Figure 2.19: International price of Arabica coffee, constant U.S. cents per Kg 600 500 400 300 200 100 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
18. In addition to volatile international prices, the country’s export earnings from coffee depend on the quantity and quality of the coffee harvest each year, which have been declining. Burundi has a biennial output cycle because of aging coffee trees. The quantity and quality of output have suffered in recent years from tree disease, low input use, and low incentives from low producers prices.41
Source: World Bank Global Economic Monitor.
19. Despite its good quality, Burundian coffee farmers have historically Figure 2.20: Price received by Burundian coffee received a lower price for their coffee producers vs. world price (in constant FBU) than the international reference price. The producer price of coffee set by the Burundian government is to some extent unrelated to the world market price of coffee (Figure 2.19). 42 Compared to its neighbors, the gap between the producer price and the market price has been much larger (Figure 2.20). 43 “The situation profoundly discourages farmers” (USAID 2010, p.4). Due to the country’s law, farmers are prohibited from destroying coffee plants. Very Source: Kimonyo and Ntiranyibagira (2007). often, farmers are choosing to neglect their coffee plants in favor of food crops.
The state-run coffee agency, OCIBU, annually sets the producer price and is in control of marketing and export. According to some observers, state-led ownership has been a major negative factor on private initiative and incentive to invest (IMF 2008, CEM 2011). 42 The state-run coffee agency, OCIBU, annually sets the producer price and is in control of marketing and export (IMF 2008). The agency argues that Burundian producers have been protected from fluctuations in international prices. Although this is true, the farmers have also not benefited from periodic price increases (USAID 2010). 43 There are different reasons for this, including (i) OCIBU’s control of coffee sales and bad marketing practices; (ii) the small volume of the country’s production; (iii) lack of access to the sea; (iv) the conflict, and according to some; (v) collusion by international traders operating in the Burundian market to maintain low prices (Kimonyo and Ntiranyibagira, 2007).
45