INDUBAN has a guaranteed domestic market for coffee that is not “export quality,” it has traditionally paid a single price to coffee producers without relation to coffee quality. This policy has served as a disincentive to improve coffee quality and on-farm post-harvest practices.

It is interesting to note that previous World Bank reports (e.g., World Bank, 1981; 1991; Varangis, 1989; World Bank, 2002a) all acknowledged the possibility that excessive market power and resulting inefficiencies “might” possibly exist in the coffee sector, but found no concrete evidence of inefficiency. These reports, however, argue that the pricing system does not reward quality and the lack of quality incentives constrains quality and price improvements for producers. A rigorous analysis of INDUBAN’s domination of the Dominican coffee sector is needed to examine the existence or absence of market inefficiencies, and impacts on the sector.

# **E.5. Estimates of Marketing Margins**

Attempts to try and generalize marketing margins are difficult because of the difficulty to obtain accurate and consistent data from all those involved in the marketing chain. Marketing margins are important for analyzing market efficiency and international competitiveness. We present indicative calculations of marketing margins based on several sources.

On May 29, 2003 the NYBOT price for “other milds” was $65/qq, and the price differential for Dominican coffee was minus 400 points<sup>45</sup> . Thus, the NYBOT reference price for Dominican coffee was $61/qq. The estimated FOB price for Dominican coffee is about $6/qq less (for broker and freight charges). Based on several sources, the domestic marketing margins from farmgate to port were estimated to be about $15-18/qq. Thus, the total difference between the NYBOT price for “other milds” to the farmgate price were estimated to be about $25-28/qq, for a farmgate price of $37-40/qq. At the same time INDUBAN was paying farmers RD$ 1500/qq as its “standard” price for coffee<sup>46</sup> , or about $55/qq (which includes the GoDR RD$200/qq support price). Thus, there is presently no clear relationship between NYBOT prices and farmgate prices.

# **F.  Other Coffee-related Institutions**

Coffee institutions include public and private sector actors who regulate, support and participate in the industries. The public sector in the Dominican Republic has undergone significant restructuring in recent years as a result of budgetary pressures and efforts to improve efficiency. The biggest impact of this restructuring on the coffee sector is to increase the administrative autonomy of government institutions serving the coffee sector. The private sector is comprised of for-profit enterprises and cooperatives and non-governmental organizations that provide a mix of public and private functions. The main institutional functions include provision of research and technical assistance, collection and dissemination of data and information, regulation of input and output markets, provision of services including marketing and export and establishment of an overarching policy environment.

This section provides an overview of public and public-private institutions, international agencies and NGOs involved in the coffee sector.

> 45 In contrast, coffee from Mexico, El Salvador, Guatemala, Costa Rica, Nicaragua and Panama were all receiving the basis, and Honduras was receiving minus 100 points and Columbia plus 200 points. 46 Although the “standard” price is RD$1500/qq, INDUBAN discounts this price for producers delivering low quality coffee. About 25% of coffee has its price discounted. With relatively low prices in recent years, INDUBAN indicated that the proportion of producers delivering low quality coffee has been increasing.

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