Responsible Sourcing: How Farmers, Companies Work Together

The “win-win” business term is usually used at large as an opportunity for mutual profit between business partners. There is an inclination to believe that both parties must be of comparable size and capacities to achieve this balance. But what exactly happens when a small- to medium-sized entrepreneur enters business with an established, large and reputable company? Is there really a possibility for both to profit from a win-win business arrangement?  

At CIMMYT, a nonprofit international agricultural research organization for sustainable development, we believe that several regions in Mexico are ripe for this type of business relationship between smallholder farmers and leading domestic and multinational agri-food companies. Once both sides see beyond common misconceptions, for example, that smallholder farmers lack the capacities and resources to engage in professional procurement agreements, or that big companies only look for large margin profits, there are sizeble business opportunities to engage in. 

Since 2018, CIMMYT has been working with grain growers and food companies to explore and materialize sourcing agreements that greatly benefit both ends of the food production chain. We have focused on the two key staple crops in which we have more research and capacity development experience: maize and wheat. Both crops are crucial to Mexico’s (and the world’s) food security. For that reason, it has been relatively easy to find the common ground for mutually beneficial engagement between grain producers and processing companies that commercialize a range of products for human and animal consumption. 

The key to these successful, responsible-sourcing partnerships has been a commitment to sustainability by which farmers innovate and adopt sustainable intensification practices based on conservation agriculture, more commonly referred to as regenerative agriculture, to transform their food production units into more productive, equitable and resilient systems.  On the other hand, food processing companies commit to supporting these innovative farmers by purchasing their sustainably produced grain at competitive prices in a rather changing or uncertain market. The incentive for both sellers and buyers is the certainty that the grain traded meets the quality and environmental standards that the Mexican market increasingly demands. At CIMMYT, our responsibility is to work together with local farmers to make sure that they achieve that transformation to sustainability, resilience and inclusion, and that they also meet the companies’ quality processing standards. 

The Results

Over the past five years, more than 650,000 tons of maize, and more than 500,000 tons of wheat, have been grown and commercialized under these responsible sourcing practices in Mexico. Over this period, more than 6,500 small- and medium-sized maize and wheat farmers growing crops on more than 85,000 hectares in Mexico have sold their grain to five leading food and beverage companies: Bimbo, Heineken, Ingredion, Kellogg Mexico and Nestlé. 

Beyond the volume of grain produced and sold, and the hectares grown under regenerative agriculture, there are substantial environmental and monetary benefits to consider. For example, the farmers supplying Bimbo with  wheat grain from Sinaloa and Sonora, have cut their greenhouse gas emissions by between 15 to 20% after substituting traditional farming practices with regenerative agriculture. Similarly, barley growers supplying Heineken in the  Bajio region have cut their water use by 20% saving more than 2.8 cubic meters of water between 2018 and 2022. Notwithstanding the adoption of water-conserving practices, their yields increased by 15% over the same period thanks to the adoption of sustainable farming practices. Similarly, more than 400 farmers supplying maize grain to Nestlé have seen their average productivity and profitability increase by 30% since 2018.

More recently, we launched a project with MARS Petcare Mexico that seeks to decarbonize their grain supply chain in Queretaro by facilitating the transition to regenerative agriculture for more than 200 farmers that supply them with over 30,000 tons of white maize. There are still plenty of opportunities for multiplying responsible sourcing initiatives across Mexico, and for scaling up to other countries and continents the benefits that they bring to farmers, processing companies and, ultimately, consumers. At CIMMYT, we are ready to explore and embark on these exciting projects that genuinely create pathways to responsible production and consumption, in line with the United Nations 2030 Agenda of Sustainable Development Goals. 

Bram Govaerts is director general of CIMMYT’ He is an international authority in maize, wheat and associated cropping systems who works for a successful transition to sustainable intensification of small-scale farming in Africa, Asia and Latin America. Govaerts advises public, private and social organizations worldwide and is an active member of research groups and associations, including the A. D. White Professor-at-Large program of Cornell University.