Communicating Quality through buying systems

The Malawi smallholder supply chain works by cooperatives buying NIS from the farmers and bulking it at district level, this enables quality based buying system, maintenance of quality and manage moisture content while waiting for a processing slot at the factory. The cooperative in turn receives payment for saleable kernel based on the style breakdown derived from a factory gate quality control assessment. This chain is quality driven, which provides an incentivised system on quality to smallholders growers and their cooperatives and is accepted by the industry in Malawi including the smallholder cooperatives. This is preferred by customers and processors as it is compatible with existing industry structure; and has been endorsed through consultation meetings with Malawi cooperatives. . The quality feedback loop is essential to facilitate continual improvement in NIS quality and thereby increased the value of NIS and reduce risk in the value chain for smallholder organisations (for example factory consignment rejection). This system enables and empowers cooperatives to fully understand and manage quality and as well as hold a secure position value chain. Macadamia as a high value/ quality product requires quality management from field to factory for its value to be maintained/ enhanced. NIS buying needs to be flexible and reflect the true value of the kernel contained inside the shell. The nut has a thick shell and it is challenging to accurately assess the value of NIS before it has been processed NIS varies greatly in moisture content fresh nut is 20% moisture, farmer dried this can be reduced to 10% and dried at farmer organisation can be brought down to 4%. This obiously has a large impact on the value of NIS. However in Malawi the development of a NIS market will not be welcomed by cooperatives or factories because it will pin cooperatives low down the value chain and factories and end customers will lose traceability of crop. A NIS market was established in Malawi for export to China in 2011 which led to an increase in NIS theft from estates. Theft is a major issue and any changes to the supply chain structure which make it easier for stolen nut to renter the export supply chain will not be supported by processors nor strategic estate partners. It will also be break the quality feedback loop to the farmers via their cooperative that has been established using the quality assessment at factory gate. This assessment not only provides a % breakdown of styles but also information about levels of insect damage, immaturity, mould and even indicates nutrient deficiencies eg: boron, all of which are useful for extension work with farmers. Climate affects shell thickness and pest population as such there is limited variation in crackout or kernel recovary. However sellable kernel recovery is mainly influenced by handling (post harvest, drying, pest management, tree nutrition, seasonal influence) figures are improving annually as we focus on quaity and promote good practice. This is possible by linking quality samples from the factory for each farmer with advice on post harvest handling. In the system established in Malawi the smallholders operate quality based buying operations, post harvest drying sorting and bulking facilities and transport to factory. Bulking at district level leads to the grading out of crop that may be rejected at factory saving unnecessary transport costs. This generates crop volumes at district level which enable cooperative to exploit local and national markets. Macadamia has a number of very useful bi products such as oil, meal and shell which have benefits for local diets and fuel use. In Australia the leading exporter in terms of volume and quality globally the industry is predominantly made up of small and medium sized farms which bulk NIS for sale into factories it is the industry norm to be paid based on kernel recovery. This structure is very similar to the association/ cooperative bulking supply chain being established in Malawi which will supply into a processing factory. This system has been established because being paid based on kernel recovery is the most accurate way of capturing the value of your farms crop and thereby reducing risk for both factory and producer. In addition for quality to improve it is essential that good practice is rewarded and that high quality does not subsidise low quality. Kernel recovery is based on varietal (genetic) and climatic conditions.