Feed the Future Innovation Lab for Food Security Policy Policy Research Brief 23

Today, it remains a primary source of cash income for over 355,000 households across the country. Since 2001, the coffee value chain has experienced a renaissance, emerging as a darling of specialty coffee markets and consumers worldwide. The processing side of the sector has thrived, with the construction of 245 privately and cooperatively funded washing stations in every coffee-growing region of the country. Dry mills and export companies, both domestic and international, have also opened for business, resulting in tremendous value added in the industry's transformation. However, not all coffee stakeholders have shared equally in this value addition or in the sector's post-genocide revival. Producers have been largely excluded from the benefits of the transformation, and as a result, the volumes of coffee produced in Rwanda have declined and stagnated over the past decades. Producers have received sub-par compensation for their cherry, averaging 24 percent below the revenues of their counterparts elsewhere in the region. This disparity has resulted in neglect and disinvestment in coffee by many producers, particularly largeholder producers. Research conducted by the Africa Great Lakes Region Coffee Support Program (AGLC) has shed light on the determinants of farmer investment in coffee production. The study found that premiums have a positive effect on productivity, with those receiving premiums enjoying yields 29 percent higher than those who do not. The study also recommends developing a system for two-tier pricing of coffee cherry based on quality. Furthermore, the research highlights the need to incentivize farmers to invest in improved agronomic practices that will enable them to maximize their returns. The study analyzed data from a sample of 1,024 households randomly selected from listings of 16 coffee washing stations geographically dispersed across four major coffee-growing districts representing Rwanda's four agricultural provinces. The research found that farmer investments in labor, inputs, and equipment vary widely, with household labor accounting for 78.2 percent of all investments. The number of trees in the coffee plantation makes a substantial difference in the amounts that farmers invest per tree, with farmers with large-scale plantations investing markedly less per tree than those with small plantations. The study also found that productivity levels vary by plantation size, with farmers with smaller plantations being more productive per tree than those with larger plantations. The analysis of variance (ANOVA) model results show that the highest level of productivity, estimated at 2.17 KG cherry/tree, is found among farms with fewer than 180 trees, while productivity declines markedly as the size of the plantation grows. The study also found that gross margins, or profits, vary across different groups, with just over 30 percent of farms in the study having negative gross margins, meaning that their costs outweighed their revenues. Overall, the research highlights the need to address the vulnerabilities of the coffee sector in Rwanda, starting by incentivizing farmers to invest in improved agronomic practices that will enable them to maximize their returns. The study's findings have important implications for policy and programming aimed at promoting sustainable growth in Rwanda's coffee sector.