Coffee marketing channels and profitability: a case of Kibinge sub-county, Bukomansimbi district.

Abstract

Despite the importance of the coffee sector in improving livelihoods of people through income generation, it is still faced by numerous challenges such as low coffee prices, post-harvest losses, poor transport networks, poor coffee species and the biggest of all is poor coffee marketing facilities and channels. Although, formal coffee marketing through cooperatives has been advocated for, the coffee marketing sector has remained largely informal. To understand why the informal coffee marketing is still popular, the study sought to the profitability of coffee marketing channels by coffee farmers and understands the drivers of choice of informal versus formal coffee marketing channel. The study was conducted in Bukomansimbi district and 120 households were randomly selected to participate in the study. The results showed that farmers who sell to formal channels (cooperative) were mainly from male headed households, married, attained primary education as highest level of education, and plant many coffee trees. Moreover, they participate in other income generating projects as compared to farmers to the informal coffee marketing channels. Probit model analysis results revealed that the significant determinants for choice of marketing channel are coffee selling price, total coffee volumes sold, age of farmers, payment period, source of market information, gender, participation in other income generating projects and education levels of farmers. The gross margin analysis results revealed that formal channels were the most profitable with an average monthly gross profit of Shs1,557,068.266 /= per farmer for 1000 kilograms of coffee sold compared to Shs1,461,349.368/= per households in the informal channels. The probit model indicated that only coffee volumes and coffee prices significantly influenced farmers’ decision to sell coffee to the formal channel. This study concludes by recommending provision of loans to enable farmers acquire good coffee species so as to enable them produce high coffee volumes that motivate them to sell to the formal channel as well as establishment of cooperatives at sub county level to ease access to the formal marketing channels by all farmers.