Value Addition and Processing by Farmers in Developing Countries: Evidence From the Coffee Sector in Ethiopia

Washed coffee is being sold in international markets with a premium of more than 20%. However, only about 30% of Ethiopia’s coffee export is washed and the small-scale coffee farmers, processors, exporters, and the country are missing out on sizable opportunity of commanding higher rewards. Relying on unique datasets and using a double hurdle technique, we examined factors affecting the decision and amount of selling coffee in red berries -the primary input for washing coffee- instead of the dried type. Results show that lack of access to wet mills, lack of enough red berry buyers, and bad quality coffee harvest reduce the likelihood of coffee sales in red berries form and hence a subsequent lower level of washed coffee. On the other hand, government’s action of deciding designated selling dates, membership to a cooperative, and access to advances and loans increase the likelihood of selling coffee in red berries form.