Wednesday, May 18, 2016

52. Cost of Production and Farmer Incentives - Rountables 1 and 2

May 13 and 17, 2016
Dr. Rukazambuga presents data to the 5th roundtable.
Last Friday and yesterday the "Roundtable Series" of the Africa Great Lakes Coffee program got started, initiating the second stage of the project's work plan on policy. These are the first two in a series of five roundtables being held with Rwanda's coffee industry stakeholders. Topics are as follows:
  • Roundtable 1: Farmer Premiums
  • Roundtable 2: Farmer Investments in Coffee
  • Roundtable 3: Pre-Finance for Farmers
  • Roundtable 4: Fully-Washed Channel Growth
  • Roundtable 5: Access to Inputs
Below is the first of a series of intriguing slides showing never-seen-before data on cost-of-production (COP) for Rwanda's smallholder coffee farmers:
The figures above show the expected decline in COP as the number of trees increases. Economies of scale exist in coffee like other crops and industries. What is helpful, and new, is to see a measure of what the difference is between the lowest and highest, and also where the mean falls. At 177 Rwf/KG (i.e. $.23/kg or $.11/lb) the mean COP is 27 Rwf above the floor cherry price (of 120 Rwf/kg cherry) in Rwanda today. One notes that even the large farmers  in this sample are probably not making a profit, or if there is one, it is very slim at a price of 120 Rwf/kg cherry. Thus the next slide is not surprising:
In this slide, the prices on the X axis are hypothetical and the gross margin is calculated using the stratification of costs of production that we have in our sample from 1024 farmers. Here we can see that at the cherry floor price of 170 that existed during the 2015 season, over 1/3 of Rwanda's coffee farmers made a loss on coffee.

Future blogs will dig deeper into this topic and look at productivity measures.

The roundtables each include a different set of selectively invited individuals, usually about 10 - 12, from government, private industry, cooperatives and relevant research groups. All are being held at the Institute of Policy Analysis and Research (IPAR) in Kigali, one of the Rwandan partners on the project.

The format of the roundtables is to first present to the participants the "fresh off the press" analysis and findings from the baseline survey of 1024 coffee producers' households conducted Jan - Mar 2016. Then, after a coffee/tea break, the participants are invited to ask questions and discuss the findings with Global Knowledge Initiative (GKI) guiding the conversation and recording comments with flipcharts and typed notes.

Grace of AgroPy and Dr. Dan Clay

Kathryn Bowman of GKI moderated the discussion.

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