Farm Productivity and Value Chain Analysis of Coffee

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Published on International Journal of Agriculture & Agribusiness
ISSN: 2391-3991, Volume 2, Issue 1, page 45 – 69
Publication Date: 11 February 2019

Hika Wana & Anteneh Temesgen

Department of Agricultural Economics, Wollega university
Wollega Zone, Oromia Region, Ethiopia

Journal Full Text PDF: Farm Productivity and Value Chain Analysis of Coffee (Study in Nejo District of West Wollega, Wollega Zone, Oromia Region of Ethiopia).

The contribution of wollega coffee to the total country’s export is high. Nejo is the very well-known district having large hectares of land for coffee production. However, benefit of coffee production in Nejo woreda tend to decline mainly due to low level of productivity, poor product handling practices, high input prices and limited access to market information. Therefore, coffee had to face several challenges in production and marketing. Hence, the study was designed to identify factors affecting coffee productivity; describe the value additions of the different actors in the coffee value chain; examine marketing costs and margins along the coffee value chains and identify constraints in the coffee value chains. The study was based on data generated from 123 coffee producers, 18 collectors, 7wholesaler, and 2 exporters. Descriptive statistics and margin analysis were employed in the process of examining and describing farm household characteristics, coffee value chains actors, their marketing margin and role of marketing intermediaries and their characteristics. Multiple linear regression model with Cobb-Douglas production function was used to identify and estimate the effects of socioeconomic factors on coffee productivity. Value chain analysis showed that the major actors in coffee value chains in the study area are farmers, collectors, processors and exporters. With regard to gross margin the study also showed that the share of producers is 58.59% of the export price at f.o.b. price. The gross marketing margin of collectors, Wholesaler and exporters were 7%, 10.5% and 18.2% respectively. Results obtained from the model indicated that among the explanatory variables, farm size, education level of household, termite incidence and total livestock unit were found to be statistically significant factors affecting coffee productivity. Among the significant variables farm size and level of education were found to be positively related to coffee productivity. Therefore, government authorities and other concerned bodies should take into consideration the above mentioned socioeconomic and institutional factors to improve the productivity of coffee in the study area.

Keywords: Coffee, value chain, value chain actors, productivity, gross margin.

1. Introduction
1.1. Background
Coffee is the world’s most widely traded tropical product, produced in over 50 developing countries. It makes an important contribution to socio-economic development and poverty alleviation and is of exceptional importance to exporting countries, some of which rely on coffee for over half their export earnings. For the 25 million smallholder farmers and their families who produce 80% of world production, coffee is an important source of cash income and responsible for significant employment (ICO, 2010).
It is also one of the most important commodities in the international agricultural trade, representing a significant source of income to several coffee producing countries including Ethiopia. Coffee is exported to more than 165 countries and therefore generated US$15.2 billion for producing countries in 2007/08. It contributed to 52% of Burundi’s, 23% Honduran’s, 17%, Uganda’s and 17% of Nicaragua’s earnings from export. World coffee consumption has been increasing at a steady annual growth rate of 2.5% per annum, from 104.6 million bags in 2000 to 128 million bags in 2008. Consumption is concentrated in the mature markets of Western Europe and North America, but is now growing faster in emerging markets, such as those in Eastern Europe and Asia, and in the coffee producing countries themselves (ICO, 2009).
The amount of Cash crop production was decreased at increasing rate from the year of 2005/06 (1998 E.C) to 2008/09 (2001 E.C) and it starts increasing up to 2014/15(2007 E.C) in SNNP, Oromia and Amhara regions. In general, the cash crop production of Ethiopia is mainly comes from SNNP and Oromia region. Most of the Cash crops growing in Ethiopia are namely, coffee, sesame, nuege chat, sugarcane & Hops. Wollega coffee is produced in western Ethiopia found in Oromia Region. The medium-to-bold bean is mainly known for its fruity taste. It has a greenish-brownish color, with good acidity and body. Many roasters put this flavor in their blends, though it can also be sold as an original gourmet or special-origin flavor. In Wollega, coffee is produced in highly diversified with boreal forest especially it’s not uncommon in Qellem and West Wollega were almost all production is forest and semi forest coffee. In west wollega production of coffee and sesame production and gold mining is the common activities that surrounding communities are based for both consumption and income in their daily life.

1.2. Statement of the Problem
The importance of coffee in the world economy is clear because it is one of the most valuable primary products in world trade. Its cultivation, processing, trading, transportation and marketing provide employment for millions of people worldwide. Coffee is Ethiopia’s number one source of export revenue. According to CSA (2016), From 2014/15 to 2015/16, total production of coffee has increased from 3.92 million quintals to 4.2 million quintals and productivity has improved only by 2% at national level. The same source indicated that in Oromia region, the total area covered by coffee in the production year of 2015/16, were 381,514.61 ha of land at national level. The total production of coffee in the same year at Oromia region was 2.86 million qt. In the same year, the total productivity of the crop at Regional level was 7.51 qt per ha. This indicates that oromia Region has always plays a great role in coffee production than other region in Ethiopia. Nejo district, which is one of the districts of West Wollega zone, is known by coffee production. Out of the total 72601.7 hectares of land in the district, land used for cultivation occupies 40 percent of total land in hectares. As coffee is concerned for this study, it occupies 22.3% percent of the total cultivable land of the district. Farmers in the district produce coffee and supply it to Nejo town market wholesaler, broker and retailer and to other domestic consumers. In 2016/17 production year, the total production and productivity of Coffee in the district was 116,245 qt and 5.2 qt per ha respectively.
The main reasons for the low yield are poor management practices, limited supply of improved coffee cultivars for each of agro-ecologies of the country, disease problems, weak extension system, low level of adoption of improved technologies, and lack of incentives to produce more, owing to the low and fluctuating coffee price. In addition to the poor yield, coffee price are very volatile. Price volatility makes the life of coffee farmers difficult because they never know in advance what the international price will be when the harvest comes, and so cannot plan their production accordingly. As coffee yields are vulnerable to temperature as well as disease, the volume of production can vary widely from one year to the other (Slob, 2006). The smallholder producers’ market access is ……..