The Coffee Science Foundation Releases New Specialty Labor Research
A new publication has been released; entitled, “Cost and Profitability Analysis of Producing Specialty Coffee in El Salvador and Honduras,” the article was published in the journal, HortTechnology.
The Coffee Science Foundation is excited to announce this output from a project intended to understand the role of labor in specialty coffee. This project was underwritten by Solidaridad, Rainforest Alliance, Conservation International, Rainforest Alliance, and the Specialty Coffee Association, and the research related to this publication was performed by a research team led by CARLOS CARPIO, PhD, of Texas Tech University.
In recent years, the global market for specialty coffee has witnessed a significant surge. This escalating demand for specialty coffee has piqued the interest of coffee farmers in producing countries, prompting them to increasingly explore its cultivation.
Honduras serves as a prime example, where specialty coffee exports represented 54% of total exports in the 2019-2020 harvest season, as per the US Department of Agriculture. Similarly, in El Salvador, approximately 80% of coffee exports were differentiated or specialty coffee, according to the Consejo Salvadoreño del Café.
Several studies have evaluated the costs and profitability of coffee production in the region. Those studies have mostly focused on conventional coffee production. This study contributes to the literature by estimating and comparing specialty coffee production costs and profitability in Honduras and El Salvador using data collected from interviews with farmers. Also, the researchers provide a comprehensive assessment of expenses involved in coffee production.
Furthermore, the study examined two production systems in Honduras: organic coffee production, which has experienced a notable surge in demand, and specialty coffee produced within a conventional (non-organic) system. In contrast, given the lesser prevalence of organic production in El Salvador, the study focused solely on specialty coffee cultivated within a conventional system, referred to as “specialty-conventional” in the study.
Ultimately, the objectives of this study were directed at determining the cost structure of specialty coffee in Honduras and El Salvador, and estimating the costs and profitability associated with specialty coffee in these countries.
To achieve these objectives, the researchers began by documenting production practices, input usage, and costs. Then they developed management plans with the help of local coffee experts in each country to outline typical activities from planting to the end of the production cycle. These plans served as the basis for a semi-structured interview instrument used to collect data from farmers. The data collected was then summarized using cost-profitability models developed by the research team.
Analysis considered the long-term perspective of coffee production as a perennial crop and included both cash and noncash costs, as well as opportunity costs. Notably, the economic approach provided insights into the economic sustainability of coffee operations, examining whether the income from production could cover annual costs, recover establishment expenses, and provide returns for unpaid family labor. However, estimating certain costs, including establishment, land, and administrative costs presented challenges in terms of methodology and data availability.
Nevertheless, the study’s findings highlight significant differences in total costs and cost structures of specialty coffee between neighboring countries, Honduras and El Salvador. These differences can be attributed to farm management – as outlined and demonstrated in the study – and natural conditions.
The findings presented in this study hold potential benefits for aspiring and existing coffee producers alike. Additionally, the study’s conclusions may prove valuable to various stakeholders in the coffee value chain, including buyers, roasters, and retail.
Synopsis by Mary Basco, SCA Research and Knowledge Development Programs Manager
“Cost and Profitability Analysis of Producing Specialty Coffee in El Salvador and Honduras,” is an open-access article published in HortTechnology, was authored by Carlos E. Carpio, Luis A. Sandoval, and Mario Muñoz.
This project was made possible thanks to generous underwriting from Solidaridad, Rainforest Alliance, Conservation International, Rainforest Alliance, and the Specialty Coffee Association.
Carpio, C. E., Sandoval, L. A., & Muñoz, M. (2023). Cost and profitability analysis of producing specialty coffee in El Salvador and Honduras. HortTechnology, 33(1), 8–15. https://doi.org/10.21273/horttech05028-22