Objective 1: Improve the capacity of research and extension services in the cocoa and coconut industries for meeting the needs of smallholders.
Considerable progress has been made towards understanding the factors affecting smallholder productivity and the uptake of new technologies, and a detailed examination of smallholder agronomic and farm management practices is underway. Two sets of weekly surveys of Bailu and Tabaule smallholders in ENB have been completed: the first in October-November, 2003; and the second, in April-May 2004. In addition a one-off survey of 80 smallholder growers in Bailu and Tabaule was undertaken by Vudal University students in May 2004.
Data analysis is underway and will be used to inform fieldwork later this year. While an initial report is being written from these data, some key issues emerging from the work to date include the following.
Very little block management is undertaken by smallholders and this appears to be a major constraint on production. In a survey of 80 cocoa smallholders, poor block management was mentioned repeatedly. Many growers had lost trees through pests and disease. Smallholders identified four main constraints/problems on cocoa production. In declining order of importance they were:

Poor block condition (pests and disease, overgrown, etc);
Stealing of pods;
Labour shortages;
Lack knowledge of proper management practices.

Objective 2: Evaluate OPIC's Mobile Card trial at Hoskins for potential introduction to other smallholder oil palm areas.
An evaluation of the Mobile Card trial amongst oil palm smallholders at Hoskins was completed in early 2004, and a report written (attached). The report has been widely circulated amongst industry stakeholders. The oil palm companies at Bialla and Popondetta are looking at ways of implementing the payment system for their smallholders.
The payment trial at Hoskins was designed to increase the supply of labour and so raise smallholder productivity. The trial was established jointly by OPRA and OPIC and ran for 15 months from July 2002 on LSS and VOP blocks at Hoskins.
There was a significant increase in oil palm production. Monthly production for trial blocks increased from 75% of the LSS/VOP average without contract labour to 113% during months when contract labour was employed. Productivity increased on 90% of blocks in the trial with 30% improving by more than 50 percentage points
In addition to productivity gains, those participating in the trial experienced considerable socio-economic benefits. These included:

Utilisation of under-employed labour.
Improved access to labour for elderly and disabled growers.
Greater financial security for married sons and caretakers.
More equal distribution of income within households.
Less social conflict on blocks.

Objective 3: Introduce and test in the smallholder cocoa sector payment systems that have proven successful in the oil palm industry for mobilising labour by guaranteeing payment of that labour.
There has been considerable work and discussion with CCI regarding the introduction of a version of the Mobile Card in a trial of the Nucleus Estate at Bailu Plantation, ENB. While some work has commenced on this initiative (e.g., establishment of cocoa nursery, and renegotiation of debt levels with the PNG Rural Development Bank), the project is waiting for the Lands Department to complete a survey and subdivision of the estate.

Objective 1: Improve the capacity of research and extension services in the cocoa and coconut industries for meeting the needs of smallholders.

Smallholder interviews and surveys examining smallholder production and productivity were completed in June 2004. The initial findings demonstrated that labour shortages and inadequate management of cocoa blocks, especially pruning and shade control, are major constraints on production. Since June 2004, attention has shifted towards understanding the complex relationships between the supply of smallholder household labour, farm management practices and pest and disease problems. To investigate these relationships we undertook cocoa block management surveys to complement the smallholder interview data collected earlier in the project.

A pest and disease survey of 98 cocoa blocks at two villages on the Gazelle Peninsula in December 2004 and January 2005 revealed very low levels of block maintenance and high pest and disease rates. Almost half of the blocks were weeded adequately or better, although a substantial proportion were less than adequately pruned (76%) or managed for shade (72%). As a consequence, mature cocoa blocks are typically characterised by the tall and dense growth of cocoa trees under a heavy shade canopy. Farm visits and smallholder interviews also revealed that most of the slashing of weeds and grasses on cocoa blocks occurs at the beginning of the cocoa flush period. This weeding is to improve access for harvesting during the flush period and not for reasons of block sanitation.

The cocoa block surveys and farm visits also indicate that pest and disease management is minimal, despite the widespread recognition of pest and disease problems amongst growers. The two major known diseases of cocoa in PNG, Vascular Streak Disease and Canker, were common with only 8% and 26% of trees, respectively, being free of these diseases (Pink Disease was absent on 96% of surveyed trees). Considerable evidence of underharvesting was also found in the cocoa block surveys, as indicated by a relatively high incidence of dry pod (29% of full size pods). Observations during the surveys suggest that dry pod is more common in the upper canopy of mature cocoa trees where harvesting is more difficult and time consuming, thus implicating labour supply constraints in its incidence and distribution.

Interview data together with general observations and data derived from the block management surveys suggest that the age of a cocoa block is a key determinant of block condition, household labour inputs and the harvesting strategies of smallholders: together they influence smallholder block productivity. Because of a lack of pruning and shade control, many cocoa blocks move prematurely into an unproductive stage where the block is overgrown and production is very low. Despite recent increases in yields per hectare obtained from new high yielding cocoa material, the results of the study demonstrate that there remains considerable potential for further rises in smallholder productivity without the need to expand the area under cultivation. The project is now examining ways to extend the productive stage of cocoa blocks through strategies to promote pruning and shade control (see Section 4.1).

Objective 2: Evaluate OPIC's Mobile Card trial at Hoskins for potential introduction to other smallholder oil palm areas.

After completing the evaluation of the Mobile Card trial at Hoskins (see Annual Report to 30 June 2004), which indicated very positive socio-economic benefits for smallholders, work commenced in 2005 to introduce and test the Mobile Card amongst oil palm smallholders at the Bialla scheme in West New Britain Province. The team has held discussions with the oil palm extension agency (OPIC), the oil palm milling company (Hargy Oil Palm Limited) and PNGOPRA. Both the General Manager of Hargy Oil Palms and the Project Manager of OPIC are very supportive of the trial which is scheduled to begin in early 2006.

Objective 3: Introduce and test in the smallholder cocoa sector payment systems that have proven successful in the oil palm industry for mobilising labour by guaranteeing payment of that labour.

Considerable progress has been made on examining the potential for the introduction of innovative payment mechanisms that raise the incomes and productivity of cocoa smallholders. However, because there are numerous competing buyers in the cocoa industry it is more difficult to establish these new payment mechanisms than in the oil palm industry where a single buyer services each region. Our discussions with key stakeholders in the cocoa industry indicate that the introduction of any new smallholder payment schemes to raise productivity would need to be established in areas near centralised processing facilities such as nucleus estate arrangements, or where a single company or buyer/processor dominates a particular district or village.

In the initial stages of the research we concentrated on Bailu Estate near Kokopo, East New Britain (ENB), where a large plantation estate had been returned to the customary landowners. However, protracted land disputes amongst landowners and a dispute with the Rural Development Bank have delayed this work, with the result that we are now concentrating our efforts on three other private sector nucleus estate models that have been developed for cocoa. The first is in the remote Bainings region of ENB and is managed by Agmark (the largest cocoa buyer in Papua New Guinea); the second has recently been established at Tokiala on the Gazelle Peninsula, also managed by Agmark; and the third is a small village-based company near Kokopo - Bitagalip holdings.

The Agmark model is similar to the traditional nucleus estate model with the company buying cocoa from smallholders surrounding the company plantation. Agmark provides extension services, planting material and other support (e.g., transport, credit and extension for other crops such as vanilla). In November last year the team completed an evaluation of the Agmark model at Stockholm in the Bainings, ENB, which included smallholder household interviews, community focus group meetings, interviews with Agmark staff and the collection of smallholder production and income data. In June this year, the research team began work at Tokiala and conducted preliminary interviews with the Agmark Project Manager and meetings with the community to form the basis of a more detailed evaluation of Agmark's partnership with smallholders surrounding Agmark's Tokiala plantation. The latter evaluation will run from September 2005 to February 2006 and involves smallholder surveys and interviews with the 38 leaseholders making up the Tokiala land settlement scheme. Smallholder production and income data will be provided by Agmark.

The village based model at Bitagalip is progressing more slowly because the service provider has much less resources than Agmark. Approximately 60 smallholders sell wet bean to the village service provider and smallholders are receiving support for block rehabilitation. Although still in its early days, this village model is proving relatively successful. CCI project staff have provided training and assisted the service provider to establish a nursery of hybrid cocoa and a budwood garden for hybrid clones. A replanting program has been initiated and is well under way. Smallholder income and production data have been collected at Bitagalip by CCI staff since November 2004; monitoring will continue until May 2006.

While the first two Agmark models are similar, in that a major company is buying cocoa and supplying services to smallholders, the third is very different because the service provider is from the same village as the smallholders. Both models offer promising opportunities for the introduction and testing of new payment mechanisms.

In February/March 2006 cocoa block surveys of pests and diseases will be undertaken of the 38 smallholder blocks at Tokiala and a subsample of the smallholder blocks at Bitagalip (n=40). This will be carried out with team members of the related project PHT/2003/015 "Enhancing cocoa production through improvement of disease control in Papua New Guinea". It is planned to trial new IDM initiatives such as strategies for black pod removal using youth and women's groups funded by new payment mechanisms organised by the service providers.

This project aims to raise smallholder productivity in the cocoa and oil palm industries by: 1) improving the capacity of research and extension services; and 2) by introducing and testing new payment mechanisms for smallholders that enhance the participation of youth and women in cash crop production. The research to date has revealed that labour shortages in both cocoa and oil palm and poor block maintenance, especially in cocoa, are key constraints limiting smallholder productivity. A central factor limiting the supply of labour is the non-payment or under-payment of family and hired labour. The project is developing and testing initiatives to improve the remuneration of household and hired labour in oil palm and cocoa smallholder production. The starting point for these initiatives was to identify the key principles underpinning the successful Mama Lus Frut Scheme introduced in 1997 in oil palm at Hoskins, West New Britain (WNB) where women were paid separately for the collection of loose fruit (ripe oil palm fruitlets). By guaranteeing women remuneration of their labour, women expanded their role in oil palm production, thereby generating considerable income and social benefits for themselves and their families. The principles underpinning the Mama Lus Frut scheme were then adapted for the payment of youth and hired labour through the "Mobile Card Scheme" which was trialled amongst Hoskins oil palm smallholders. The Mobile Card involved paying family and hired labour a portion of the harvested fruit thereby circumventing the problem of payment uncertainty associated with cash payments for labour. By guaranteeing payment of labour, disincentives to the mobilisation of family and hired labour were greatly reduced thereby significantly raising smallholder productivity and incomes. For further information see http://espace.lis.curtin.edu.au/archive/00000236/
During 2005 and 2006 it was intended to adapt and trial the new payment initiative amongst cocoa growers in East New Britain (ENB) and further refine and test the payment method amongst oil palm smallholders at Bialla, WNB. In late 2005, work commenced amongst cocoa growers near Tokiala Plantation in ENB, in an initiative supported by New Guinea Island Produce (NGIP) (Tokiala Plantation is owned by NGIP). A baseline survey involving a demographic and livelihood survey was undertaken amongst smallholder cocoa growers who were to participate in a trial involving the private sector (NGIP) in the delivery of extension services including the testing of a new payment mechanism to raise smallholder productivity. However, the outbreak in ENB of Cocoa Pod Borer (CPB) in early 2006 meant that the work on cocoa was suspended for the rest of the year as CCI focused all its efforts and resources on the eradication of this major pest. The work in cocoa will recommence in early 2007.
With the delay in the cocoa research program arising from the CPB outbreak, the new payment trial amongst oil palm smallholders at Bialla was brought forward. The Bialla trial builds on the Hoskins trail and includes: village oil palm (VOP) growers; blocks managed by "caretakers"; labour-short blocks of elderly growers in the older land settlement subdivisions where replanting has been delayed; and labour-short blocks occupied by young families.
The earlier Mobile Card trial amongst Hoskins VOP growers revealed that some blockholders were reluctant to use the same contract labourer for an extended period to prevent the labourer building up "ownership" rights in the block. To circumvent this problem, the Bialla trial is employing labouring groups on VOP blocks - youth, church and sports groups - because such contract groups do not undermine the tenure rights of the blockholder.
In February 2006 the Mobile Card trial began with the recruitment of two extension officers and the implementation of an awareness program amongst growers. By May 2006 Hargy Oil Palms Ltd had incorporated the percentage split between the blockholder and the Mobile Card worker into their smallholder payment system. In June 2006, 12 blocks were participating in the trial and this number will rise to 40 by the end of 2006. A preliminary assessment of these 12 blocks indicate that production and block management are steadily improving, and the new payment system introduced into the company payment system is operating successfully. The results of a visit to the Bialla trial by one of the CCI research collaborators to briefly assess the trial will be used in the design of the Mobile Card trial in the cocoa smallholder sector.
During the year progress was also made on examining strategies to improve the capacity of research and extension services in the cocoa sector. Two public seminars were held at CCI and with the Cocoa Board in ENB outlining the results of the smallholder socio-economic studies and proposed recommendations to improve research and extension services. Feedback from these seminars are currently being incorporated into the draft smallholder cocoa report to be completed in January, 2007. Also, fruitful discussions with the private sector have continued to assist in developing and evaluating new extension models involving partnerships between smallholder growers/customary landowners and the private sector. For example, in the cocoa sector, NGIP is servicing smallholders in ENB by providing planting materials, tools and extension advice. Thus, rather than limiting its activities to buying cocoa, as has been the case in the past, the company is now becoming more involved in supporting smallholders to raise productivity and increase or rehabilitate the area under cocoa production. This has the potential to substantially increase smallholder incomes, particularly in more remote areas where extension and support services are virtually absent. In 2006 the research team visited WNB to assess similar models currently being established for cocoa growers by Kimbe Bay Shipping Agency (KBSA). These new forms of extension tend to be self-sustaining (largely self-funding), and they are raising smallholder productivity and improving the quality of product for international markets. As well as the social benefits arising from higher smallholder incomes associated with increased productivity, some of these new initiatives are also generating additional social benefits such as improved participation rates of women in export cash cropping and increased economic opportunities for rural youth.
Finally, the research team is currently organising, in association with the Cocoa Coconut Institute of PNG and the PNG Oil Palm Research Association, a joint one-day workshop in Port Moresby in March 2007 to "showcase" successful initiatives in agricultural extension involving partnerships between smallholders and the private sector in PNG's main export tree crops. The aim of the workshop is to identify key principles that have contributed to the success of each new extension initiative, and to incorporate these into a set of guidelines to assist smallholders and industry organisations develop partnerships for the delivery of effective extension in a range of tree-crop export industries.