with title deeds (11.6%) on their land and to step up Tanzania interventions to increase yields of the country’s priority commodities and ensure that at least 30% of agricultural land (as against current 10.9%) is placed under sustainable land and water management practices. The biennial review also revealed that fertilizer use, for example, was at less than one half of the recommended average level of 50 kg per hectare of arable land. Consequently, farmers have consistently failed to improve and reach technically acceptable yield levels.  

Has public investment failed smallholder farmers?

It is indisputable that SSA’s Governments and Development Partners have pumped a lot of monetary and non-monetary resources to support smallholder farmers. However, the responses in enhancing yields and quality performance have been less than best, or short-lived in nature, lacking sustainability. For those reasons, one is left to wonder what is the missing link in enabling these farmers to reach the expected levels possible under experimental conditions and/or commercial large-scale farmers?

Interviews with farmers in this MATS CS04 study attributed the failure to weakly funded research and extension services, which usually decline once the donor-funded programme ends, or there is a regime change in government. Private sector financing has also not been forthcoming to support primary production by smallholder farmers citing lack of assets owned by farmers, such as land title deeds, for use as collateral. This is the case in Tanzania whereby only 11.6 percent of farming households had title deeds on their land. Vagaries of weather have also limited the penetration of crop and livestock production insurance schemes, selectively starting down the value chain in storage and trading activities (AU-NEPAD, 2022). Smallholder farmers have also not managed to optimally take advantage of the premium prices obtained from exporting organically grown agri-commodities due to lack of ability and skills in setting up a reliable system for certification and traceability (Nyambo, Patrick, et.al., 2022[xiii]).

What should be done to encourage private sector investment to complement public sector investment?

This CS04 report has shown that there is a high market potential for expanded exportation of agrifood commodities (Intracen, 2022[xiv]: ITC, 2023[xv]). These include traditional cash crops such as cocoa, and emerging commodities like banana, cassava and goat meat, which historically have been regarded as non-tradable goods as they were used as subsistence and staple food items. Private sector investors, both local and international, can be mobilized and motivated to collaborate with governments, as part of public-private partnerships (PPP), to set up licensed improved seed multiplication farms, farm mechanization centres, input credit supply to smallholder farmers, warehousing services, and commodity auction systems.

Breaking the cycle of government and donor dependence by smallholder farmers?

Organizing farmers in stronger well governed cooperative societies and apex cooperative unions can entice the banking sector to provide loans to farmers through these farmer-based institutions. This should, however, happen parallel to financial sector reforms that compel financial institutions to set aside a minimum proportion of gross income to agri-production lending and promoting climate-indexed insurance schemes.

Dr.H. Bohela Lunogelo, ESRF MATS Project CSO4 Team Leader and Mr.Maximillan Yanda, Researcher at the Economic and Social Research Foundation

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[i] Golin, Douglas (2014). Smallholder agriculture in Africa: An overview and implications for policy. Posted on: IIED.pdf:

[ii] Kamala, Alie; Abdul Konte; Edward Rhodes; and  Ricard Coo (2019). The Relevance of Smallholder Farming to African Agricultural Growth and Development. In: African Journal of Food, Agriculture, Nutrition and Development 19(01):14043-14065. DOI:10.18697/ajfand.84.BLFB1010. February 2019.

[iii]Maryono, Maryono, Aditya M Killoes, Rajendra Adhikari and Ammar A. Aziz. Agriculture development through multi-stakeholder partnerships in developing countries: A systematic literature review. In: Agricultural Systems. Volume 213. January 2024, 103792. Posted on: www.sceiencedirect.com/science/articile/pii/SO308521X2300197X.

[iv] Agrictoday.com.gh (2023). (Donors supporting about 40% of Ghana’s agric production expenditure is a great threat. Posted on: Donors supporting about 40% of Ghana’s agric production expenditure is a great threat. | AgricToday

[v] World Bank (2017). Ghana: Agricultural Sector Policy Note. Transforming Agriculture for Economic Growth, Job Creation and Food Security. June 2017. Posted on: World Bank Document

[vi] OECD (2023). Geographical Distribution of Financial Flows to Developing Countries 2023: Disbursements, Commitments, Country Indicators (oecd-ilibrary.org)

[vii] Southern Voice (2020). The Future of Agriculture in Sub-Saharan Africa. Paper by Suwadu Sakho-Jimbira and Ibrahima Hathie. In: Policy Brief No.2. April 2020. Posted on: www.IFAD.org: future_agriculture_sahara_e-pdf

[viii] AU 2003 Maputo Declaration on Agriculture and Food Security | AUDA-NEPAD

[ix] The Malabo Declaration on Accelerated Agricultural Growth and Transformation for Shared Prosperity and Improved Livelihoods. Posted: as Malabo Declaration on Agriculture in Africa – Ministry of Agriculture, Animal Industry and Fisheries, Uganda Government

[x] Bearing in mind that African countries spend about USD 90 billion to import food that could be easily produced locally (Oxfam, 2024) as stated in the article titled: African states slash agriculture budgets amidst a worsening food crisis | Oxfam International Pan Africa Program

[xi]  Biennial Review – CAADP

[xii] 41573-doc-ENGLISH_3rd_CAADP_Biennial_Review_Report_final.pdf

[xiii] Patrick Nyambo, Peter Nyambo, Zira Mavunganidze and Violet Nyambo  (2022). Food Security for African Smallholder Farmers. Chapter in: Sub-Saharan Africa Smallholder Farmers Agricultural Productivity: Risks and Challenges. First Online: 28 February 2022: pp 47–58:

[xiv] Intracen (2022). Export Potential Map (intracen.org) (figure 17-20)

[xv] ITC (2023). Trade Map 2023. Accessed from https://www.trademap.org/Country_Sel Product_TS.aspx?nvpm=1%7c%7c%7c%7c%7c0803%7c%7c%7c4%7c1%7c1%7c2%7c2%7c1%7c2%7c1%7c1%7c1

Ethical trade initiatives in the South African wine industry: a brief comparison

Ernst Idsardi, North-West University | 22 October 2024

Case Study 12 of the MATS project evaluated the social standard schemes in the South African wine sector. The sector is renowned for its “high-quality-good-value” wines and is highly export orientated. In 2022, 37 percent of the sector’s export was destined for the EU. However, over the last decade the local wine sector has received quite some negative international publicity on the poor working conditions of farm workers. Various reports have raised issues with labour contracts, housing, working hours, wages, migrant and female workers, and occupational health and safety.  

To improve the situation, several voluntary ethical trade initiatives haven been implemented in the sector. Fair Trade International, the Sustainability Initiative of South Africa (SIZA) and the Wine Industry Ethical Trade Association (WIETA) are the most prevalent ones in the wine sector. The latter two initiatives were developed locally and follow a more “bottom up” approach in setting social criteria. In doing so they are addressing a common complaint that many sustainability standards are too “top down” where requirements are set in the export market and “pushed” down the value chain to producers (and workers).  

All these ethical trade initiatives have developed a of set of core principles which are underpinned by a multitude of social standard requirements. These criteria deal with, amongst others, a safe work environment, freedom of association, working conditions and wages. The compliance of member wine farms with these criteria is audited and certified within set intervals. Many wine producers seeing it as “doing the right thing” as well as a means by which they maintain their position and reputation in overseas wine markets.

The case study reviewed a vast body of previous research on the impact of voluntary sustainability standards, both globally as well as in the South African wine sector. Not surprising, the outcomes of most global studies were mixed but most found a positive impact on social sustainability. At local level, some research argues that social standards will not be able to redress the inequalities in the agricultural sector and propose the inclusion of worker equity schemes. Other points of concern raised are the auditing process which is sometimes perceived as flawed as well as the limited representation of workers in the standard setting procedure. Overall, most publications acknowledged that ethical trade initiatives do have a role to play in enhancing working conditions in the wine sector.  

The case study also conducted a brief comparison of the three social standard schemes and found that almost 170 wine cellars and more than 1 300 wine grape producers are members of one of these social standard schemes. This is a relative high coverage among the estimated total of 2 487 wine farms. Apart from alignment with international labour conventions, the two local standards (SIZA, WIETA) are also relative strongly aligned with local labour legislation enhancing their local relevance. It was also found that of the three programs, WIETA has the most members, but it has a narrower scope as it merely focusses on social standards. On the other hand, Fair Trade International has the least number of members but it has a much wider coverage as it also embraces other pillars of sustainable wine production (e.g. environmental impact). Fair Trade traditionally focused on fair working conditions for small-scale farmers in the Global South, but it has developed a special standards code for farm workers in the wine sector.

It is also the only of the three programs that pays a price premium to its producers for complying with their standards. In doing so it tackles a common complaint amongst wine producers that the risks and cost of compliance with social standards are not spread along the value chain but only burdened by wine (grape) producers. This burden is being amplified by the lower levels of profitability that producers experiencing for some years now.  

Furthermore, the payment of a “living wage”[i] remains a contentious issue in the local wine sector, but it could go a long way in improving the livelihoods of farm workers. There is no universal method in determining a “living wage”, however, the Decent Standard of Living (DSL) project uses a set of 21 socially perceived necessities that are widely accepted as essential to live a decent life in South Africa. For 2022, their estimated “living wage” amounted to a monthly household income of R 6 034 (€ 351). The current minimum wage in agriculture should be increased by 48% to cover the shortfall to this estimated “living wage”.

Of the three ethical trade initiatives evaluated in the case study, only Fair Trade international stipulates a “living wage” requirement. The SIZA code states that the wage must be at least equal to the national minimum wage for the agricultural sector. Furthermore, the WIETA code recommends a “living wage” but only if it is endorsed by government. They do however require that farms must demonstrate how a “living wage” can be reached over time. Thus, three different approaches to the remuneration issue.

This raises a few questions: Should the “living wage”” requirement be specified by an international social standard or rather be tackled by local minimum wage regulations? In a sector with decreasing profitability, will an increase in labour cost not lead to alternative employment strategies or even increased mechanisation resulting in lower job security and employment? The bottom line here is that there is a shared responsibility within the wine export value chain, including wine consumers, to ensure fair remuneration and labour conditions.

Ernst Idsardi is a senior lecturer in Agricultural Economics at the North-West University in South Africa. His research interests include international agricultural trade and agricultural development.

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[i] “Remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent standard of living of the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, healthcare, transport, clothing and other essential needs including provision for unexpected events.” (Anker and Ankler 2013)

Prioritizing SDGs, the case of the Algerian dairy sector

Alberto Menghi, CRPA & Dorothee Boelling, IFCN | 22 October 2024

In the last few decades, Algerian governments have decided to stimulate milk consumption by setting a low affordable “political price” for most of the citizens/consumers. The result is a relatively high annual consumption per capita of about 147 kg of Milk Equivalent (ME), trend increasing trend, much higher than neighbouring countries such as Tunisia with about 90 kg of annual ME consumption, or Morocco with about 66 kg of annual ME consumption, as reported in the IFCN Dairy report 2023. This strategy of stimulating milk consumption is fitting the SDG1 Zero Hunger well.  In particular, it helps to achieve several specific targets:

• end hunger and ensure access to food (milk) to all people, in particular the poor and people in vulnerable situations, including infants; access to safe, nutritious and sufficient food all year round

• end all forms of malnutrition, including  the internationally agreed targets on stunting and wasting in children under 5 years of age (including achieving these targets by 2025), and addressing the nutritional needs of adolescent girls, pregnant and lactating women and older persons

Subsidized milk consumption contributed to reaching these targets, and  it was also possible to redistribute profits from crude oil extraction in Algeria.

Considering the supply side, Algeria cannot be considered a favourable country in terms of natural conditions for forage production, considering its dry climate. Only 20% of the land can be cultivated and a limited part is dedicated to forage production, leading to high fodder costs. For this reason, dairy production faces specific constraints, and the annual production is 2,5 million tons of milk (increasing trend). However, national milk production is able to cover only 56% of self-sufficiency. To cover the remaining part of milk consumption, Algeria would have to double its dairy production.

Further, the competitiveness gap in terms of costs of production is high compared to other key exporting countries. Most competitive farms in European countries, such as France or Germany, were producing milk in a range of about 43-50 €/100 kg milk (2022). As for another important trade partner like Argentina, large farms (about 400 cows) can produce milk at a production cost of about 24 €/100 kg milk (2022). In Algeria, milk is mainly produced in small size farms (up to 18 cows) and the most competitive ones can produce milk at a cost of 80,8 €/100 kg of milk produced. This cost gap is very high, if the government were to stimulate local milk production.

Only 5-7% of milk consumed in Algeria is fresh and sourced from local producers, the rest is reconstituted milk powder imported from all over the world. About 419.000 tons of Milk Powder has been imported by Algeria in 2022. The high quantity of imported dairy products is putting pressure on the local dairy market limiting the evolution of the dairy sector. This expensive strategy to subsidize milk consumption by using imported milk powder, is also a way to redistribute profits coming from other national resources.  However, in terms of SDG’s this strategy is conflicting with SDG 8 (decent work and economic growth).

Besides the dairy import strategy, the Algerian government supported several milk-related programmes to increase national milk production. On the one hand, farmers were supported either by raising their own heifers or by importing female calves from Europe. As a consequence, a large number of heifers were imported mainly from EU countries to increase the national dairy herd, but in many cases it was more convenient to slaughter the animals after 1-2 lactations given the good prices for beef in the local market. This resulted in high costs of cattle purchases, but in even higher returns for slaughter animals. On the other hand, milk production is subsidised by the Algerian government on a per litre basis. Given the market structure with high beef prices and high feed costs, all these different programmes have not yet contributed satisfactorily to a higher self-sufficiency in milk consumption. Many other aspects are related to the strategic choice of importing commodities versus increasing local production in order to fill the consumption gap. Among them are negative environmental impacts generated by long distance transport of dairy products from New Zealand, Argentina or Europe, thereby affecting aspects related to SDG 13 (Climate Actions).

In sum, the Algerian case is key to understanding that sustainable trade in dairy products is related to several economic, environmental and social aspects that need to be considered at different levels, yet these aspects can conflict with the political priorities and decisions of national governments, resulting in very different impacts on Sustainable Development Goals.

Source: IFCN Dairy Report 2024 and Case Study 13  

Who’s taking responsibility for fair cocoa prices?

Bart Van Besien, Oxfam België | 10 October 2024

The 400USD “Living Income Differential” (LID) that the Ivorian and Ghanian governments fought hard for since its announcement in 2018, seems insignificant compared with current price levels the cocoa market. However, there are some important lessons to be learned from the experience. Chocolate companies will need to revise their purchasing practices to bring them in line with new Human Rights standards.

In October 2024, cocoa prices have stabilized around 7.000 USD per metric ton (MT). This is more than double the price that was paid just one year ago, when the rollercoaster on the cocoa market took off. The crazy ride reached its peak in April 2024 hitting 12.000 USD. The high prices are a direct consequence of an acute shortage of cocoa beans due to a significant production drop during 2023-2024 harvest in the biggest producing countries Ghana (-45%)  and Côte d’Ivoire (-28%), mainly caused by the El Niño weather phenomenon that hit the region.

Imperfect differentials

The current price dynamics make the 2018 announcement of the “Living Income Differential” (LID) feel like a far away memory. The governments of Ghana and Côte d’Ivoire had managed to find an agreement with the major cocoa companies to receive a 400 USD differential on top of every ton of cocoa sold, as a way to stabilize farmgate prices and tackle farmer poverty. Cocoa companies grudgingly accepted.

However, when the LID was introduced, one of the side effects was the drop of “country differential”, to negative values. Country differentials typically reflect the quality of the cocoa from a given country. The country differentials for Ghanian and Ivorian cocoa had been positive for decades because of their prized characteristics in terms of butter content, aroma, etc… After the LID was introduced, suddenly Ghanian and Ivorian cocoa was perceived as below standard quality.

Active undermining or systemic issue?

The question was raised by many actors and observers: Were cocoa/chocolate companies actively undermining the initiative?

It’s hard to find proof for this kind of a scheme. What our study did show, however is that downstream actors (e.g., chocolate brands, supermarkets) turn a blind eye on the purchasing practices on the ground. Some of these actors agreed that 400USD was to be paid on top of every ton of cocoa. The fact that this led to negative country differentials was perceived as “outside of their zone of influence”.

Big chocolate companies have outsourced purchasing practices almost entirely to international traders. The latter are highly specialized in hedging futures contracts at the Intercontinental Exchange (ICE) and securing a thin margin for themselves, while the former focus on the higher margins they can make from selling their products to customers.

When international traders negotiated down the country differentials, it’s because no actor was willing to secure these contracts from them and working on thin margins, it would make no business sense to pay higher for something you aren’t able to sell at a higher price.

Breaking the cycle

The reality today is that the cocoa price has raised by a multiple of the LID… and companies are paying it. The irony is that farmer poverty and the consequent bad farm management has led to this situation.

Decades of moral calls for fair prices have turned out ineffective to push companies to change their purchasing practices. The current situation shows, however that paying fair prices is very realistic and reasonable. Yet, companies only pay it when they are cornered by the market.

To turn around this vicious cycle of poverty and low prices, which is also linked with deforestation and child labor, chocolate companies need to take full responsibility for the purchasing practices that they are currently outsourcing. This should be a central aspect of their human rights and environmental due diligence (HREDD) process.

Bart Van Besien is a Policy Advisor at Oxfam België, specializing in cocoa, coffee, and fair supply chains