DESIRABLE ELEMENTS OF A RAW MATERIAL PRICING SYSTEM

• The price paid to the smallholders should be linked to the market price of the end product, eg with a first payment on delivery designed to cover production costs, and a second payment at the end of the season reflecting the average price realized
• The smallholders should have a stake in the profitability of the company, e.g. through profit-sharing schemes, share allocation, etc.
• Bonus payments should be made for quantities of crop delivered and quality standards achieved above targeted levels
• Bonuses or discounted interest rates should be applied to smallholders repaying debts early

Related Information: Essential and optional elements of a pricing system, Sample smallholder price formula