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ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
Benefits and challenges for wet mill use in
the coffee sector
Seneshaw Tamru and ...
1. Introduction
• Global market shifting towards ‘buyer-driven’ value chains
• Buyers increasingly requesting quality stan...
Coffee value (quality) depends importantly on
the type of processing: i.e. ‘wet’ or ‘dry’.
• Washing - wet processing: fre...
• Washed coffee sold in
international markets with a
premium of more than 20%.
• However, only about 30% of
Ethiopia’s cof...
2. Problem identification
It seems that we might have underused capacity of
wet mills (in some areas)
26,025
34,111
25,415...
2. Problem identification
Households that have possibility to sell to wet mills, do not always sell to them:
there is a la...
3. Propositions
Five challenges that might possibly explain low level of selling coffee in
red berries by the farmer
• Cha...
Challenge 1 : Presence washing stations
Distance matters. The further away, the lower share of red cherries sold
0
50
100
...
Challenge 2: Beliefs on Rewards
Not all farmers convinced that selling red cherries is more profitable
62%
35%
2% 1%
Do yo...
Producer price trends
05
10152025
2006m1 2008m1 2010m1 2012m1 2014m1
period
Jima red Jima dry
Nekemte red Nekemte dry
Rewa...
Challenge 3: Theft issues
If red cherries harvested too early, not suitable for washing
4.1
2.0
1.5
2.0
0.0
0.5
1.0
1.5
2....
Challenge 4: Lack of savings instruments
Dried cherries can be kept as savings (red cherries have to be sold at once)
91.9...
Challenge 4: Lack of saving instruments
Little access to formal institutions but those with access, seemingly
hesitant to ...
Challenge 5: Labor requirements
Red cherries require more effort in marketing
Labor requirements Unit
Red Dry T-test diffe...
Regression analysis
• Lack of access to wet mills (in close proximity)
• Fear of theft
• Government’s action of setting pr...
5. Policy Implications
Higher sales to wet mills can be achieved by:
• Designing ways to improve access to wet mill for fa...
Thank you!
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Benefits and challenges for wet mill use in the coffee sector

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Benefits and challenges for wet mill use in the coffee sector

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Benefits and challenges for wet mill use in the coffee sector

  1. 1. ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE Benefits and challenges for wet mill use in the coffee sector Seneshaw Tamru and Bart Minten IFPRI ESSP Ethiopia’s coffee value chain: Evidence towards improved investments and policies Addis Ababa Hilton September 15, 2015 Addis Ababa 1
  2. 2. 1. Introduction • Global market shifting towards ‘buyer-driven’ value chains • Buyers increasingly requesting quality standards • Producers required to adhere to stringent quality and safety standards and regulations in these markets • Buyers are willing to premiums for added quality • For coffee, value can be added in such ways as: • Washing • Specialty production • Environmental sustainability • Organic production • Produce’s origin and characteristics • In this paper, we are looking at the issue of washing
  3. 3. Coffee value (quality) depends importantly on the type of processing: i.e. ‘wet’ or ‘dry’. • Washing - wet processing: fresh red berries are de- pulped, fermented and washed using wet-mill machines. - Red cherries delivered to washing stations within 10 -12 hours of picking - KEY: Farmers need to sell their coffee in red berries • Dry processing: berries are dried, often in the house of the farmer, and hulled using hullers - Mostly very traditional
  4. 4. • Washed coffee sold in international markets with a premium of more than 20%. • However, only about 30% of Ethiopia’s coffee export is washed (and share is constant over time) • The small-scale coffee farmers, processors, exporters, and the country are missing out on sizable opportunity of commanding higher rewards. 0 .2.4.6.8 1 Density 0 1 2 3 4 USD/lb unwashed washed Kdensity plot of prices of washed vs unwashed
  5. 5. 2. Problem identification It seems that we might have underused capacity of wet mills (in some areas) 26,025 34,111 25,415 4,854 2,904 5,483 RED CHERRY WASHED WHOLE DRIED PROCESSING VERSUS USED CAPACITY (QUINTALS) Maximum capacity Used capacity Capacity (Average) Unit Wet mills Dry mills Number of mills owned per sampled households Number 1.4 1.3
  6. 6. 2. Problem identification Households that have possibility to sell to wet mills, do not always sell to them: there is a large gap Question: What are the perceived benefits and constraints to the sales of red cherries by farmers?
  7. 7. 3. Propositions Five challenges that might possibly explain low level of selling coffee in red berries by the farmer • Challenge 1 : Presence washing stations • Challenge 2 : Volatility in prices and rewards • Challenge 3 : Fear of theft • Challenge 4 : Lack of savings instruments • Challenge 5 : Labor requirements (Marketing costs)
  8. 8. Challenge 1 : Presence washing stations Distance matters. The further away, the lower share of red cherries sold 0 50 100 0 50100150200 0 50100150200 0 50100150200 0 50100150200 0 50100150200 0 50100150200 Sidama Yirgachefe Jimma Nekemte Harar Total % of red berries sales Fitted values (mean) time_nearest_wetmill
  9. 9. Challenge 2: Beliefs on Rewards Not all farmers convinced that selling red cherries is more profitable 62% 35% 2% 1% Do you think that it is more profitable to sell coffee as dried berries than as red? All Farmers Dried cherries more profitable Red cherries more profitable The same It depends from year to year 54% 43% 2% 1% Farmers with access to sell in red Zone Sidama Yirgachefe Jimma Nekemte Harar Overall Average (Birr/kg) 24.5 21.4 24.1 21.8 24.1 23.3 Inyour opinion,if the price of redberries was 10 Birr per kg,the price of driedberries shouldbe ______ Birr per kgto be equally proftable.
  10. 10. Producer price trends 05 10152025 2006m1 2008m1 2010m1 2012m1 2014m1 period Jima red Jima dry Nekemte red Nekemte dry Rewards of red vs dried berries:2006-2013
  11. 11. Challenge 3: Theft issues If red cherries harvested too early, not suitable for washing 4.1 2.0 1.5 2.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 harvest coffee beans earlier/unripe -afraid of theft? harvest coffee beans earlier/unripe- afraid of them being eaten by animals? % of berries stolen by thieves? % of berries eaten by monkeys/apes? Theft issues (%)
  12. 12. Challenge 4: Lack of savings instruments Dried cherries can be kept as savings (red cherries have to be sold at once) 91.9 16.5 16.2 3.0 2.9 4.8 6.9 0 10 20 30 40 50 60 70 80 90 100 For savings bad quality (e.g. picked from the ground etc.) late ripening and I could not sell them anymore as red berries lack of labor for timely red berry harvesting I like to spread out my income over the year harvest early because of fear of theft not enough buyers of red berries Percent Reasons for not selling as red cherries Yes
  13. 13. Challenge 4: Lack of saving instruments Little access to formal institutions but those with access, seemingly hesitant to use 86.8 31.1 11.3 64.8 14.4 16.9 0 20 40 60 80 100 Local Savings Savings & credit assoc. Bank/MFI ACCESS TO SAVING FORMS % of farmers having access to saving instruments in the kebele % of farmers using this saving form 15 17 19 0 5 10 15 20 25 Local Savings Savings & credit assoc. Bank/MFI If saving form is not available, distance to the nearest one 75.7 19.2 4.7 “I prefer selling coffee in dried form instead of red berries because I can spread out my income that way (it is a way of saving)” Yes, I agree No, I disagree It depends
  14. 14. Challenge 5: Labor requirements Red cherries require more effort in marketing Labor requirements Unit Red Dry T-test difference Mean Mean Mean (difference) Quantity sold per transaction kgs 53.4 235.8 -182*** Harvesting cost (labor) birr 1427.7 1398.6 29* Average Marketing costs (transport cost ) birr/kg 0.186 0.118 0.068*** ***, **, * significant at 1%, 5%, and 10% significant levels respectively
  15. 15. Regression analysis • Lack of access to wet mills (in close proximity) • Fear of theft • Government’s action of setting prices for red berries • Not enough red berry buyers • Perception of farmers that dry is more profitable • Considering the dry coffee as a saving mechanism • Government’s deciding selling date • Source of information through radio • Daily wage rates • Source of info through mobile phones • Reduce the likelihood and/or quantity of red berries sales • Increase the likelihood of selling in red-berries. • Raise the quantity of red berries sales.
  16. 16. 5. Policy Implications Higher sales to wet mills can be achieved by: • Designing ways to improve access to wet mill for farmers (encourage further private investors and cooperatives) • Encourage formal saving institutions (Saving & Credit Associations, Microfinance Institutions and Banks) • Ensure quality improvement trainings to farmers • Encourage better price transmission for better incentives • Better information dissemination mechanisms
  17. 17. Thank you!

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