Contracting decision and performance of Mexican coffee traders: The role of market institutions

We identified and explained the contractual choices of Mexican coffee traders in selling their product and analyzed the traders´ performance. The data were obtained from personal interviews with 53 intermediaries in four coffee producing regions of the states of Oaxaca and Veracruz, Mexico. Marketing margins were used as an indicator of traders’ performance. The results indicate that being a roaster, having a wet processing plant and selling cherry coffee negatively affects the use of contracts whereas being vertically integrated has a positive effect. The results also suggest that being registered in the National Coffee System (which only a minority of the interviewed traders were) increases the margin for the trader. Selling cherry coffee, participating in a competitive environment and having a contract decreases these margins (at 5% significance) and may thus enhance the performance of the supply chain and benefit the producer