Cooperative membership and effect on profit efficiency of coffee farmers in Kirimiro Region, Burundi

Abstract

Before liberalization, the whole value chain of coffee was controlled by the government. Government of Burundi was managing all activities from production to marketing through the washing management societies. When the privatization process started, the government of Burundi initiated restructuring of coffee producers to form an associative movement. The objective was to enable coffee farmers to position themselves to play an important role in the management of the privatized coffee sector and to make coffee production sustainable. It is in this context that coffee farmers are currently getting more organized in cooperative movement. Not all coffee farmers are members of the cooperative, and this phenomenon is blamed for the poor market performance among small-holder coffee farmers in the country. The main objective of this study is to compare profit efficiency of cooperative and non-cooperative coffee farmers, and to identify its determinants in Kirimiro region in Burundi. The research design is cross-sectional in nature. Data used are quantitative supported by key information collected from cooperative managers and other interventions in the coffee sector. Data were analyzed using stochastic production frontier (both efficiency and inefficiency model). However, t-tests were also run in order to examine quality management practices adopted by cooperative and non-cooperative coffee farmers. The results from t-tests show that cooperative coffee farmers are following better management practices than non-cooperative coffee farmers. In the other hand, the results from the stochastic frontier model revealed that the cost of fertilizer, cost of farm tools, and farm size under coffee and cooperative membership positively affected profit efficiency while the cost of labor cost of compost and age of coffee trees negatively affected profit efficiency. These results further reveal that both cooperative and non-cooperative coffee farmers are not operating on the frontier. The mean efficiency scores are shown to be 80.10 percent and 43.71 percent for cooperative and non-cooperative coffee farmers respectively. This implies therefore that the cooperative and non-cooperative coffee farmers are losing a profit of 19.90 percent and 56.29 percent respectively due to inefficiencies. However, cooperative coffee farmers are more profit efficient than non-cooperative coffee farmers. The underlying profit inefficiencies among coffee farmers are mainly due to lack of education, lack of non-farm employment, long distance from the farm to the selling point, lack of extension service, limited access to credit, aging of coffee plantation and the involvement of the government in the domestic market that leads to market inefficiencies.