Xavier, Arnold. 2011. Market Reform And Its Impact On The Price Transmission In The Coffee
Supply Chain: A Case Study Of Colombia, Ghana And Ivory Coast. Doctoral
Dissertation, Cornell University.
Historically, coffee has
been an important cash crop in the developing world and a major source of
employment, foreign exchange and revenue. However, coffee producers have not
always received a very large share of the export price of green coffee. Reasons
that are often mentioned are heavy government intervention and high marketing
and processing costs. Prior to reforms, government regulation of the domestic
coffee markets in the form of fixed producer prices and the monopoly power of
the Marketing Boards in Africa put a substantial wedge between the producer
price and the world price of coffee by imposing an implicit tax on producers.
From the early 1990s onwards, various Structural Adjustment Programmes were
introduced in coffee exporting countries. This had direct consequences for the
various forms of marketing boards which were prevalent in the coffee and other
commodity sectors. In most cases, they were either dissolved or had their
powers curtailed. One of the key objectives driving the reforms was to ensure that
the farmer received a higher proportion of crop proceeds. Liberalization was
envisaged to have a positive effect on producer prices and price transmission
signals from world markets to producers. This paper, an Error-Correction Model
(ECM), analyses the impact of policy reform in Colombia, Ghana and Ivory Coast.
A key question is whether producers of coffee beans received a higher share of
the international price after reforms, as was the desired policy outcome. As
findings indicate, the reforms induced stronger relationships among domestic
and international prices in Colombia, but not in Ghana or the Ivory Coast. The
institutional arrangements coordinating the domestic coffee system and contract
enforcement may help explain the differences and should be explored further.
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