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 getting more organized in cooperative movement. However, not all coffee farmers are members of a cooperative, a phenomenon that is attributed to 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 further identify determinants of profit efficiency in Kirimiro region in Burundi. The research design is cross-sectional in nature. Data used are mainly quantitative in nature, and also supported by key information collected from cooperative managers and other stakeholders in the coffee sector. Data were analyzed using stochastic production frontier (both efficiency and inefficiency model). The t-test statistics were also used to examine differences in quality management practices adopted by cooperative and non-cooperative coffee farmers. The findings from t-tests show that cooperative coffee farmers are using better management practices than their non-cooperative counterparts. Results from the stochastic frontier model show that each of: the cost of fertilizer, cost of farm tools, farm size under coffee, and being a member of a cooperative has a positive effected on profit efficiency, while the cost of labor, cost of compost manure, and age of coffee trees have a negative effect on profit efficiency. The results of the study further reveal that both cooperative and non-cooperative coffee farmers are not operating on the frontier. The mean efficiency scores were found to be relatively high at 80.1 percent for cooperative farmers and low at 43.7 percent among non-cooperative coffee farmers. Cooperative and non-cooperative coffee farmers are therefore losing a profit of 19.9 percent and 56.3 percent respectively due to inefficiencies. Cooperative coffee farmers are more profit efficient than non-cooperative coffee farmers. The underlying levels of profit inefficiencies among coffee farmers is mainly exacerbated by the 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 distortions and market inefficiencies created by government involvement in the domestic market.