Modeling Profitability in the Jamaican Coffee Industry

Mario Mighty,Gabriel Granco

doi:10.3390/agriculture11020121

Mario Mighty, Gabriel Granco

Open Access

https://doi.org/10.3390/agriculture11020121

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Abstract

It is well known that producers of agricultural products do not able to capture most of the value from what they grow. As such, it is important for producers to be attuned to the various factors that impact the viability of their products. One such potential avenue for coffee producers is developing a strong awareness of profitability across their respective geographic regions. This research presents a fine-scale geospatial profitability model for coffee production using the test case of the Jamaican Coffee Industry, a sector which once guaranteed profitability but now presents variable (often losing) returns for many producers, this research presents a cost-surface model for coffee production in the island of Jamaica. Results indicated large scale profitability in the 2016–2017 coffee year but limited profitability in the 2019–2019 coffee year, highlighting the important role of revenue fluctuation in island-wide profitability. Results underscore importance of scenario planning in the coffee production cycle. By understanding the spatial properties of profitability producers will obtain better decision-making insight for production and management decisions in the coffee industry around the world. The geospatial profitability model establishes a baseline approach that can be accessed by industry stakeholders of varying technological capacities.

Highlights

Coffee is one of the most popular beverages in the world and its economic influence is as big as its popularity
Variable supplies and changing consumer preferences, prices paid to farmers fluctuate—sometimes significantly over a relatively short period of time
While always an enterprise fraught with risk, these wide price fluctuations add an element of risk that many stakeholders, small farmers are no longer willing to endure

Summary

Introduction

Coffee is one of the most popular beverages in the world and its economic influence is as big as its popularity. This commodity is the second most valuable good legally traded and over 100 million people derive their livelihood in one way or another from coffee [1,2]. Retail prices do not necessarily reflect profitability in coffee production. The modern development of the global agricultural commodity value chain has shifted value away from the farm and toward the retailer. Researchers have found agricultural producers capture only a small fraction of the overall economic value generated by the global value chain; with small landholders netting even less of the economic benefit. Alternatives to improve farmers’ revenue include increased involvement in vertical integration up the value chain or engaging in cooperative approaches to production [3,4,5,6,7]

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