An Economic Evaluation of Alternative Coffee Trading Regimes

Produced in fifty-six countries, coffee is a key source of income for twenty to twenty-five million farmers and farm workers around the globe (Nicholls and Opal 2005; Lewin, Giovannucci and Varangis 2004). In addition, small-scale coffee farmers with less than ten hectares account for about seventy percent of the coffee production worldwide (Fridell 2007). Although small-scale coffee farmers play such an important role in the coffee industry, they receive the smallest income share in the conventional coffee trading system. This study compares and contrasts three coffee trading models currently functioning in Chiapas, Mexico—the conventional, fair trade, and vertically integrated models—and test the hypothesis that the small scale coffee farmers who are vertically integrated from production to retailing are better off than farmers in the fair trade and conventional coffee trading regimes. Using both qualitative and quantitative analysis, this study found that (1) coffee farmers organized into cooperatives are better off than non-aligned conventional farmers, (2) fair trade farmers are better off than vertically integrated farmers, while conventional farmers are the worst off, and (3) the coffee revenue of female headed households is less than other household units.

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