An economic exploration of smallholder value chains: Coffee Transactions in Chiapas, Mexico

Fair trade and vertical integration represent two popular approaches for enhancing the incomes of organized farmers in a volatile coffee market as compared to the uncertain plight of independent, non-affiliated growers. A mixed method approach, utilizing informal interviews and a household survey in Chiapas, Mexico, analyzed three coffee trading regimes: independent, non-affiliated farmers, and growers in cooperatives pursuing a fair trade or vertical integration strategy. Survey and econometric results indicate that concentration on specialty coffee production with a portfolio of foreign contracts is economically preferable to a vertically integrated cooperative, which in turn produces more favorable coffee prices for smallholders than the non-affiliated conventional, coyote-dominated trading system.