Description

Abstract: Coffee is one of the most important export commodities in Guatemala, Honduras, Nicaragua and Vietnam. Unfortunately, a recent decline in the price of coffee due to an oversupply in the world market has dramatically lowered farmgate prices and reduced farmers incomes on coffee-growing countries. By studying and comparing production experiences, this study seeks to identify mechanisms that might permit smallholder coffee farmers to increase efficiency, especially technical efficiency, by optimizing their use of inputs and thereby maximizing their net income.

Data for the study were collected through surveys conducted by CATIE, ANACAFE, IHCAFE, CAFENICA, and the World Bank (2003) in the communities of San Marcos, Huehuetenango, Olancho, El Paraiso, Francisco, Morazan, Matagalpa, Boaco, and Segovia in Guatemala, Honduras, and Nicaragua. The Vietnam survey was conducted by researchers at Nong Lam University under support of USAID in the communities of EaTul, Quang Phu, Eakpam, and Ea Pok. Production parameters and technical efficiency scores are derived and presented to explain patterns of inefficiency.

In addition, a profit model based on production estimates for a representative farm is also presented. Results from the production function suggest that all inputs contribute positively to yield, with the exception of organic fertilizer. In addition, all models imply sharply diminishing returns to increase use of all inputs per hectare. Results from the inefficiency analysis suggest that Guatemalan farmers, on average, were the most technically efficient in the sample, followed by Vietnamese, Nicaraguan and Honduran farmers. It was also found that larger farms were more technically efficient and that higher levels of organic fertilizer and labor were correlated with lower relative technical efficiency. Results from the profit maximization model suggest that farmers in

Guatemala, Honduras, Nicaragua and Vietnam were not behaving optimally, typically applying inputs at below the optimization rules, with the exception of organic fertilizer in Central America countries and chemical fertilizer in Vietnam.

Results provide insights that could help coffee farmers and those who work with them on topics related to on-farm efficiency and profitability. Results also inform policy makers who seek to effectively meet the needs of farmers.