coffee producers have small landholdings, income-generating activities are needed to supplement coffee incomes. In fact, many small-scale coffee producers rely on their coffee trees as “banks”-a source of cash that supplements other income generating activities. With more alternative income generating activities, smaller-scale producers can manage their plantations in a manner that is responsive to international coffee prices - when prices are high they devote more labor to maintenance activities and harvest, and when prices are low they do less. This type of supply response causes coffee production to fluctuate from year to year. A similar situation exists for small-scale cocoa producers.

The high degree of diversity in income generation among coffee-producing households is confirmed by the CRMG survey. It found that about 61% of producers received less than 50% of their family income from farm sources, and only 16% received 75-100% of their income from the farm. Coffee is also not the only source of farm income; the CRMG survey found that 63% of coffee producers receive less than 50% of their farm income from coffee and less than 15% received 75-100% from coffee. The share of total income from farm sources and the share of farm income from coffee were not related to landholding sizes. Thus, for the majority of coffee producers surveyed, coffee only represents a portion of a diversified portfolio of on- and off-farm income sources.

The fact that so many coffee producers have alternative sources of income needs to be taken into account when designing a strategy for the future. Taking a holistic approach that accounts for all household income generating activities and labor flows from on- and off-farm activities (and the risks that producers face) is critical for understanding the receptiveness and responsiveness of coffee producers to different opportunities. A holistic approach is also for important for assessing the profitability and competitiveness of coffee production from a producer’s perspective. This is also the case for the cocoa sector.

# _Coffee Producer Perceptions of Risks_

The primary risks faced by coffee producers are weather and price-related. The CRMG survey asked producers to score several risks in terms of their importance. Risk associated with coffee price was ranked first, but closely followed by risks associated with weather, diseases and pests, household health, and access to credit (all were scored 2.5 and above on a 1 to 3 scale where 1 was not important, 2 important, and 3 very important). Reduction in yields from other crops and employment sources were scored as less important. No significant variation in response emerged by landholding size. Thus, coffee producers perceive that they are operating in a very risky environment. In reaction to the current coffee price crisis, a high proportion of producers responded that they are reducing the use of inputs, hired labor and, in some cases, not harvesting their coffee. Many also indicated that they are having difficulty repaying their debts. These reactions to the current coffee price crisis indicate that there are potential negative impacts that extend beyond producers; to others directly and indirectly linked to the sector.

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