improving export quality and what else? nespresso in colombia · 2018. 4. 4. · track coffee sales...
TRANSCRIPT
Improving Export Quality and What Else?:Nespresso in Colombia
Rocco Macchiavello - LSE & IGCJosepa (Pepita) Miquel-Florensa - TSE
Roma 3 GVC - March 2018
Very Preliminary
Macchiavello Miquel-Florensa Export quality March 2018 1 / 23
Motivation
"For agriculture to deliver on its full potential as a poverty reduction toolvalue chains must be strengthened, smallholders linkages to marketsimproved, and agribusiness expanded" (WB 2017)
⇒ Access to GVC requires quality upgrading:
Input: Failures in input/credit/insurance markets and extension services
Output: Difficulties in transmitting price signals from export to farmers’ gate
Welfare: Distributional concerns (across and within the supply chain)
X This paper: impact evaluation of the AAA Program in Colombia:I A buyer-driven quality-upgrading programI (Industry equilibrium) Farmers’ investments, marketing
arrangements and welfare; price pass-through along the chain
Macchiavello Miquel-Florensa Export quality March 2018 2 / 23
Motivation
"For agriculture to deliver on its full potential as a poverty reduction toolvalue chains must be strengthened, smallholders linkages to marketsimproved, and agribusiness expanded" (WB 2017)
⇒ Access to GVC requires quality upgrading:
Input: Failures in input/credit/insurance markets and extension services
Output: Difficulties in transmitting price signals from export to farmers’ gate
Welfare: Distributional concerns (across and within the supply chain)
X This paper: impact evaluation of the AAA Program in Colombia:I A buyer-driven quality-upgrading programI (Industry equilibrium) Farmers’ investments, marketing
arrangements and welfare; price pass-through along the chain
Macchiavello Miquel-Florensa Export quality March 2018 2 / 23
Motivation
"For agriculture to deliver on its full potential as a poverty reduction toolvalue chains must be strengthened, smallholders linkages to marketsimproved, and agribusiness expanded" (WB 2017)
⇒ Access to GVC requires quality upgrading:
Input: Failures in input/credit/insurance markets and extension services
Output: Difficulties in transmitting price signals from export to farmers’ gate
Welfare: Distributional concerns (across and within the supply chain)
X This paper: impact evaluation of the AAA Program in Colombia:I A buyer-driven quality-upgrading programI (Industry equilibrium) Farmers’ investments, marketing
arrangements and welfare; price pass-through along the chain
Macchiavello Miquel-Florensa Export quality March 2018 2 / 23
Motivation
"For agriculture to deliver on its full potential as a poverty reduction toolvalue chains must be strengthened, smallholders linkages to marketsimproved, and agribusiness expanded" (WB 2017)
⇒ Access to GVC requires quality upgrading:
Input: Failures in input/credit/insurance markets and extension services
Output: Difficulties in transmitting price signals from export to farmers’ gate
Welfare: Distributional concerns (across and within the supply chain)
X This paper: impact evaluation of the AAA Program in Colombia:I A buyer-driven quality-upgrading programI (Industry equilibrium) Farmers’ investments, marketing
arrangements and welfare; price pass-through along the chain
Macchiavello Miquel-Florensa Export quality March 2018 2 / 23
Motivation: This paper – The AAA Program
A. Intrinsic interest
I Coffee is one of the most valuable agricultural commodities, sustains livelihoods ofapprox. 30 million smallholders
I Quality-upgrading program introduced by world’s largest coffee buyerI Radically different approach from social/environmental certifications
B. Methodological interest: Administrative data
1. Implement Multiple Identification Strategies: DID at plot level, Border Discontinuity2. Track coffee sales from farm to export gate
Macchiavello Miquel-Florensa Export quality March 2018 3 / 23
Motivation: This paper – The AAA Program
A. Intrinsic interest
I Coffee is one of the most valuable agricultural commodities, sustains livelihoods ofapprox. 30 million smallholders
I Quality-upgrading program introduced by world’s largest coffee buyerI Radically different approach from social/environmental certifications
B. Methodological interest: Administrative data
1. Implement Multiple Identification Strategies: DID at plot level, Border Discontinuity2. Track coffee sales from farm to export gate
Macchiavello Miquel-Florensa Export quality March 2018 3 / 23
Colombian Coffee Value Chain
FARMERS
PrivateMill
Coopera3veBuyer
(FNC)Mill
PrivateBuyer
Exporter/ForeignBuyer
Exporter/ForeignBuyer
Macchiavello Miquel-Florensa Export quality March 2018 4 / 23
Sustainable Quality Program: Question 1
FARMERS
PrivateMill
Coopera3veBuyer
(FNC)Mill
PrivateBuyer
Exporter/ForeignBuyer
Exporter/ForeignBuyer
Q1 Do farmers invest in upgrading quality? If so, which farmers?Does quality improve?
Macchiavello Miquel-Florensa Export quality March 2018 4 / 23
Sustainable Quality Program: Question 1
FARMERS
PrivateMill
Coopera3veBuyer
(FNC)Mill
PrivateBuyer
Exporter/ForeignBuyer
Exporter/ForeignBuyer
Q1 Do farmers invest in upgrading quality? If so, which farmers?Does quality improve?
I Yes, (larger) eligible farmers take-up the program, upgrade andexpand farms. Aggregate quality improves
Macchiavello Miquel-Florensa Export quality March 2018 4 / 23
Sustainable Quality Program: Question 2
FARMERS
PrivateMill
Coopera.veBuyer
(FNC)Mill
PrivateBuyer
Exporter/ForeignBuyer
Exporter/ForeignBuyer
Q2 Does program translate into higher sales, at higher (unit) prices,under more loyal arrangements?
Macchiavello Miquel-Florensa Export quality March 2018 4 / 23
Sustainable Quality Program: Question 2
FARMERS
PrivateMill
Coopera.veBuyer
(FNC)Mill
PrivateBuyer
Exporter/ForeignBuyer
Exporter/ForeignBuyer
Q2 Does program translate into higher sales, at higher (unit) prices,under more loyal arrangements?
I Yes, certified farmers get ∼7% higher prices, and increase sharesold to main buyer (coop)
Macchiavello Miquel-Florensa Export quality March 2018 4 / 23
Sustainable Quality Program: Question 3
FARMERS
PrivateMill
Coopera3veBuyer
(FNC)Mill
PrivateBuyer
Exporter/ForeignBuyer
Exporter/ForeignBuyer
Q3 How much of the export price premium is transmitted along thechain?
Macchiavello Miquel-Florensa Export quality March 2018 4 / 23
Sustainable Quality Program: Question 3
FARMERS
PrivateMill
Coopera3veBuyer
(FNC)Mill
PrivateBuyer
Exporter/ForeignBuyer
Exporter/ForeignBuyer
Q3 How much of the export price premium is transmitted along thechain?
I Most, certified export contracts have higher prices (3-5%) aftercontrolling for contract conditions and detail product characteristics
Macchiavello Miquel-Florensa Export quality March 2018 4 / 23
Sustainable Quality Program: Question 4
FARMERS
PrivateMill
Coopera3veBuyer
(FNC)Mill
PrivateBuyer
Exporter/ForeignBuyer
Exporter/ForeignBuyer
Q4 What is the overall welfare impact of the program?
Macchiavello Miquel-Florensa Export quality March 2018 4 / 23
Sustainable Quality Program: Question 4
FARMERS
PrivateMill
Coopera3veBuyer
(FNC)Mill
PrivateBuyer
Exporter/ForeignBuyer
Exporter/ForeignBuyer
Q4 What is the overall welfare impact of the program?
I W.I.P. calibration of a simple model + infer welfare weights impliedby the price premium
Macchiavello Miquel-Florensa Export quality March 2018 4 / 23
Roadmap
1 Background
I Colombian Coffee MarketI Sustainable Quality Program
2 Farm(er)-Level Impact
I Investments, Quality, Sales, Prices and Loyalty
3 Market-Level Impact
I Price transmission along the chain
4 Conclusions and Future Work
Macchiavello Miquel-Florensa Export quality March 2018 5 / 23
Setting: Colombian Coffee Market
Coffee Production in Colombia
I First-processing done by farmers, mostly small-holders
Institutionality: Federación Nacional de Cafeteros (FNC)
I Former monopolist before the break of the International CoffeeCartel in 1989. Nowadays manages around 40% of the exports
I Main Voluntary Sustainability Standards (Ex. Fair Trade, Rainforest,Nespresso, 4C) implemented with FNC involvement
I Existence of "Garantía de compra": Commitment to buy coffeefrom farmers at "fair market price"
Macchiavello Miquel-Florensa Export quality March 2018 6 / 23
Setting: Colombian Coffee Market
Formula−Based Price differential on the NY Arabica C Price
Regional adjustments based on, e.g., transport costs
Approx. 560 buying points
Macchiavello Miquel-Florensa Export quality March 2018 6 / 23
Sustainable Quality Program
Voluntary Sustainability Standard implemented by big private company
I Add quality and productivity dimensions to sustainability concerns ofnon-company certifications
I Started in 2003 in several countries in LAC
? Need to provide consistent (high) quality to downstream clients ... with avoluntary program
I "Non-written contract" with: farmers - 1st stage buyers - processors
? The program looks out for regions where: (CRECE 2011)
I Coffee has the same global characteristics (altitude, soil, varieties, etc.)⇒ Coffee meets the required quality and aroma standards
I Coffee can be fully traced⇒ Implementer has a direct relationship with farmers
Macchiavello Miquel-Florensa Export quality March 2018 7 / 23
Sustainable Quality Program
Voluntary Sustainability Standard implemented by big private company
I Add quality and productivity dimensions to sustainability concerns ofnon-company certifications
I Started in 2003 in several countries in LAC
? Need to provide consistent (high) quality to downstream clients ... with avoluntary program
I "Non-written contract" with: farmers - 1st stage buyers - processors
? The program looks out for regions where: (CRECE 2011)
I Coffee has the same global characteristics (altitude, soil, varieties, etc.)⇒ Coffee meets the required quality and aroma standards
I Coffee can be fully traced⇒ Implementer has a direct relationship with farmers
Macchiavello Miquel-Florensa Export quality March 2018 7 / 23
Sustainable Quality Program
Voluntary Sustainability Standard implemented by big private company
I Add quality and productivity dimensions to sustainability concerns ofnon-company certifications
I Started in 2003 in several countries in LAC
? Need to provide consistent (high) quality to downstream clients ... with avoluntary program
I "Non-written contract" with: farmers - 1st stage buyers - processors
? The program looks out for regions where: (CRECE 2011)
I Coffee has the same global characteristics (altitude, soil, varieties, etc.)⇒ Coffee meets the required quality and aroma standards
I Coffee can be fully traced⇒ Implementer has a direct relationship with farmers
Macchiavello Miquel-Florensa Export quality March 2018 7 / 23
Sustainable Quality Program: In Colombia
Program implemented (extension and commercialization) byFederación Nacional de Cafeteros
Cer$fiedFarmers
PrivateMill
(FNC)Coopera$ve
Buyer
(FNC)Mill
PrivateBuyer
Exporters/ForeignBuyers
Non-cer$fiedFarmers
Coffeeflow Cer$fiedCoffeeflow
Macchiavello Miquel-Florensa Export quality March 2018 8 / 23
Sustainable Quality Program: In Colombia
Program implemented (extension and commercialization) byFederación Nacional de Cafeteros
Cer$fiedFarmers
PrivateMill
(FNC)Coopera$ve
Buyer
(FNC)Mill
PrivateBuyer
Exporters/ForeignBuyers
Non-cer$fiedFarmers
Coffeeflow Cer$fiedCoffeeflow
Macchiavello Miquel-Florensa Export quality March 2018 8 / 23
Sustainable Quality Program: In Colombia
Program implemented (extension and commercialization) byFederación Nacional de Cafeteros
Regional expansion:
1. Caldas and Huila roll-out started in 20062. Cauca and Nariño Departments roll-out started in 20073. Santander roll-out started in 2013
Focus on [2.], which accounts for 84.5% of certified farmers
for 1 Very different, and eventually aborted, pilotfor 3 Different part of the country, farmers sales data available only pre roll out
Macchiavello Miquel-Florensa Export quality March 2018 8 / 23
Sustainable Quality Program: Sales
I To local FNC CooperativeF Permanent buying points in all locations
I Premium: COP 40/kg (5-9 % over daily FNC price for standardquality)
Macchiavello Miquel-Florensa Export quality March 2018 9 / 23
Sustainable Quality Program: Roll-Out
1. A region (set of municipalities) is identified that satisfies relevantterroir conditions
2. Within the region, eligible veredas are identifiedF Average of 25 farmers- 30 Ha.
3. All plots within selected veredas are potentially eligible, providedthey meet TASQ requirements
(TASQ - Tool for the assessment of sustainable quality)F All farmers receive training and extensionF Voluntary Program: farmers chose if / when to upgrade and get
certified
Macchiavello Miquel-Florensa Export quality March 2018 10 / 23
Sustainable Quality Program: Roll-Out
Macchiavello Miquel-Florensa Export quality March 2018 11 / 23
Sustainable Quality Program: Roll-Out
Macchiavello Miquel-Florensa Export quality March 2018 11 / 23
Sustainable Quality Program: Roll-Out
Macchiavello Miquel-Florensa Export quality March 2018 11 / 23
Sustainable Quality Program: Roll-OutThree sources of time variation:
Staggered roll−out across DepartmentsStaggered roll−out across Veredas within DepartmentsWithin Vereda, farmers’ (endogenous) take-up
Graph 13/03/18 10:13
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0040
0060
0080
00N
umbe
r of f
arm
ers
ente
ring
the
prog
ram
2008 2010 2012 2014 2016Year of entry in the program
Farmer entry
Macchiavello Miquel-Florensa Export quality March 2018 12 / 23
Sustainable Quality Program: Roll-Out
Given focus on quality, program wasn’t rolled out randomly. Twomain sources of selection:
A. Eligible locations are different along geographic dimensions
I Selected veredas are different in terrain conditions Table (but not insocioeconomic and conflict incidence Table )
⇒ DID with Plot Fixed Effects, Border discontinuity
B. Within eligible veredas, farmers endogenously chose whether toget certified
I Certified farmers are different in farm characteristics Table
⇒ Various "ITT" strategies
Data sources
Macchiavello Miquel-Florensa Export quality March 2018 13 / 23
Sustainable Quality Program: Roll-Out
Given focus on quality, program wasn’t rolled out randomly. Twomain sources of selection:
A. Eligible locations are different along geographic dimensions
I Selected veredas are different in terrain conditions Table (but not insocioeconomic and conflict incidence Table )
⇒ DID with Plot Fixed Effects, Border discontinuity
B. Within eligible veredas, farmers endogenously chose whether toget certified
I Certified farmers are different in farm characteristics Table
⇒ Various "ITT" strategies
Data sources
Macchiavello Miquel-Florensa Export quality March 2018 13 / 23
Roadmap
1 Background
I Colombian Coffee MarketI Sustainable Quality Program
2 Farm(er)-Level Impact
I Investments, Quality, Sales, Prices and Loyalty
3 Market-Level Impact
I Price transmission along the chain
4 Conclusions and Future Work
Macchiavello Miquel-Florensa Export quality March 2018 13 / 23
Plot-Level Impact: Upgrading
Do farmers upgrade their plots as they get certified?
Ypvmy = β0 + β1 × Tpvmy + γp + γmy + εpvmy
⇒ Plot Index: z-score of tree age, density, resistant varieties.
z-score plantation characteristics
OLS ITT
Treated plot 0.0738*** 0.2035***(0.003) (0.005)
Vereda treated 0.1310***(0.004)
Not yet treated 0.1489***(0.005)
Never treated (eligible) 0.1149***(0.004)
Observations 780,047 780,047 780,047Number of plots 84,907 84,907 84,907Plot FE Yes Yes YesMun-Year FE Yes Yes YesRobust standard errors in parentheses.*** p<0.01, ** p<0.05, * p<0.1, + p<0.15
Parallel trends ( Go ); robustness to border-year FE
Macchiavello Miquel-Florensa Export quality March 2018 14 / 23
Plot-Level Impact: Upgrading
Do farmers upgrade their plots as they get certified?
Ypvmy = β0 + β1 × Tpvmy + γp + γmy + εpvmy
⇒ Plot Index: z-score of tree age, density, resistant varieties.
z-score plantation characteristics
OLS ITT
Treated plot 0.0738*** 0.2035***(0.003) (0.005)
Vereda treated 0.1310***(0.004)
Not yet treated 0.1489***(0.005)
Never treated (eligible) 0.1149***(0.004)
Observations 780,047 780,047 780,047Number of plots 84,907 84,907 84,907Plot FE Yes Yes YesMun-Year FE Yes Yes YesRobust standard errors in parentheses.*** p<0.01, ** p<0.05, * p<0.1, + p<0.15
Parallel trends ( Go ); robustness to border-year FE
Macchiavello Miquel-Florensa Export quality March 2018 14 / 23
Plot-Level Impact: Other Outcomes
Do farmers upgrade their plots as they get certified?
(1) (2) (3) (4) (5) (6)
Plot improvement Log area coffee Plot ending activity
Treated plot -0.0815*** 0.0585*** -0.0088***(0.007) (0.003) (0.000)
Vereda treated 0.4324*** 0.1022*** -0.0694***(0.010) (0.004) (0.001)
Observations 737,881 737,881 766,987 766,987 780,049 780,049Number of plots 82,650 82,650 84,256 84,256 84,907 84,907Plot FE Yes Yes Yes Yes Yes YesMun-Year FE Yes Yes Yes Yes Yes Yes
Notes: Robust standard errors in parentheses.*** p<0.01, ** p<0.05, * p<0.1, + p<0.15. Time period is 2006 - 2016.
Other programs (placebos) Go
Land Transactions
Macchiavello Miquel-Florensa Export quality March 2018 15 / 23
Plot-Level Impact: Quality⇒ Did program increased quality?
We do not observe plot-level output quality (but see timing of sales Go )
We do observe extremely detailed quality testing of batches by sourcing location:
Qspcomy = β0 + β1 × CSspcomy + γoy + γmy + γpc + εspcomy
Quality Q of sale s btw. mill p and coop c for coffee from origin o in month m of year y
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Gr. Almendra Sana Gr. Pasilla Quality Index Sample Accepted Defects Reportedin Sample in Sample (neg.)
Cert. Sale 0.0543** 0.0443+ 0.2083+ 0.0436* 0.1313* 0.0439* 0.0085** 0.0080** -0.0371** -0.0338*(0.024) (0.027) (0.135) (0.023) (0.072) (0.022) (0.003) (0.003) (0.018) (0.019)
Observations 223,674 126,507 223,674 126,507 223,674 126,507 223,385 126,369 223,385 126,369R2 0.911 0.936 0.726 0.783 0.538 0.753 0.265 0.333 0.144 0.185
Mean dep. var 0.951 0.959 0.090 0.066Sample All Non-standard All Non-standard All Non-standard All Non-standard All Non-standardMill (buyer) FE Yes Yes Yes Yes Yes Yes Yes Yes Yes YesCoop (seller) FE Yes Yes Yes Yes Yes Yes Yes Yes Yes YesAgency - Year FE Yes Yes Yes Yes Yes Yes Yes Yes Yes YesYear-Month FE Yes Yes Yes Yes Yes Yes Yes Yes Yes YesRobust standard errors in parentheses, cluster product. *** p<0.01, ** p<0.05, * p<0.1, + p<0.15. Data: 2009-2014.Quality index calculated as average of pasilla and almendra sana indicators.
NB: Aggregate quality increases, no reduction in the quality of non-certified coffee sourced
from a given origin Go
Macchiavello Miquel-Florensa Export quality March 2018 16 / 23
Plot-Level Impact: Quality⇒ Did program increased quality?
We do not observe plot-level output quality (but see timing of sales Go )
We do observe extremely detailed quality testing of batches by sourcing location:
Qspcomy = β0 + β1 × CSspcomy + γoy + γmy + γpc + εspcomy
Quality Q of sale s btw. mill p and coop c for coffee from origin o in month m of year y(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Gr. Almendra Sana Gr. Pasilla Quality Index Sample Accepted Defects Reportedin Sample in Sample (neg.)
Cert. Sale 0.0543** 0.0443+ 0.2083+ 0.0436* 0.1313* 0.0439* 0.0085** 0.0080** -0.0371** -0.0338*(0.024) (0.027) (0.135) (0.023) (0.072) (0.022) (0.003) (0.003) (0.018) (0.019)
Observations 223,674 126,507 223,674 126,507 223,674 126,507 223,385 126,369 223,385 126,369R2 0.911 0.936 0.726 0.783 0.538 0.753 0.265 0.333 0.144 0.185
Mean dep. var 0.951 0.959 0.090 0.066Sample All Non-standard All Non-standard All Non-standard All Non-standard All Non-standardMill (buyer) FE Yes Yes Yes Yes Yes Yes Yes Yes Yes YesCoop (seller) FE Yes Yes Yes Yes Yes Yes Yes Yes Yes YesAgency - Year FE Yes Yes Yes Yes Yes Yes Yes Yes Yes YesYear-Month FE Yes Yes Yes Yes Yes Yes Yes Yes Yes YesRobust standard errors in parentheses, cluster product. *** p<0.01, ** p<0.05, * p<0.1, + p<0.15. Data: 2009-2014.Quality index calculated as average of pasilla and almendra sana indicators.
NB: Aggregate quality increases, no reduction in the quality of non-certified coffee sourced
from a given origin Go
Macchiavello Miquel-Florensa Export quality March 2018 16 / 23
Plot-Level Impact: Sales, Prices and Loyalty
⇒ Did the program impact farmers sales?
We consider three outcomes:
1. Volumes2. Prices3. Buyer’s composition
I Transaction-level data of all farmers sales of coffeeI Caveat:I Data only for two years, late in the sample, farmer FE not feasible→ border discontinuity design
I Do not know which sales belong to the program→ Additionaldetailed data from one of the two coops
Macchiavello Miquel-Florensa Export quality March 2018 17 / 23
Plot-Level Impact: Sales
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
ln Q Share sold to Coop
OLS BDD OLS BDD
Treated farmer 0.6155*** 0.4149*** 0.6217*** 0.6522*** 0.2704*** 0.3022*** 0.2387*** 0.1607**(0.040) (0.097) (0.037) (0.159) (0.031) (0.031) (0.034) (0.056)
Vereda treated -0.0391 0.0935***(0.094) (0.026)
Will be treated -0.3829*** -0.0191 0.1108*** -0.0439(0.093) (0.157) (0.031) (0.055)
Not treated (eligible) -0.1867* 0.0344 0.0248 -0.0814*(0.094) (0.146) (0.030) (0.045)
Observations 67,184 67,184 67,184 6,402 6,402 67,184 67,184 67,184 6,402 6,402R2 0.347 0.324 0.348 0.465 0.465 0.174 0.127 0.175 0.335 0.335Farmer Controls Yes Yes Yes Yes Yes Yes Yes Yes Yes YesMunicipio FE Yes Yes Yes - - Yes Yes Yes - -Border (5km.) FE - - - Yes Yes - - - Yes YesRobust standard errors (cluster municipio) in parentheses *** p<0.01, ** p<0.05, * p<0.1, + p<0.15
i) Evidence consistent with all the increase in production being sold to the cooperative
ii) But approximately only 2/3 of production meets quality standard
Balance Condition appears to be satisfied Table
Macchiavello Miquel-Florensa Export quality March 2018 18 / 23
Plot-Level Impact: Price
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
ln P ln P (Coop)
OLS BDD OLS BDD
Treated farmer 0.0294*** 0.0227*** 0.0300*** 0.0289** 0.0389*** 0.0296*** 0.0346*** 0.0509*(0.004) (0.005) (0.004) (0.010) (0.004) (0.006) (0.005) (0.026)
Vereda treated 0.0002 0.0016(0.004) (0.004)
Will be treated -0.0028 -0.0006 -0.0092 0.0077(0.010) (0.013) (0.010) (0.024)
Not treated (eligible) -0.0072* -0.0011 -0.0095** 0.0172(0.004) (0.010) (0.004) (0.025)
Observations 67,184 67,184 67,184 6,391 6,391 52,388 52,388 52,388 5,032 5,032R2 0.130 0.113 0.130 0.185 0.185 0.116 0.094 0.116 0.271 0.271Farmer Controls Yes Yes Yes Yes Yes Yes Yes Yes Yes YesMunicipio FE Yes Yes Yes - - Yes Yes Yes - -Border (5km.) FE - - - Yes Yes - - - Yes YesRobust standard errors (cluster municipio) in parentheses *** p<0.01, ** p<0.05, * p<0.1, + p<0.15
i) No price spillover on non-treated farmers
ii) No price spillover from other buyers and higher loyalty ( Go )
iii) Robustness to Border Distance ( Go & Go )
Macchiavello Miquel-Florensa Export quality March 2018 19 / 23
Plot-Level Impact: Sales, Prices and Loyalty
Panel of yearly (t) farmer (f) sales to the different programs (p), with farmer FE
Ypfmy = β0 + β1 × Tpfmy + β2 × Xfy + γf + γmy + εpfmy
Outcome Y of sale from farmer f under program p in municipality m of year y
(1) (2) (3) (4) (5) (6)
ln price per Kg. - pergamino ln quantity
Certified Sales 0.0846*** 0.0691*** 0.0709*** 1.4048*** 1.2525*** 1.3114***(0.009) (0.014) (0.014) (0.103) (0.125) (0.123)
Observations 35,182 29,296 29,201 35,485 29,314 29,314Number of farmers 10,087 9,950 9,950 10,087 9,950 9,950R2 0.378 0.342 0.346 0.559 0.566 0.603
Sample All Non-standard Non-standard All Non-standard Non-standardLocation-Year FE Yes Yes Yes Yes Yes YesFarmer FE Yes Yes Yes Yes Yes YesFarmer-Year controls No No Yes No No YesRobust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1, + p<0.15Farmer-year controls include share sold certified, yearly total quantity produced and its square. Time period: 2015-2017
NB: Average share of certified sales is 78% (median 90%)
Macchiavello Miquel-Florensa Export quality March 2018 19 / 23
Roadmap
1 Background
I Colombian Coffee MarketI Sustainable Quality Program
2 Farm(er)-Level Impact
I Investments, Quality, Sales, Prices and Loyalty
3 Market-Level Impact
I Price transmission along the chain
4 Conclusions and Future Work
Macchiavello Miquel-Florensa Export quality March 2018 19 / 23
Price premium along the chain
⇒ How much of the export price premium is transmitted along thechain?
Macchiavello Miquel-Florensa Export quality March 2018 20 / 23
Price premium along the chain
⇒ How much of the export price premium is transmitted along thechain?
Cer$fiedFarmers
PrivateMill
(FNC)Coopera$ve
Buyer
(FNC)Mill
PrivateBuyer
Exporters/ForeignBuyers
Non-cer$fiedFarmers
Coffeeflow Cer$fiedCoffeeflow
5-7%priceincrease
Macchiavello Miquel-Florensa Export quality March 2018 20 / 23
Price premium along the chain
⇒ How much of the export price premium is transmitted along thechain?
Cer$fiedFarmers
PrivateMill
(FNC)Coopera$ve
Buyer
(FNC)Mill
PrivateBuyer
Exporters/ForeignBuyers
Non-cer$fiedFarmers
Coffeeflow Cer$fiedCoffeeflow
Pricedifferen$alexplainedbyquality
Macchiavello Miquel-Florensa Export quality March 2018 20 / 23
Price Premium at Processing Stage
(1) (2) (3) (4) (5) (6)
ln Price per Kg. - pergamino ln Quantity Future sale
Cert. Sale 0.0670*** 0.0475*** 0.0473*** 0.0057 0.4090*** -0.0429***(0.015) (0.005) (0.005) (0.004) (0.061) (0.010)
Observations 207,895 116,545 116,545 116,545 120,993 120,993R2 0.999 0.999 0.999 0.999 0.333 0.304
Sample All Non-std. Non-std. Non-std. Non-std. Non-std.Mill (buyer) FE Yes Yes Yes Yes Yes YesCoop (seller) FE Yes Yes Yes Yes Yes YesAgency - Year FE Yes Yes Yes Yes Yes YesYear-Month FE Yes Yes Yes Yes Yes YesQuantity control No Yes Yes Yes No NoQuality control No No No Yes No NoRobust standard errors in parentheses. Cluster product (Columns (1)-(4)), Year-month (Columns (5)-(6)).*** p<0.01, ** p<0.05, * p<0.1, + p<0.15 Data: 2006-2014Future sale takes value 0 when the agreement is made at the moment of the delivery, and 1 otherwise.
Macchiavello Miquel-Florensa Export quality March 2018 20 / 23
Price premium along the chain⇒ How much of the export price premium is transmitted along the
chain?
Cer$fiedFarmers
PrivateMill
(FNC)Coopera$ve
Buyer
(FNC)Mill
PrivateBuyer
Exporters/ForeignBuyers
Non-cer$fiedFarmers
Coffeeflow Cer$fiedCoffeeflow
3-5%pricedifferen$alwhenaccoun$ngforcontractcondi$ons
Macchiavello Miquel-Florensa Export quality March 2018 21 / 23
Price Premium at Export Gate
(1) (2) (3) (4) (5) (6)
ln price per Kg. - green coffee
Certified Contract 0.0049 0.0342*** 0.0238+ 0.0345*** 0.0514*** 0.0422**(0.009) (0.012) (0.015) (0.012) (0.015) (0.017)
Observations 56,766 24,921 5,211 56,766 24,921 5,211R2 0.836 0.829 0.876 0.843 0.839 0.892
Sample All Non-standard Supremo All Non-standard SupremoPort & Destination country Yes Yes Yes Yes Yes YesYear-Month FE Yes Yes Yes Yes Yes YesContract conditions No No No Yes Yes YesRobust standard errors (cluster year-month-destination country) in parentheses. *** p<0.01, ** p<0.05, * p<0.1, + p<0.15Contract conditions: Quantity, payment terms, type of coffee. Daily exchange rate included in all specifications.
⇒ Supremo: Beans of size > 17 and minimal defaults.
⇒ Certified contracts have more delayed payment conditions and smaller volumes.
Macchiavello Miquel-Florensa Export quality March 2018 21 / 23
Conclusions and future work
Very Preliminary !Comprehensive analysis of buyer-driven quality-upgradingprogram
1. Evidence suggests that the programI Incentivized (larger) farmers to invest and upgrade farmI Quantity, Quality and Prices increased
2. Price TransmissionI Program successfully transmitted export price premium to farmersI Price premia hidden under contractual termsI "No double marginalization from FNC"I No evidence of spillover (possibly due to garantia de compra)
3. Future work:I Explore take-ups and costs,I Model calibration, CBA and welfare (function)
Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Conclusions and future work
Very Preliminary !Comprehensive analysis of buyer-driven quality-upgradingprogram
1. Evidence suggests that the programI Incentivized (larger) farmers to invest and upgrade farmI Quantity, Quality and Prices increased
2. Price TransmissionI Program successfully transmitted export price premium to farmersI Price premia hidden under contractual termsI "No double marginalization from FNC"I No evidence of spillover (possibly due to garantia de compra)
3. Future work:I Explore take-ups and costs,I Model calibration, CBA and welfare (function)
Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Conclusions and future work
Very Preliminary !Comprehensive analysis of buyer-driven quality-upgradingprogram
1. Evidence suggests that the programI Incentivized (larger) farmers to invest and upgrade farmI Quantity, Quality and Prices increased
2. Price TransmissionI Program successfully transmitted export price premium to farmersI Price premia hidden under contractual termsI "No double marginalization from FNC"I No evidence of spillover (possibly due to garantia de compra)
3. Future work:I Explore take-ups and costs,I Model calibration, CBA and welfare (function)
Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Conclusions and future work
Very Preliminary !Comprehensive analysis of buyer-driven quality-upgradingprogram
1. Evidence suggests that the programI Incentivized (larger) farmers to invest and upgrade farmI Quantity, Quality and Prices increased
2. Price TransmissionI Program successfully transmitted export price premium to farmersI Price premia hidden under contractual termsI "No double marginalization from FNC"I No evidence of spillover (possibly due to garantia de compra)
3. Future work:I Explore take-ups and costs,I Model calibration, CBA and welfare (function)
Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Gracias!
Thank You!
Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Comparison of municipality characteristicsNever treated Treated T-test
N Mean/SE N Mean/SE (1)-(2)
Official Area (Km2) 35 453.086(92.036)
34 379.382(61.297)
73.703
Altitude 35 1745.371(127.926)
34 1687.412(109.646)
57.960
Distance to district capital 35 52.692(4.457)
34 53.619(3.522)
-0.928
Rurality Index (Rural/ Total Population) 35 0.747(0.032)
34 0.769(0.028)
-0.021
Poverty Index (SISBEN) 35 93.199(2.799)
33 97.560(0.418)
-4.361
Land Gini Index 35 0.765(0.015)
33 0.744(0.014)
0.020
Land Gini Index (Ownership) 35 0.752(0.013)
33 0.720(0.010)
0.032*
Literacy rate in 2005 35 84.475(1.892)
33 85.531(0.775)
-1.056
Spanish ocupied land (1510 - 1561) 35 0.371(0.083)
34 0.265(0.077)
0.107
Presence of land conflics (1901 - 1917) 35 0.057(0.040)
34 0.059(0.041)
-0.002
Presence of land conflicts (1918 - 1931) 35 0.086(0.048)
34 0.118(0.056)
-0.032
Violence 1948 to 1953 35 0.143(0.060)
34 0.059(0.041)
0.084
Presence of Guerrilla groups 36 3.361(0.326)
33 2.242(0.342)
1.119**
Presence of ELN 36 1.528(0.307)
33 1.758(0.323)
-0.230
Presence of FARC 36 5.194(0.479)
33 2.727(0.451)
2.467***
Presence of Paramilitar groups 36 0.333(0.138)
33 0.242(0.098)
0.091
Presence of Coca cultivation 36 2.583(0.619)
33 2.606(0.617)
-0.023
Mean homicide rate 34 13.908(3.457)
33 9.458(3.202)
4.451
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Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Terrain conditions comparison
Not-Certified Ver. Certified Ver. T-testDifference
N Mean/SE N Mean/SE (1)-(2)
Total Land (Ha.) 396 109.847(10.068)
354 91.105(10.674)
18.742
Agro-climatically attainable yield 1961-90, kg DW/ha 416 1039.913(21.879)
359 1006.997(22.307)
32.916
Altitude (mean), metres 416 1728.530(26.925)
359 1894.322(24.372)
-165.793***
Altitude (std), metres 416 156.548(5.653)
359 184.112(5.252)
-27.564***
Slope (mean), degrees 416 15.968(0.359)
359 19.303(0.247)
-3.335***
Slope (std), degrees 416 6.412(0.112)
359 7.260(0.103)
-0.848***
Terrain ruggedness index (mean) 416 76.000(1.722)
359 91.248(1.210)
-15.248***
Notes: The value displayed for t-tests are the differences in the means across the groups. ***, **, and * indicatesignificance at the 1, 5, and 10 percent critical level.
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Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Data Sources
Analysis relies on a uniquely rich combination of administrative data.
A. Plot-level (treatment and) outcomes:I SICA (Sistema de Información Cafetera): Coffee census
F Geocoded 2006-2016 panel of all coffee plots in the country.F Farm characteristics, improvements, certifications, extension, etc.
B. Farmer-level sales and prices:I PIC (Protección del Ingreso Caferero) program:
F All coffee sales from farmers to any buyer (2012-2014 only)I Internal records from the largest Coop
F More detailed information on quality and certifications
C. Quality and Price Premia along the chain:I Transaction level sales from FNC Cooperatives to processors
F Including all sales under the program, with detailed information on quality andorigin
I Transaction Level Export DataF Allows for tracking of coffee lots, detailed info on quality, origin, etc.
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Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Farmer characteristics
Panel A: Municipalities comparison
Not-certified Certified T-test
N Mean/SE N Mean/SE (1)-(2)
Total plot area 58338 1.787(0.010)
48002 1.356(0.008)
0.431***
Year last plot update 58338 1996.717(0.041)
48002 1996.281(0.045)
0.435***
Altitude 58338 1665.304(0.686)
48002 1740.324(0.880)
-75.021***
Panel B: Plots inside certified municipalities
Not-certified Certified T-test
N Mean/SE N Mean/SE (1)-(2)
Total plot area 26318 1.298(0.011)
21684 1.425(0.013)
-0.127***
Yaear last plot update 26318 1994.532(0.064)
21684 1998.404(0.059)
-3.872***
Altitude 26318 1726.577(1.265)
21684 1757.010(1.190)
-30.433***
Panel C: Early adopters of certification
Cert. after 2008 Cert. before 2008 T-test
N Mean/SE N Mean/SE (1)-(2)
Total plot area 10152 1.538(0.020)
11532 1.326(0.016)
0.212***
Year last plot update 10152 1996.886(0.096)
11532 1999.740(0.069)
-2.854***
Altitude 10152 1750.293(1.747)
11532 1762.923(1.624)
-12.630***
Notes: The value displayed for t-tests are the differences in the means across the groups.***, **, and * indicate significance at the 1, 5, and 10 percent critical level.Notes: Comparison on 2006 Census.
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Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Appendix: Farmer impactX Parallel pre-trends condition appears to be satisfied (ITT)
Bla BlaBla Bla
-.2-.1
0.1
-5 -4 -3 -2 -1 +1 +2 +3 +4 +5
z-score of tree age, density, resistant varieties
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Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Coverage and Participation in FNC programs
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Any propgram Individual program Credit program Technical program Farmer ID program
Treated plot -0.0588*** -0.0351*** 0.0129*** -0.0471*** -0.0050***(0.006) (0.006) (0.005) (0.009) (0.001)
Treated vereda -0.0075 -0.0013 0.0042 -0.0157 0.0009(0.008) (0.008) (0.005) (0.011) (0.002)
Observations 66,221 66,221 66,221 66,221 66,221 66,221 66,221 66,221 66,221 66,221Number of Farmers 12,894 12,894 12,894 12,894 12,894 12,894 12,894 12,894 12,894 12,894Farmer FE Yes Yes Yes Yes Yes Yes Yes Yes Yes YesBorder-Year FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Notes: Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1, + p<0.15. Time period is 2007 to 2016.Border with is 10 Km.
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Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Balance Condition – BDD
(1) (2) (3) (4) (5) (6)Elevation Longitude Latitude
Treated Vereda 9.39 303.9 -224.0(31.75) (401.8) (195.3)
Treated Farmer 16.19 299.6 -247.0(31.45) (399.3) (202.3)
Will be treated 32.7 229.4 -355.5*(29.9) (340.7) (193.6)
Not-Treated 7.999 301.6 -222.4(31.24) (340.7) (195.5)
Observations 6,645 6,645 6,645 6,645 6,645 6,645
Border FE Yes Yes Yes Yes Yes YesRobust standard errors (cluster municipality) in parentheses.
*** p<0.01, ** p<0.05, * p<0.1, + p<0.15
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Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Border distance robustness: Treated farmersLocal spillover might invalidate BDD (particularly for prices)
⇒ Check robustness varying distance definition of border
-.05
0.0
5.1
.15
Estim
ated
Coe
ffici
ent
0 5 10 15 20 25Distance from Vereda Border (Kms)
Coop Price (ln)Private Buyers Price (ln)
Treated Farmers
X Limited spillover possibly due to garantia de compra and competitivefringe
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Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Border distance robustness: Eligible not treatedfarmers
Local spillover might invalidate BDD (particularly for prices)⇒ Check robustness varying distance definition of border
-.04
-.02
0.0
2.0
4.0
6Es
timat
ed C
oeffi
cien
t
0 5 10 15 20 25Distance from Vereda Border (Kms)
Coop Price (ln)Private Buyers Price (ln)
Eligible, Never Certified, Farmers
X Limited spillover possibly due to garantia de compra and competitivefringe
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Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Quality sorting
(1) (2) (3) (4) (5) (6)
Quality non-certified buying point sales
Certified point 0.0465* -0.0567***(0.025) (0.009)
Cert. Sales (month) 0.0348** 0.0144(0.017) (0.011)
Share Cert. Sales (month) 0.0512* 0.0128(0.030) (0.021)
Observations 26,254 26,254 26,254 14,555 14,555 14,555R2 0.714 0.714 0.714 0.763 0.853 0.853Sample All All All Non-std. Non-std. Non-std.Year-Month FE Yes Yes Yes Yes Yes YesYear-Origin FE Yes Yes Yes Yes Yes YesRobust standard errors (clusted buying point) in parentheses *** p<0.01, ** p<0.05, * p<0.1, + p<0.15
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Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Plot-level Impact: Timing of sales
Farmers process coffee at home before selling
⇒ Quality deteriorates with inadequate storage
0.2
.4.6
.81
Shar
e to
tal c
offe
e so
urce
d
0 10 20 30 40 50Week_ From start main harvest
Coop sales - Non-cert. farmers Coop sales - Cert. Farmers
Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Plot-level Impact: Timing of sales
Farmers process coffee at home before selling
⇒ Quality deteriorates with inadequate storage
0.2
.4.6
.81
Shar
e to
tal c
offe
e so
urce
d
0 10 20 30 40 50Week_ From start main harvest
Coop sales - Non-cert. farmers Coop sales - Cert. Farmers
Macchiavello Miquel-Florensa Export quality March 2018 22 / 23
Plot-level Impact: Timing of sales
Let W xfm be the week (from start main harvest) when farmer f in municipality m
has sold x% of her harvest:
W xfm = β0 + β1 ∗ Tf + β2 ∗ Xf + γm + εfm
(1) (2) (3) (4) (5) (6) (7) (8) (9)
25% sold 50% sold 75% sold
Treated farmer -1.3479*** -1.3190*** -1.2147*** -1.1805*** -1.7337*** -1.7954***(0.176) (0.168) (0.230) (0.214) (0.307) (0.315)
Vereda treated -0.9499** -0.4108 0.0898(0.472) (0.495) (0.510)
Will be treated 0.3429 0.4064 -0.7309**(0.277) (0.455) (0.322)
Observations 74,364 74,364 74,364 74,364 74,364 74,364 74,364 74,364 74,364R2 0.420 0.417 0.420 0.412 0.410 0.412 0.322 0.320 0.322Farmer Controls Yes Yes Yes Yes Yes Yes Yes Yes YesMunicipio FE Yes Yes Yes Yes Yes Yes Yes Yes YesRobust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1, + p<0.15
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Macchiavello Miquel-Florensa Export quality March 2018 23 / 23
Plot-level Impact: Buyer composition
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Exclusivity to one buyer ln P (Non-coop)
OLS BDD OLS BDD
Treated farmer 0.1648*** 0.1789*** 0.1495*** 0.0523 0.0045** 0.0029 0.0056+ 0.0057(0.020) (0.027) (0.014) (0.056) (0.002) (0.009) (0.003) (0.006)
Vereda treated 0.0496* -0.0004(0.028) (0.008)
Will be treated 0.0906*** -0.0646 -0.0049 0.0065(0.028) (0.060) (0.007) (0.013)
Not treated (eligible) 0.0070 -0.1007* -0.0013 -0.0003(0.030) (0.055) (0.008) (0.008)
Observations 67,184 67,184 67,184 6,414 6,414 38,034 38,034 38,034 3,339 3,339R2 0.165 0.151 0.165 0.234 0.234 0.124 0.124 0.124 0.214 0.214Farmer Controls Yes Yes Yes Yes Yes Yes Yes Yes Yes YesMunicipio FE Yes Yes Yes - - Yes Yes Yes - -Border (5km.) FE - - - Yes Yes - - - Yes YesRobust standard errors (cluster municipio) in parentheses *** p<0.01, ** p<0.05, * p<0.1, + p<0.15
i) Half farmers are exclusive with the cooperative.
ii) Average number of non-coop buyers is 1.2 – max. 16
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Macchiavello Miquel-Florensa Export quality March 2018 23 / 23