final thesis defence-rishi
DESCRIPTION
MSc thesis presentationTRANSCRIPT
11
Supervisors:
Prof. Dr. Ulrike GroteProf. Dr. Dieter M. HörmannProf. Dr. Bernhard Hau
THE IMPACT OF COFFEE THE IMPACT OF COFFEE PRODUCTION ON NEPALI PRODUCTION ON NEPALI SMALLHOLDERS IN THE SMALLHOLDERS IN THE
VALUE CHAINVALUE CHAIN
byby
Rishi Ram KattelRishi Ram Kattel
Final Thesis Defence24th Sep. 2009IUW
Financial support by DAAD is acknowledged.
Outline
Problem Statement
Review of Literature
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
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The Facts of Nepali Coffee
Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW
• The agricultural sector is the backbone of Nepalese economy
38% share GDP 2.8% annual growth rate, 66% labor force (employment).
• Coffee share: 7.3% share in country‘s total 15% agricultural export share.
• Annual growth rate: 35% coffee production and 25% production area.
• Coffee production: in 33 districts out of 75 (altitude: 600 – 1600 m)
• High quality specialty coffee
Key market players in Nepal:
Coffee Farmers 12,800
Pulper operators 200
Processors /Marketers 9
Exporters 4
Coffee farming on thefoothills of the
Himalaya.
Photo: Field survey, 2008.
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Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUWComparision of Nepali Coffee Sales, 2004 to 2007
114
40
6766
80
37
34 37
0
20
40
60
80
100
120
2004 2005 2006
Fiscal Years
Gre
en B
ean
s in
Met
ric
To
n
InternationalMarket
DomesticMarket
2007
Development of Nepali Coffee Sales, 2004 to 2007
Total Green Beans Marketed: 181 MT (in 2007).
1. International Market: 63%; Japan (55%), Europe (34%), USA (3%) & other countries (8%)
2. Domestic Market: 37% (Source: CoPP/Helvetas, 2007 )
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Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUWMajor Problems in Nepali Coffee Sector
• Lack of Research: to analyse the impact of ‘Group Organic Certification’ on the livelihood strategies of Nepali smallholder coffee producers in the value chain.
• Lack of marketing strategies.
• Low economies of scale in production
• Nepali coffee sub-sector underdeveloping in the value chain: quality? value chain upgrading?
Need to identify and recommend upgrading strategies.
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Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW
Types of upgrading at producers’ level:1. Product upgrading: improving the product quality. 2. Process upgrading: improvement of process efficiency (e.g. wet processing at farm)
3. Function upgrading: new process form e.g. roasting of coffee
4. Chain upgrading: adding a new value in chain, investing product diversification with fruits (coffee with cocoa or fruit crops as shade trees) or possibilities of changing
buyers in the value chain system. ( Source: Humphrey & Schmitz, 2000)
Literature Review: Value Chain
TechnologyProduction Process
Upgrading means that individuals, firms or even a whole country improves its original situation through
“Changes in the nature and mix of activities, both within each linkage in the chain, and in the
distribution of intra-chain activities” (Kaplinsky & Morris, 2001, p.38).
Input Supply
Production Processing Marketing Consumption
Component of general value chain.
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Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW
Past Empirical Research Findings
The specialty coffee segment has been growing at an annual rate of 5-10% in the world market (Lewin et al., 2004).
Cooperatives play an important role in enabling farmers to access specialized markets (Blackman et al., 2005).
Strong coordination between development organizations and coffee producers‘ cooperatives have increased smallholders status (Fromm & Dubon, 2006; Honduras).
Farmers’ access to relevant information and marketing assistance is expected to have a positive influence on marketing performance (Poole, 2000).
Entry barrier in coffee marketing: “low quality” and “low level of product and process efficiencies” (Oxfarm, 2005; Calo & Wise, 2005).
Consistence quality of the coffee is most important factors to be competitive in markets (Lewin et al., 2004).
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Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUWMajor objective:Major objective: To examine the impact of coffee production on To examine the impact of coffee production on
Nepali smallholdersNepali smallholders’’ livelihoods taking their livelihoods taking their integration into value chain into account. integration into value chain into account.
The specific objectives are:
1. To assess the differences between certified and non-certified Nepali coffee farmers.
2. To understand the function of the Nepali coffee value chain and investigate whether certification scheme offers additional benefits to the smallholder coffee producers.
3. To assess major entry barriers of Nepali coffee in the international market.
4. To identify the determinants which lead farmers‘ decision to adopt process upgrading at farm and to investigate whether this decision provides higher annual household income from coffee sector.
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Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW
Coffee Producers
Chain Performance:Type of contractMarketing conditionCoffee quality
Marketing Chains
Domestic Market
International Market
Production SystemEfficiency: Input & Output
Organizations
With Certification
Without Certification
By whom ?? By whom ??
Conceptual Framework. Source: Own illustration
Capital
Study Area
1010
Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUWGulmi DistrictCertified: 60 HHs
Marketing: Cooperative
Kavre DistrictNon-certified: 60 HHsMarketing: Company
Major coffee growing districtsOther coffee growing districts
1111
Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW
Survey Method: Purposive selection of districts and villages and random sampling of smallholder coffee farmers.
Survey Techniques:
1. Coffee producers’ survey: Semi-structured interviews with 120 HHs ( i.e. 60 in each district).
3 villages were selected in each district according to the criteria: (a) altitudes (<850 m, 1000-850 m & > 1000 m) (b) smallholders: All are small-scale coffee producers (< 1 ha)
2. Focus group discussions: total 6 (8-10 smallholder coffee producers per group).
3. Expert interviews with: a cooperative in Gulmi, 2 District Coffee Producers’ Associations, 3 traders.
Methods of Data Analysis: Descriptive statistics, LOGIT and OLS regressions.
Research Methodology
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Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW Descriptive & Comparative Statistics:
*** significant at 1%; **significant at 5%; *significant at 1% levels. 1 US $ = Rs. 71.06
Variables Total Average (N=120)
Certified (n=60)
Non-certified (n=60)
t-test,X2 -test
Continuous: Mean SD Mean Mean t-value
Education (years) 6.3 4.64 7.3 5.2 2.674***
Experience of coffee cultivation (years) 9.2 5.85 9.8 8.6 1.139
Adult HH members (number) 4.4 2.02 4.6 4.1 1.355
% of shade trees cover 57.2 29.88 50.7 63.8 -2.457**
Yield of coffee in 2007 (qq/ha) 24.5 22.91 20.7 27.8 -1.844*
Income from coffee (Rs.) 6,056 9,111 6,140 5,966 0.103
Dummy: % % % X2 -value
Gender (male =1) 58 52 65 2.194
Altitude (>1000 m =1) 28 27 30 0.164
Wet process upgrading (yes=1) 33 25 40 3.077*
Training received (yes=1) 64 70 58 1.331
Membership (yes=1) 24 33 15 5.502**
Book keeping (yes = 1) 31 43 18 8.792***
Access to credit (yes=1) 42 38 45 1.739
Trust (yes=1) 38 45 32 2.256
Shocks (yes=1) 47 72 22 30.134***
Poor (< US $ 1.25 =1) 34 40 28 1.815
1313
Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW
***significant at 1%; **significant at 5% level; *significant at 10% level. Here, 1 US $ = Rs. 71.06Different letters a, b indicate significant difference of mean ( ).
05.0
Variables (N=120) Low alt. Medium alt. High alt. F-test
Yield (qq/ha) 20.4 b 20.9 b 32.8 a 4.502**
Income from coffee (Rs.) 4,605 b 4,876 b 9,206 a 2.972*
(32.2) a
(20.2) b
(23.3) ab
(11.4) b (13.3) b
(33.2) a
F: 8.923*** F: 2.480*
( ) : mean
F : F-test
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Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW
Certified Farmers
Cooperative(Certified)
PulperOperators
Companies (Conventional)
Domestic Market
Input Suppliers
Non-certified Farmers
International Market
90%Wet processed Green
Beans (GB) only30% wet processed GB70% unwashed GB/RB
65%
45%Dry Cherry (90%)
Dry Parchment (10%)
Dry Parchment(20%)
Filter Coffee(2%)
Nepali Coffee Value Chain: Two Districts Investigate
1515
Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUWOrganic Certification
What are the major benefits from certified organic coffee production?
• Price premium ?• Other benefits?
Price premium
Price (2007/008) Certified Non-certified
t-test
Fresh Cherry (Rs./kg) 30 ($ 0.42)
25.08 ($0.35) 11.195***
Dry Parchment (Rs./kg)(CR 4:1) 160 ($
2.25)151.19 ($2.13)
5.817***
Dry Cherry (Rs./kg)(CR 3:1) 60 ($ 0.84) Not sales
Ground Coffee (US$ /kg)(CR 7.5:1)
300 ($ 4.22) 300 ($ 4.22)
No premium(domestic market)
Green Beans (US$/kg)(CR 6.6:1) 640 ($ 6-12) 426 ($ 4-8 )
Premium for cooperative (export)
Price Premium:20% in per kg FC
& 6% in per kg DP
Farm gate
***significant at 1% levelNote: CR: Conversion Ratio of Fresh Cherry to processed form. FC for Fresh Cherry Coffee and DP for Dry Parchment US $ 1 = Nepalese Rs. 71.08 (in 2007/008)
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Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUWOther benefits from
certification
Benefits due to: Index % Rank
Price security 3.36 38.4 I
Easy to sell/market guarantee 2.79 19.7 II
Environmental benefits 2.76 19.4 III
High price per unit 2.07 14.6 IV
Better coffee quality 1.64 5.6 V
Diversified income sources 0.90 2.2 VI
*n = 47Note: Benefits from certification. (The scale values considered: 4 for very high and 1 for very low)
Source: Questionnaire results-from ranking matrix and importance of index (from certified respondents)
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Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW Findings from Expert Interviews & SWOT Analysis
Export requirements:1. Variety: Identification is necessary2. Supply continuation of high quantity3. Quality consistency4. Specialty coffee
Major entry barriers to export: Marketing Chains:
Certified Non-certified
1. Consistency in quality High High
2. Quantity supply High High
3. Relationship with buyer Medium Medium
4. Certification of origin Low High
5. Initial qualification (related to product & process upgrading)
High - Medium Medium
Thus, quality inconsistency and low quantity supply are major barriers to entry for both chains in the international market.Note: Degree of barrier to entry: High, Medium and Low to the exports.
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Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW1. Logit model (to determine the farmers‘ decision to adopt process
upgrading)
i
n
iiii
i
ii xZ
P
PInL
1
.1
Yi =1; P (Yi = 1) = Pi
Yi =0; P (Yi = 0) = 1-
Pi
Pi = E (Y = 1/x) iixfYi = f (Gender, Education, Adult, Poor, Production, Training, Trust, Credit, Book, Certified) ---------Equation (1)
i
COFFEE
CertifiedShockYieldShade
AltitudeServiceMemberocess
AdultExperienceAgeInY
....
...Pr.
...1
111098
7655
32
--------- Equation (2)
COFFEEInY
Yi (PROCESS upgrading at farm) = a dichotomous dependent variable (1 if farmer sells dry parchment after wet processing, 0 otherwise)
= Annual HH income from coffee sector in 2007 (In Natural log form)
Source: Gujarati, 2003
2. OLS regression (for determinants of annual HH income from coffee sector)
1919
Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUWLogit regression results: [farmers’ decision to adopt process upgrading, Yi =1]
Variables ( N= 120) Coefficients Robust S.E dy/dx #
Gender (male = 1)) 0.451 0.719 0.079
Education (years) 0.110* 0.060 0.019*
Adult (number) 0.094 0.183 0.016
Production (qq) 0.162 0.141 0.029
Book keeping (yes = 1) 1.759** 0.878 0.356**
Credit (yes = 1) 1.421** 0.587 0.266**
Trust (yes = 1) 2.119*** 0.627 0.410***
Training (yes = 1) 1.196** 0.636 0.194**
Poor (< US $ 1.25/d/p = 1) -0.441 0.653 0.076
Certified (yes = 1) -2.466*** 0.716 0.429***Constant -4.239*** 1.151 -Log likelihood = - 44.27 Wald test (10) = 42.02*** (Prob > Chi2=0.000) Pseudo R2 = 0.41
Goodness-of fit test = Pearson Ch2 (109) = 88.19; Prob > Chi2 =0.9286Area under the ROC curve = 0.8990Overall corrected prediction = 82.05%
*** significant at P = 0.001; ** significant at P = 0.05; * significant at P = 0.10. Model : Logit Regression. # Marginal change of probability (after logit).
2020
Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW OLS Regression estimates: [for determinants of annual household income from coffee (in natural log)]
Variables ( N= 117) Coefficients S.E t-value
(Constant) 5.991*** 0.458 13.06
Age (years) 0.002 0.006 0.42
Experience (years) 0.059*** 0.014 4.14
Adult (number) 0.020 0.040 0.51
Process upgrading (yes=1) 0.622*** 0.186 3.34
Member (yes=1) 0.499** 0.197 2.54
Service (yes=1) 0.161 0.228 0.71
Altitude (>1000m =1) 0.494** 0.191 2.58
Shade cover (%) 0.010*** 0.003 3.28
Yield (qq/ha) 0.015*** 0.005 3.17
Shock (yes=1) -0.969*** 0.200 -4.83
Certified (yes=1) 0.061 0.193 0.32
R-square = 0.67 Adjusted R-square = 0.63 F-value (11, 105) = 19.42***
Heteroscedasticity: Chi2 (1) =0.55; Prob > Chi2= 0.4586 (Constant variance)VIF = 1.31 (mean): None of the independence variables > 1.65 VIF (No multicollinearity)Model has no omitted variables (ovtest ): F (3, 102) = 0.46; Prob > F = 0.7107
*** significant at P = 0.001; ** significant at P = 0.05; * significant at P = 0.10. Model : Linear Regression
2121
Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUW
-2-1
01
2R
esi
du
als
6 7 8 9 10 11Fitted values
Residual – versus - fitted plot (rvfplot): Randomness of the estimated errors
[Coffee income (Log)]
2222
Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Methodology
Results
Conclusions
IUWSummary and Conclusions
1. Differences between certified and non-certified farmers: Significant factors: education level, yield, shade, process upgrading,
membership, documentation and shocks. Non significant: gender, experience, income from coffee
2. Value chain analysis and impact of certification: The major actors in Nepali coffee value chain: input suppliers,
smallholder farmers, pulper operators, cooperative and private companies.
Benefits from certification: - a passport to entry international markets - price premium: 6 -20% for the certified smallholders. - farmers experience environmental benefits.
3. Major entry barriers to the international market: -inconsistency in quality and low quantity supply
4. Results from regression models: Results from the logit model: (decision to adopt process upgrading) Significant factor (+): Level of education, book keeping, training
received, access to credit and trust. However, certification dummy (-) Results from the OLS regression: (smallholders’ income from
coffee sector) Significantly factors (+): experience, yield, process upgrading,
membership, % of shade tree covers, altitude (>1000 m). However, production related shocks (-).
2323
Problem Statement
Literature Review
Research Objectives
Conceptual Framework
Research
Methodology
Results and Discussion
Conclusions
Recommendation
IUW
Recommendation
Investment should be made in product and process upgrading by improved production management through extension and research and investment in wet process upgrading at farm level according to altitudes.
Finally, significant factors from LOGIT and OLS regressions models have to be considered in designing strategies aimed at improving livelihood status of smallholders.
THANK YOU FOR YOUR
ATTENTION !!