On international markets, higher quality coffee that is ripe, undamaged, and washed can receive premiums of over 90% compared to lower-quality coffee. In Uganda, many farmers produce lower-quality coffee that does not meet international standards. By not taking the actions known to improve the quality of their beans, small-scale farmers may be missing an important business opportunity. However, coffee has a long supply chain of intermediary traders and processors, and only a small portion of quality premium offered on the world market appears to “pass through” to farmers. When compared to the returns farmers receive from selling lower-quality coffee, this limited pass-through may not be enough to incentivize farmers to invest in the costs of shifting their production practices to improve quality. The research team is working with Kyagalanyi Coffee Limited, Uganda’s largest coffee exporter, to understand how particular price schedules offered to traders affect price pass-through to farmers, and the quality of coffee produced and purchased in the value chain as a result. Farmers’ reports and traders’ records will reveal how the size of the price premium offered to traders, and competition among traders in a given market, impact the price and quality of coffee along the value chain.
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