Determinants of Smallholders’ Market Preferences: The Case of Sustainable Certified Coffee Farmers in Vietnam

Abstract

This study attempts to analyze the market preference of coffee farmers in Vietnam. Using the transaction cost approach, a seemingly unrelated regression (SUR) model was developed based on the sales volume in different markets, transaction cost attributes, socioeconomic factors, and behavioral aspects of sustainable certified coffee farmers. Factors that significantly influence farmers’ market preference include several transaction cost attributes (price uncertainty, market competition, transportation cost, speed of payment, and sale volume agreement) and characteristics of coffee farmers (age, ethnic, farming experience, location, and certificate ownership). Repeated economic transaction embedded in the social relationship indicates the largest sales volume of coffee farmers to the market of buying agents and the existence of local traders. There is a belief that formal institution brings better market access for coffee farmers, but main issues are regarding opportunistic behavior, imperfect market knowledge, traditional farming habits, and contract noncompliance, which have resulted in a lower preference for the market of processors/exporters.