Abstract
This study attempts to analyze the market preference of coffee farmers in Vietnam. Using the transaction cost approach, a seemingly unrelated regression (SUR) model was developed based on the sales volume in different markets, transaction cost attributes, socioeconomic factors, and behavioral aspects of sustainable certified coffee farmers. Factors that significantly influence farmers’ market preference include several transaction cost attributes (price uncertainty, market competition, transportation cost, speed of payment, and sale volume agreement) and characteristics of coffee farmers (age, ethnic, farming experience, location, and certificate ownership). Repeated economic transaction embedded in the social relationship indicates the largest sales volume of coffee farmers to the market of buying agents and the existence of local traders. There is a belief that formal institution brings better market access for coffee farmers, but main issues are regarding opportunistic behavior, imperfect market knowledge, traditional farming habits, and contract noncompliance, which have resulted in a lower preference for the market of processors/exporters.
Highlights
Rural coffee farmers are often extremely vulnerable to climate and market shocks that leave them struggling to improve their main source of income
Coffee farmers achieved the average productivity of 2.3 tons/hectare, which contributed to the provincial annual yield of 400,000 tons
Many smallholder farmers at this moment still work their way to struggle with the main source of income from coffee production
Summary
Rural coffee farmers are often extremely vulnerable to climate and market shocks that leave them struggling to improve their main source of income. Access to productive technologies and effective production management can partly minimize the impact of climate change, yet market failure can occur due to a variety of reasons In this regard, improved market access has been identified as one of the vital elements for enhancing agriculture-based economic growth and increasing rural income [1]. Vietnamese coffee farmers sell most of their products to purchasing agents or local traders because of inadequate market information, limited sales channel choices, and poor marketing infrastructures. This serves as a further reason for why smallholder farmers are often cash-strapped and forced into a debt cycle where they seek credit to repay previous loans. Smallholder farmers usually capture less than 10% of the retail price while buyers set rules of the game, especially in the context of current oversupply of green coffee beans
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