The bittersweet economics of different cacao production systems in Colombia, Ecuador and Peru

Cacao production takes place in diverse environments and agricultural systems, with its performance and income generation potential depending on multiple contextual factors. The crop has been promoted among smallholders in South America as a driver for sustainable rural development, but a systematic comparison of the economic performance of diverse cacao production systems in this region was missing, which led to a lack of consistency and clarity on the conditions that enable the crops' success in terms of profitability and income generation for farmers. We aimed to understand the economic performance of different cacao production systems from Colombia, Ecuador and Perú, and the factors that affect their profitability and income generation potential with regards to poverty and living income benchmarks under varying contexts. We employed the ‘typical farm approach’ to perform a comparative analysis of fifteen different cacao production systems from six distinct agroecological regions from Colombia, Ecuador and Perú. Eight out of the fifteen systems analyzed were found to be economically viable, while the remaining systems generate considerable losses. Positive outcomes depend on a combination of factors including sufficient prices, yields and land availability, adequate labor allocation, timely diversification, subsidies and low costs of productive factors. Considering those factors, we identified minimum conditions for achieving profitability and living incomes. Our findings provide essential information to decision makers on the limitations of cacao productive systems for achieving a living income, as well as the type of diversification, minimum prices, area and yields that could enhance their economic sustainability. Based on our findings, we discuss the relevance of subsidies for improving the system's performance. Finally, we suggest the use of different indicators and standardized assumptions to allow more reliable comparisons between cacao production systems. • We compare the financial performance of fifteen cacao production systems from three South American countries. • Using consistent parameters and assumptions, we evaluate which factors are more relevant for farm's economic success. • Different systems can generate a living income, but a combination of various favorable conditions is required. • High prices, high yields, diversification and minimum farm size are critical for generating a living income