The State of the Sector: Reflecting on the impact of volatile commodity prices on small-scale producers

In August, Paul Sablich, Head of Lending at Shared Interest, joined a panel of experts from around the world to discuss insights from this year’s State of the Sector Report, published by the Council on Smallholder Agricultural Finance (CSAF).

CSAF is a global network of social lenders who share knowledge, develop industry standards and promote inclusive finance for ‘The Missing Middle’ : small-and-medium-sized enterprises which are too large for microfinance, but too small or high-risk for traditional banks to lend to, creating a significant funding and support gap.

Shared Interest is a founding member of CSAF. Since its establishment in 2012, CSAF members have collectively lent over $7 billion to more than 1,700 co-operatives and businesses, supporting at least seven million smallholder farmers.

The Impact of Volatile Commodity Prices on Farmers

During the seminar, which was attended by over 100 participants worldwide, each panelist shared their perspectives on the risks and opportunities for impact in the lending sector for agricultural SMEs today.

Paul opened his discussion by spotlighting the impact of volatile commodity prices on agricultural co-operatives and their members in recent times.

“Average coffee prices in 2022 were no more than $2 per pound, whilst in 2024, that increased to $2.60 on average. This is nearly 30 percent more – in one year … After just two months in 2025, we reached a 50-year peak of $4.40 per pound.

“In cocoa, we saw a similar trend. In 2023, we saw prices range from $2,500 to $3,000 per metric tonne, on average … who could have foreseen that cocoa prices would have reached up to $12,000 per metric tonne by April 2024, never seen before in the market?

“What do these gigantic prices mean for agricultural enterprises and SME’s? It is colossal pressure on cash liquidity and produce collection, with even more aggressive competition from coyotes (exploitative middlemen) and intermediaries...”

Finance as a tool to protect producers against price volatility

Although higher commodity prices can be beneficial for farmers, boosting their household income, Paul explained that these prices also demand increased capacity for farmers’ co-operatives – not only to source sufficient working capital and prefinance, but also having it at the right time.

Paul said:

“I always say that money which arrives late, tends to be useless in these commodity markets.”

“Therefore, we collectively as CSAF members have sought to cover those incremental financial needs to the best of our capacities. In the case of Shared Interest, we have lent more to our existing portfolio of customers to help producer groups navigate this high price environment.

“For me, supporting producers in these times means to be capable of acknowledging those needs, acting accordingly and fast. We also see this as a matter of building relationships with co-operatives and agri-SMEs, for their almost-unlimited need for growth.

“Let’s not forget that facilitating trade, especially if it is fair trade, is one of the fundamental tools to alleviate poverty.”

According to Andrea Zinn, Director of CSAF, unpredictable volatility in commodity prices (price risk) ‘has become one of the biggest threats to producer organisations’.

Paul said:

“Co-operatives still need access to sufficient liquidity, but further attention needs to be given to price risk management … we need to keep considering the risk factors and how we can support agri-SMEs to manoeuvre challenges.”

Maria Raurell Carulla, Senior Director of Investments and Risk at MCE Social Capital, said:

“SMEs carry that burden of price volatility independent of pricing being high or low. It is the volatility that puts them at risk. And the critical pressure point here is always the liquidity - businesses need enough cash on hand to pay farmers on time … Especially, when they are competing with other buyers in the region."

Maria provided an example of a Colombian coffee producer her company partners with, which faced a liquidity crunch during peak season. Coffee prices were ‘sky high’, and a season that should have encompassed two or three harvests, condensed and collapsed into one six-week window.

“Farmers were ready to sell – and sell fast. But aggregators and exporters, like this [Colombian] company, didn’t have enough working capital. Many of them in the region had to close down for the season because they could not pay farmers…”

“Only our company stayed open … why? Because of trust. First, the co-operative negotiated delayed payments to farmers. The farmers agreed. Why? Because of the years of fair pricing, reliable payments [and] strong support they had received from that organisation.”

By accepting to delay their own payments, farmers freed up working capital for the co-operative, enabling it to stay open and continue purchasing their coffee. As a result of its reliability, farmers from across the region requested to join the co-operative and solid relationships were built with international buyers.

“What this tells me is that supporting agri-SMEs which prioritise farmer livelihoods is critical … because it can, quite literally, save you the season.”

Unlocking potential through fair finance

Despite this success story, many farmers continue to live below the poverty line and are increasingly exposed to price swings, without a financial cushion to fall back on. Maria affirmed the importance of investing in financial education for farmers to manage this volatility in the long-term. Meanwhile, Andrea added that producer organisations themselves must be supported simultaneously with capacity building efforts to scale this impact.

However, both of these approaches require funding, which has been slashed in recent times as policies shift on global aid. 

Against this backdrop, Shared Interest Society’s financial support of producer organisations is more important than ever, whilst Shared Interest Foundation continues to deliver technical assistance and capacity building as a core component of its field work.

Paul said: 

“Producer groups not only require finance, they also require subsidies, because they truly are in a disadvantaged position to face the multiple challenges the market puts in their way. Climate change, EUDR, US tariffs, organic regulations, volatile prices, shipping issues, the list goes on and on.

“We as financiers need to accompany them for quite a long time until they reach a satisfactory maturity level … Shared Interest [has supported] the smallest crops and agri-SMEs, and we have observed that our funds with those very small producer groups have acted as catalytic capital attracting other investors or lenders, now willing to support those farmer groups.”

“In early 2024, Shared Interest provided working capital to an agri-SME from Rwanda trading in horticulture, which gathers more than 1,600 farmers, of which around 80 percent are women.”

Andrea affirmed the importance of supporting businesses to reach higher levels of maturity, making reference to two case studies featured in ‘The State of the Sector 2025’ report, in which SMEs in Guatamala and Ivory Coast were able to diversify into a second value chain.

Andrea said:

“These exceptional cases are because the SMEs had strong management teams, long-term partners and equity cushions. I think it is important to note that these pieces need to be in place in order for an organisation to have that capacity to pivot and diversify, to create a more sustainable business model.

“Lenders really have a pivotal role to play to accompany these younger and less mature SMEs to get to that exemplary stage."

Invest in a fairer world today

To close the webinar, Paul thanked guests for attending and acknowledged our shared interest and belief in the greater good.

Speaking to guests, Paul said:

“Even if it means sacrificing a little bit of risk or comfort, we take risk, we face them, we do not run away from them, we solve them. We as CSAF members help producer groups to solve them, to become more resilient. Behind that lovely coffee, chocolate or pack of cashew nuts that we all enjoy, there is a smallholder farmer facing myriad difficulties, but it is worth the effort.

Investing in Shared Interest means supporting the livelihoods of farmers and artisans across the globe. It means strengthening businesses, creating opportunities and fighting for trade justice. You can taken the next step and open a Share Account by clicking the button below.

Click here to read CSAF's State of the Sector Report 2025.