Uncovering the Costs and Profitability of Specialty Coffee Production

In the world of coffee, specialty coffee has garnered significant attention for its unique attributes and flavors that distinguish it from conventional coffee. A recent study, supported by the nonprofit Coffee Science Foundation, delves into the economics of specialty coffee production, shedding light on the intricacies of farmer profitability with a particular focus on labor. The research, conducted in the coffee-producing nations of Honduras and El Salvador, offers valuable insights into the economics of specialty coffee farming.

Defining Specialty Coffee

To provide context, the study adopts the Specialty Coffee Association’s working definition of specialty coffee. According to this definition, specialty coffee derives its extra market value from its distinctive attributes. These attributes encompass various factors, including flavor profiles, growing conditions, and processing methods, that set it apart from standard coffee.

Honduras and El Salvador, two neighboring countries, were selected for this study due to their significant exports of specialty coffee. As the study notes, both nations have seen the share of specialty coffee in their coffee exports steadily increase over the years.

Addressing the Knowledge Gap

Despite the growing importance of specialty coffee in these countries, there has been a notable lack of knowledge regarding its cost structure and profitability, especially concerning labor costs. The primary objectives of the research were to uncover the cost structure of specialty coffee production in Honduras and El Salvador and to estimate the costs and profitability associated with producing specialty coffee in these regions.

Research Leadership and Support

Led by Texas Tech University Professor Carlos Carpio, the research group received support from several nonprofits, including Solidaridad, Rainforest Alliance, Conservation International, and the Specialty Coffee Association (SCA). Together, they designed a survey instrument and gathered data from 14 coffee farmers in Honduras and El Salvador. Their aim was to build on existing research related to the cost of production, with a specific focus on the specialty coffee segment.

Variations in Coffee Production Systems

The study considered two distinct production systems within Honduras. The first system centered on organic coffee production, which has witnessed a surge in demand in recent years and represents a well-identified specialty coffee category. Additionally, the study looked into specialty coffee produced within a conventional (nonorganic) system. In the case of El Salvador, where organic production is less common, the research concentrated solely on specialty coffee cultivated in a conventional system, hereafter referred to as ‘specialty-conventional’ coffee production.

Country-Specific Differences

An intriguing aspect of the study was the identification of clear cost differences between Honduras and El Salvador. Despite the geographical proximity and similar economic and cultural backgrounds, the cost structure for producing specialty coffee was notably different. Honduras displayed lower costs and higher profits compared to El Salvador. Additionally, the specialty-conventional coffee production system proved to be more profitable than the organic production system.

Implications and Insights

The authors of the study suggest that the findings not only serve as a valuable cost analysis tool for current and prospective coffee producers but also offer insights into the socio-economic aspects of coffee production. These insights extend beyond the farm level and encompass the broader implications for various stakeholders within the coffee supply chain who are interested in the long-term financial sustainability of coffee farm operations.

Full article: https://journals.ashs.org/horttech/view/journals/horttech/33/1/article-p8.xml