Dynamics in coffee sector eea conference 16 june 2014
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Dynamics in coffee sector eea conference 16 june 2014

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Dynamics in coffee sector eea conference 16 june 2014

Dynamics in coffee sector eea conference 16 june 2014

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  • 2. World coffee price were five times higher in 2011 than in 2002.

Dynamics in coffee sector eea conference 16 june 2014 Dynamics in coffee sector eea conference 16 june 2014 Presentation Transcript

  • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE DYNAMICS IN COFFEE PRODUCTION AND MARKETING IN ETHIOPIA Ermias Engida, Mekdem Dereje, Tadesse Kuma and Bart Minten IFPRI ESSP 19th Annual Conference of the African Region Chapter of the Econometric Society and 12th International Conference on the Ethiopian Economy. July 19, 2014 Addis Ababa 1
  • 2 1. Introduction • Coffee very important commodity in the world • Important changes internationally: 1. increasing willingness to pay for coffee, specialty coffee on the rise, increasing demand for quality coffee, increasing market differentiation and segmentation 2. large price changes • Important changes locally (ECX, primary marketing centers, emergence of cooperatives) • Purpose of study: Understand how production and marketing is changing upstream locally
  • 3 2. Background coffee in Ethiopia • Coffee major export product from Ethiopia • Ethiopia endowed with very good production environment • Ethiopia the country of origin of Coffea Arabica; large diversity of coffees found • 4 different types of production systems: forest (10% of production), semi-forest (35%), garden (50%), and plantation (5%)
  • 4 2. Background coffee in Ethiopia
  • 3. Data • Focus on the major 12 coffee producing zones. 5 strata based on the 5 coffee varieties of Ethiopia (Sidama, Yirgachefe, Jimma, Nekemte and Harar) • 16 kebeles from each variety (total of 80 kebeles) randomly selected • Total of 1600 coffee farmers and 206 processors were randomly sampled with an even distribution among each variety (320 farmers each strata) • Survey fielded in February 2014
  • 4. Production practices • Changes in management practices: significant improvements over time % of farmers At the time of the survey Ten years earlier Stumping of trees 3 1 Mulching 44 22 Pruning 37 16 Compost use (% land) 9 2 Tilling 77 72 Number of weeding 2.07 1.93
  • 4. Production practices • Modern input use: very low; however, increasing improved seedling adoption At the time of the survey Ten years earlier Improved seedlings (% of land) 30 23 Chemical fertilize use (kgs/ha) 4 8 Herbicide use (% of farmers) 1 1 Pesticide use (% of farmers) 1 2
  • 4. Production practices • Improvement in access to extension agents as well as in perceived quality of extension advice At the time of the survey Ten years earlier Availability of coffee extension agents … - Very available (%) - A bit available (%) - Not available (%) - Do not know (%) 46 36 13 5 12 46 29 13 Quality of extension advice on coffee related issues: - Very good (%) - Moderately useful (%) - Not useful (%) - Do not know (%) 48 31 9 12 16 33 21 30
  • 4. Production practices • Despite adoption of improved practices and access to advice, we see few changes in yields (and strong declines in Nekemte and Harar) Yields in whole dried cherries per hectare At the time of the survey Ten years earlier Sidama 8.0 7.2 Yirgacheffe 6.9 6.5 Jimma 10.8 10.5 Nekemte 5.6 11.3 Harar 7.0 11.9
  • 4. Production practices • Less than expected impact on yields: Might be due to issues with diseases and climate change At the time of the survey Ten years earlier For every year,… - One bad year (% farmers) - Two bad years (% farmers) - Other frequency (% farmers) - No difference between years (% of farmers) 39 38 17 6 43 39 7 12 Diseases are a problem: - Big problem (% of farmers) - Small problem (% of farmers) - No problem (% of farmers) 35 46 19 26 49 25
  • 5. Harvest and post-harvest practices • Improvements in harvest and drying methods At the time of the survey Ten years earlier Harvest practices Share of green cherries in coffee harvest (%) Stripping of cherries (% of farmers): - All - Partly - Selective harvest only 4 5 13 82 11 35 40 26 Post-harvest practices Type of drying (% of farmers): - Traditional bed - On a mat or plastic on ground - On bare ground - Other 77 17 3 3 29 8 59 4
  • 6. Changes in marketing • Major policy changes at the marketing level: 1/ the set-up of primary market centers • As stated in the proclamation, all coffee should be traded on these primary marketing centers • Markets should be fenced with specific sheds for different buyers • Only licensed agents of akrabi are allowed to buy coffee at these marketing centers 2/ the set-up of the ECX • All coffee trade by private traders have to go through ECX
  • 6. Changes in marketing • Uneven implementation of policy of primary market centers: large differences by regions and coffee type At the time of the survey Primary marketing centers as place of sale of sales red cherries (%): - Sidama - Yirgacheffe - Jimma - Nekemte - Harar 80 77 14 0 2 Primary marketing centers as place of sale of sales (%): - Red cherries - Dry cherries 56 22
  • 6. Changes in marketing • Large changes in market outlets and role of regular markets; however, village trader still important At the time of the survey Ten years earlier Place of sales of red cherries (%): - Primary marketing center - Regular market - Village trader - Site of mill - Other 56 8 20 15 1 3 2 31 39 1 Place of sales of dried cherries (%): - Primary marketing center - Regular market - Village trader - Site of mill - Other 22 44 26 4 4 2 70 20 4 5
  • 6. Changes in marketing • Improvements in markets overall: farmers trust weighing traders more; have to walk less far; and have option of red berries sales At the time of the survey Ten years earlier Average distance walked (in minutes) to sell: - Red cherries - Dried cherries 27 61 43 84 Farmer trust the weighing of the trader (%) 55 43 Farmers have option to sell red cherries (%) Share of coffee sold as red cherries 43 19 28 13
  • 6. Changes in marketing • Farmers have improved choice for trade and have more options to sell to cooperatives as well At the time of the survey Ten years earlier Farmer has the choice between traders (%): - A lot - A little - No choice 29 38 33 12 35 53 Famer has the option to sell to cooperatives (%): - For those that sell red cherries - For those that sell dried cherries 61 16 56 6
  • 6. Changes in marketing • Price information has improved; however, few farmers have access to ECX information; price information does not lead to quality premiums At the time of the survey Ten years earlier Price information - Farmer has access to price information from radio (%) - Farmer has access to price information from auction/ECX (%) 67 23 47 13 “Better quality coffee gets a premium”: - A lot (% of farmers) - A little (% of farmers) - No premium (% of farmers) 4 7 89 2 5 93
  • 6. Changes in marketing • Some improvements for akrabi/processors, partially due to ECX At the time of the survey Ten years earlier Access to credit (%): - Big problem - Small problem - Not a problem 30 15 55 31 33 36 Incidence where buyer pay/false cheques: - Big problem - Small problem - Not a problem 1 6 92 48 17 35 Incidence of theft during transportation/trade: - Big problem - Small problem - Not a problem 6 15 79 31 25 45
  • 6. Changes in marketing • However, akrabi complain about the increased transaction cost in the system At the time of the survey “Since the ECX, the transaction costs in the coffee trade have increased significantly” (% of akrabi): - Strongly disagree - Disagree - Not sure - Agree - Strongly agree 9 20 15 40 15
  • 7. Conclusions • Important changes are happening in the Ethiopian coffee sector • At the production level, increasing adoption of improved practices, improved good access to extension agents and better harvest and post-harvest practices; however, no major effect on production possibly due to disease problems and climate change • At the marketing level, important changes in markets due to policy of primary marketing centers and ECX • Policy of primary market centers is unevenly implemented over regions and by coffee type
  • 7. Conclusions • Overall, farmers have more choice between traders, have the additional option to sell to cooperatives, have to walk less far for their sales, and sell more washed coffee; however, no perceived quality premium • Akrabi complain less of theft and problems of payments because of ECX; however, there is an issue of transaction costs in the system
  • THANK YOU!!!