Historically, coffee has been an important cash crop in the developing world and a major source of employment, foreign exchange and revenue. However, coffee producers have not always received a very large share of the export price of green coffee. Reasons that are often mentioned are heavy government intervention and high marketing and processing costs. Prior to reforms, government regulation of the domestic coffee markets in the form of fixed producer prices and the monopoly power of the Marketing Boards in Africa put a substantial wedge between the producer price and the world price of coffee by imposing an implicit tax on producers. From the early 1990s onwards, various Structural Adjustment Programmes were introduced in coffee exporting countries. This had direct consequences for the various forms of marketing boards which were prevalent in the coffee and other commodity sectors. In most cases, they were either dissolved or had their powers curtailed. One of the key objectives driving the reforms was to ensure that the farmer received a higher proportion of crop proceeds. Liberalisation was envisaged to have a positive effect on producer prices and price transmission signals from world markets to producers. This paper, an Error-Correction Model (ECM), analyses the impact of policy reform in Colombia, Ghana and Ivory Coast. A key question is whether producers of coffee beans received a higher share of the international price after reforms, as was the desired policy outcome. As findings indicate, the reforms induced stronger relationships among domestic and international prices in Colombia, but not in Ghana or the Ivory Coast. The institutional arrangements coordinating the domestic coffee system and contract enforcement may help explain the differences and should be explored further.
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