When Unfair Trade Is Also at Home: The Economic Sustainability of Coffee Farms

Daniel Grandisky Lerner, Helder Marcos Freitas Pereira, Maria Sylvia Macchione Saes and Gustavo Magalhães de Oliveira
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Daniel Grandisky Lerner: Center for Organization Studies (CORS), University of Sao Paulo (USP), 05508-011 Sao Paulo, Brazil
Helder Marcos Freitas Pereira: Center for Organization Studies (CORS), University of Sao Paulo (USP), 05508-011 Sao Paulo, Brazil
Maria Sylvia Macchione Saes: Center for Organization Studies (CORS), University of Sao Paulo (USP), 05508-011 Sao Paulo, Brazil
Gustavo Magalhães de Oliveira: Center for Organization Studies (CORS), University of Sao Paulo (USP), 05508-011 Sao Paulo, Brazil

Sustainability, 2021, vol. 13, issue 3, 1-14

Abstract: This paper addresses the issue of unfair trade practices, investigating the drivers of the differences between farm-gate and free-on-board (FOB) prices in the most important Arabica coffee producing countries worldwide: Brazil, Guatemala, Colombia, Honduras, Peru, and Ethiopia. Our study looks at those differences taking into account the literature on governance in agri-food chains, with a focus on each country’s domestic market. We performed panel-corrected standard error (PCSE) estimates in ICO and World Bank data, covering the period from 2007 to 2016. In the paper we analyze (i) property rights as a proxy of transaction costs, once it brings more transparency and support to negotiations; (ii) access to electricity as a proxy of supporting infrastructure in communication and information activities, and (iii) quality of roads and quality of ports as proxies of transportation infrastructure. Our results show that heterogeneity in institutions and infrastructure are key in explaining the differences between farm-gate and FOB prices. The transaction costs derived from institutional failures and infrastructure gaps, lead to the use of intermediaries in the coffee supply chain, and this reduces the margin for coffee farmers. Actions that aim to reduce these inefficiencies bring more transparency and lower transaction costs, thereby directly contributing to the United Nations (UN) Sustainable Development Goals (SDGs).

Keywords: farm-gate prices; FOB prices; unfair trading; coffee (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:13:y:2021:i:3:p:1072-:d:484207

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