Value chain analysis of arabica coffee (Coffea arabica l.) in Arghakhanchi district of Nepal

Figures & data

Figure 1. Map of Arghakhanchi district including study area.

Table 1. Area under coffee cultivation in the study site

Variables	Category	Chhatradev rural municipality (n=55)	Sitganga municipality (n=55)	Total (N=110)
Area under coffee cultivation	Landless or near landless farmer (<4.9 ropani)	48 (44)	41 (37)	89 (81)
	Subsistence farmer (9.8–19.6 ropani)	7 (6)	14 (13)	21 (19)
	Small commercial farmer (19.6–98 ropani)	0	0	0

Note: Figure in the parentheses indicates percentage

1 Hectare = 19.65 Ropani

Figure 2. Shade tree in the coffee orchard.

Figure 3. Intercropping in the coffee orchard.

Figure 4. Source of seedlings for coffee orchard.

Table 2. Factor encouraging coffee production among respondents in the study site

Encouraging factors	P1 (1)	P2 (0.8)	P3 (0.6)	P4 (0.4)	P5 (0.2)	Weightage	Index	Rank
Market demand	7	14.4	18	14.4	3.8	57.6	0.52	III
High income/return	25	38.4	18	1.6	.6	83.6	0.76	II
Less care or less intensive	74	24.8	0	2	0	100.8	0.92	I
Neighbor influence	1	5.6	16.8	16.4	6.6	46.4	0.42	IV
Land suitability	3	4.8	13.2	10	1.8	41.8	0.38	V

Note: Figure in the parentheses indicate the score used and ‘P’ stands for priority (Ex. P1= First priority and so on).

Table 3. Problems in coffee production among respondents in the study site

Problems	P1 (1)	P2 (0.8)	P3 (0.6)	P4 (0.4)	P5 (0.2)	Weightage	Index	Rank
Lack of organic plant protection means	3	7.2	1.8	12.4	9.8	43.2	0.39	V
Lack of technical knowledge and extension	3	32	18	14.4	.2	67.6	0.61	III
Lack of quality seedling	5	12	21	15.6	3.2	56.8	0.51	IV
Attack of insect (WSB)	53	33.6	6.6	1.2	.2	94.6	0.86	I
Poor rainfall and irrigation	49	32	3.6	2.8	1.6	89	0.8	II

Note: Figure in the parentheses indicate the score used and ‘P’ stands for priority (Ex. P1= First priority and so on).

Figure 5. Wet processing method of coffee.

Figure 6. Value chain map of arabica coffee in Arghakhanchi district of Nepal

Table 4. Cost of production per kg. fresh cherry in the study area, 2022

Particulars	Unit	Quantity	Unit cost (NRs.)	Total (NRs.)
Variable cost
FYM	Kg	9800	1.5	14,700
Labor cost for manuring	Man day	12	800	9,600
Labor cost for plant protection	Man day	3	800	2,400
Labor cost for intercultural operation	Man day	21	800	16,800
Labor cost for harvesting	Man day	100	800	80,000
Miscellaneous cost				13,000
Total variable cost				136,000
Fixed cost
Rent	Ha.	1	37,600	39,200
Land tax	Ha.	1	1,000	1,000
Depreciation cost of seedling (5% of 1,380)	Unit	1	20	1,380
Depreciation cost (10%) of farm equipment				3,836
Other costs				8,612
Total fixed cost				54,028
Total cost of production per hectare per year				190,028
Total cost of production per kg of Fresh cherry				72.89

Note: 1 USD = 132.33 NRs

Table 5. Cost of production per kg. dry parchment in the study area, 2022

Particulars	Unit	Quantity	Unit cost	Total (NRs.)
Variable cost
Cost of Fresh cherry	Kg	4.25	80	340
Electricity cost	kilowatt hour (kWh)	0.36	10	3.6
Labor cost for washing	Man day	0.017	800	13.6
Labor cost for sorting	Man day	0.035	800	28
Packaging cost (Packaging material + Labor)				2.09
Other cost				9.94
Total Variable cost				397.17
Fixed cost
Depreciation				5.02
Rent				1.48
Tax				0.37
Repair and maintenance				2.67
Other cost				1.26
Total fixed cost				10.8
Total cost per kg of dry parchment				407.94

Note: 1 USD = 132.33 NRs

Table 6. Cost of production per kg. green beans in the study area, 2022

Particulars	Unit	Quantity	Rate (NRs.)	Total (NRs.)
Variable cost
Input cost of dry parchment	Kg	1.41	500	705
Electricity	kilowatt hour (kWh)	0.42	10	4.2
Labor cost for hulling	Man day	0.053	800	42.4
Labor cost for hand sorting	Man day	0.049	800	39.2
Labor cost for packaging	Man day	0.003	800	2.4
Packaging cost (Jute bag)	No.	0.033	100	3.3
Other cost				22.8
Total variable cost				819.3
Fixed cost
Depreciation				8.69
Rent				2.3
Tax				0.6
Repair and maintenance				2.95
Other cost				2.74
Total fixed cost				17.28
Cost per kg. of Green Bean				836.58

Note: 1 USD = 132.33 NRs

Table 7. Cost of production per kg. coffee powder in the study area, 2022

Particulars	Unit	Quantity	Rate	Total cost
Variable cost
Input cost of green beans	Kg	1.399	1000	1,399
Electricity cost	kilowatt hour (kWh)	0.82	10	8.2
Fuel cost				4.7
Labor cost for roasting	Man day	0.056	800	44.8
Labor cost for grinding	Man day	0.052	800	41.6
Labor cost for packaging	Man day	0.0053	800	4.24
Packaging cost	No.	1	6.2	6.2
Other costs				26.2
Total variable cost				1,534.94
Fixed Cost
Depreciation				7.02
Tax				3.62
Rent				4.82
Repair and maintenance				5.31
Other cost				3.02
Total fixed cost				23.79
Total cost per kg of coffee power				1,558.73

Note: 1 USD = 132.33 NRs.

Table 8. Gross margin analysis of fresh cherry production, 2022

Particulars	Fresh cherry (NRs/Kg)	Dry parchment (NRs/Kg)	Green beans (NRs/Kg)	Powder coffee (NRs/Kg)
Total fixed cost (TFC)	20.72	1.8	17.28	23.79
Total variable cost (TVC)	52.17	397.17	819.3	1,534.94
Cost of Production (CoP)	72.89	407.14	836.58	1558.73
Gross Return (GR)	78.23	490	990	1750
Gross Margin (GM= GR – TVC)	26.06	92.83	170.7	215.06

Note: 1 USD = 132.33 NRs.

Table 9. Value addition in different levels of value chain, 2022

Levels	Particulars	Price (RS/Kg)	GBE conversion factor*	GBE price (NRs/kg)	Value addition (NRs/kg)
Produces	Fresh cherry	78.23	0.18	434.6
Primary processors	Dry parchment	490	0.8	544.4	109.8
Secondary processors	Green beans	990	1	990	445.6
Consumers	Coffee powders	1750	1.19	147.58	480.58

Note: *FNCCI/AEC (2006) and ITC (2011).

Table 10. Marketing of coffee in the study site, 2022

Parameters	Category	Chhatradev rural municipality (n=55)	Sitganga municipality (n=55)	Total (N=110)
District to sell	Arghakhanchi	49 (44.5)	55 (50)	104 (94.5)
	Gulmi	6 (5.45)	0	6 (5.45)
Place to sell	Home	55 (50)	55 (50)	110 (100)
Collector Involved	Local level Collector	25 (22.7)	20 (18.18)	45 (40.9)
	Pulpers	30 (27.3)	35 (31.81)	65 (59.1)
Agreement	Oral Agreement	55 (50)	55 (50)	110 (100)
	Written Agreement	0 (0)	0 (0)	0 (0)
Payment Mechanism	Advance payment	0 (0)	0 (0)	0 (0)
	Cash payment	25 (22.7)	10 (9.09)	35 (31.8)
	Payment with month	25 (22.7)	33 (30)	58 (52.7)
	Payment after one month	5 (4.6)	12 (10.91)	17 (15.5)

Note: Figure in the parentheses indicates percentage.

Table 11. Problems in the marketing of coffee among growers in the study area, 2022

Problems	P1 (1)	P2 (0.8)	P3 (0.6)	P4 (0.4)	P5 (0.2)	Weightage	Index	Rank
Lack of storage facilities	3	0	6	4.4	17.2	30.6	0.29	V
Lack of marketing knowledge	2	7.2	31.8	14	2.2	57.2	0.52	IV
Lack of processing facilities	7	14.4	34.2	15.2	2	72.8	0.66	III
Low farmgate price	57	25.6	5.4	4	.4	92.4	0.84	I
Poor transportation and connectivity	41	4.8	.6	6.4	.2	89	0.8	II

Note: Figure in the parentheses indicates the score used and ‘P’ stands for priority (Ex. P1= First priority and so on).

Figure 7. Marketing channel of coffee value chain in study area.

Table 12. Estimation of producer share’s in different identified marketing channels in the study area

Particulars	Marketing channel
	I	II	III	IV
Farm gate Price (NRs/Kg)	434.6	434.6	434.6	434.6
Total Marketing Margin (NRs/Kg)	490	1203.9	1203.9	4136.8
Retailer’s sales price (NRs/Kg)	924.36*	1,638.65**	1,638.65**	4571.42***
Producer’s share (%)	47.01	26.52	26.52	9.5

Note: *indicates price at local area, ** indicates price at Bhatbhateni super market which was considered as the final price to domestic consumer, and *** indicates price at online market (Alibaba.com) which was considered as the final price to International consumer.

Table

Strength	Weakness
Diverse range of inputs such as seeds, fertilizers, pesticides, machinery, and equipmen	Fluctuating prices of inputs, such as fertilizers or pesticides
Suppliers often have knowledgeable staff who can provide guidance and technical support to coffee farmers	Limited accessibility to rural farmers
Established suppliers have well-managed supply chains, ensuring timely delivery of inputs to farmers	Some coffee farmers might not be fully aware of the range of inputs available or the latest advancements in agricultural technology
Opportunities	Threats
Growing domestic and international demand for coffee	Intensifying competition among input suppliers
Rising demand for environmentally sustainable inputs in agriculture and have opportunities to offer eco-friendly alternatives, promoting organic practices, and supporting farmers in obtaining certifications	Changes in government regulations related to input use, import/export restrictions, or labeling requirements
Government initiatives and policies that promote agriculture and provide subsidies or incentives for input procurement	Instability in the global or domestic coffee market can affect farmers’ incomes

Table

Strength	Weakness
Good returns	Lack of quality seedling
Less time Intensive	Lack of awareness about improved and scientific cultivation practices
Higher profit in comparison to cereals like rice, wheat, maize, etc.	Less time for processing due to perishable nature of fresh cherry
Less investment	Higher gestation period (i.e. 3–4 years)
Scope for cultivation in marginal land	Fragmented and scattered land that restrain scope of commercialization
Opportunities	Threats
Utilization of barren land for expansion	Infestation of Insect (White Stem Borer) & Disease (Leaf rust)
Great scope for increasing productivity	Climate change causing shift in altitude
Opportunity for production of organic specialty coffee	Inconsistent quality of production
Many I/NGO working for the capacity building of farmer	Inconsistent volume of production

Table

Strength	Weakness
Can be done at farm level	Scarcity of water/poor water supply for washing
Low initial investment	Lack of skilled manpower for repairing pulping machines
Cheap and easy availability of pulper machine	Low quality of pulping machine causing more wastage
	Low quality of pulping machine causing broken parchment
Opportunities	Threats
Government provide subsidy for establishment of pulping center	Untimely supply of fresh cherries by farmers
Organized collection of fresh cherry through institutions like farmer groups and cooperatives	Presence of middle man
Growing coffee plantation area increasing the volume of fresh cherry	Lack of research in processing technology

Table

Strength	Weakness
Organized channel for the collection of dry parchment	Lack of skilled manpower for repairing pulping machines
Easy availability of processing machineries	Low quality of processing machine causing more wastage
Processors doing processing as well as trading thus reducing the number of middleman in value chain	Low quality of processing machine causing broken green beans
Opportunity	Threats
Increasing demand of Nepalese specialty coffee in both domestic and foreign market	Increment in price of coffee cherries every year
Shifting of consumer preference from tea to coffee	Dependence on limited buyers
Potential to fetch premium price by certification	Decreasing international reputation due to adulterations
	Uncertified coffee sold as organic coffee in international market

Table

Strength	Weakness
Active engagement with the coffee community and coffee culture	Nepalese specialty coffee production is relatively small-scale, resulting in limited accessibility for consumers
Nepalese specialty coffee is often produced with meticulous attention to detail, focusing on quality cultivation, processing, and roasting methods, ensuring a premium product for consumers.	Specialty coffee often comes with a higher price tag due to its quality and unique characteristics. This may be a deterrent for price-sensitive consumers.
Many Nepalese specialty coffee producers follow sustainable and ethical practices, including organic farming methods, fair trade principles	Many consumers have limited knowledge about specialty coffee
Opportunity	Threats
Rise of e-commerce platforms and coffee subscriptions provides convenience and accessibility	Limited availability of specialty coffee
Opportunity to explore and discover new and unique flavor experiences	Economic downturns, inflation, or changes in consumer spending habits can impact the purchasing power
Customization based on individual preferences where consumers can choose their preferred origin, roast level, brewing method, or even experiment to create their own unique flavor combinations.	With the increasing popularity of specialty coffee, there is a risk of counterfeit or mislabeled products entering the market

FNCCI/AEC. (2006). The study report on trade competitiveness of Nepalese coffee. Federation of Nepalese Chamber of Commerce and Industries, Agro-Enterprise Center. Available: http://www.aec-fncci.org/wp-content/uploads/2015/01/Trade-competitiveness-study-Report-Coffee-Full.pdf).

 Google Scholar

ITC (International Trade Centre). (2011). The coffee exporter’s guide. 3rd Ed. International Trade Centre, 54-56, rue de Montbrillant, 1202. pp. 4 Available: http://www.thecoffeeguide.org/coffee-guide/world-coffeetrade/conversions-and-statistics/

 Google Scholar