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Coping with the Coffee Crisis

An Analysis of the Production and Marketing Performance of Coffee Farmers in Costa Rica

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Meike Wollni

At the turn of the millennium, world coffee prices dropped to their lowest levels in 30 years giving rise to the most severe crisis experienced by the coffee sector. The study evaluates the effects of the coffee crisis on the Costa Rican coffee sector and identifies the factors that influence farmers’ production and marketing performance. A two-step selection model is applied to analyze farmers’ participation in specialty markets and cooperatives and the effects on producer prices. Furthermore, a stochastic production frontier is estimated to explore technical efficiency levels of specialty and conventional coffee farmers. Based on the results of the study, policy recommendations are derived that should help farmers to improve their competitiveness and their ability to cope with the crisis. These include the provision of extension and information, the support of coffee cooperatives, and the diversification of the rural economy.
Contents: The international coffee market and the coffee crisis – Structure and performance of the Costa Rican coffee sector – Conceptual framework for analyzing farmers’ performance and decision-making – Socioeconomic impacts of the crisis – Farmers’ participation in specialty markets and the effect on producer prices – Technical efficiency in coffee production – Policy and research implications.