Heifer and Fairfood Release “Commodity Living Income Strategy” White Paper

Heifer International and Fairfood International today released the “Commodity Living Income Strategy” White Paper, a data-forward strategy for commodity supply chains. The paper outlines a process for supporting farmer livelihoods through holistic efficiency and income interventions, and provides an open-source methodology for calculating commodity prices that deliver living incomes for farming households.

Why This Matters, and Why Now

The contemporary agri-food sector faces a profound challenge that threatens the socio-economic stability of smallholder farmers worldwide: the pervasive inability to secure a living income. This issue stems from multiple factors, including limited arable land, suboptimal agricultural productivity, and inequitable value distribution within supply chains. As global commodity prices fluctuate, smallholder farmers remain vulnerable, often unable to influence market trends or earn a fair share for their products.

Amid these challenges, the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) marks a critical juncture for international supply chains, mandating higher social responsibility standards for commodity buyers. This regulation offers a unique opportunity to create a level playing field, benefiting all producing countries equally. The White Paper’s release is timely, aiming to harness this regulatory shift to drive significant, data-informed changes across global supply chains.

Introducing the White Paper

The Commodity Living Income Strategy is a data-first intervention aimed at achieving living incomes in commodity supply chains. It is founded on principles of fair value distribution and data-driven decision-making, advocating for a two-pronged intervention approach: first, assisting producers, organized producer groups, and their supply chain partners in understanding their cost-efficiencies and living income price gaps; second, it leverages this data to design holistic intervention strategies tailored to local sustainability, production, and quality needs.

This White Paper introduces two key methodologies:

1. Living Income Price (LIP): The LIP calculates the price per unit of a commodity based on its actual production costs across various supply chain stages (farmgate, producer organizations or “cooperatives”, and Free on Board. This approach helps establish a minimum viable price floor, ensuring that producers are compensated fairly for their sustainable and efficient production efforts.

2. Cost-Yield Efficiency (CYE): This CYE categorizes producers’ efficiency by considering both their costs and yields. It provides a nuanced understanding of efficiency levels among farmers, identifying areas for improvement and forming the basis for tailored intervention strategies.

The strategy presented within this White Paper encapsulates both methodologies, providing a structured approach to understand both productivity and efficiency aspects of pricing, and identify the necessary interventions to bridge living income gaps. It addresses the critical question: Where is this supply chain currently, and how far do we need to go to achieve sustainability? Moreover, it promotes data-driven, defensible decision-making involving both efficiency and pricing interventions, strategically co-created with supply chain stakeholders, and, most crucially, with farmers themselves.

“By leveraging real, verifiable data, and investing in both efficiency and pricing interventions, we can set a new standard for transparency and accountability in global supply chains,” said Antoinette Marie, director of Heifer Labs, a digital technology unit within Heifer International. 

Commitment to Transparency and Open-Source

By making the parameters and tools publicly accessible and open-source, Heifer and Fairfood aim to inspire industry-wide change. This transparency is designed to foster a community of informed stakeholders, enhancing dialogue and collaboration across the supply chain. The Open-Source Toolkit previewed in the White Paper will provide practical resources for implementing LIP and CYE methodologies, driving sustainable practices, and ensuring that all stakeholders can contribute to and benefit from these innovations. “This is not just about compliance or corporate responsibility,” said Sander de Jong, managing director of Fairfood International. “It’s about recognizing the human side of supply chains and committing to a future where every farmer can live with dignity.”