Financial analysis of coffee farming in an agro-industry perspective: comparative cost of production and processing

Abstract Coffee production and prices have varied over the past five years, affecting farmers’ income and the sustainability of coffee farming. This study aims to examine and compare the financial analysis of coffee farming systems: one without post-harvest processing and the other involving processing into green beans. Data were collected from 120 farmers using a questionnaire. The financial feasibility was analyzed using NPV, net B/C, IRR, and payback period indicators, along with the Mann-Whitney difference test. The total costs, revenues, and profits of the system with post-harvest processing are higher than those without processing. Both systems are financially feasible, as indicated by positive NPV, Net B/C values greater than 1, IRR well above the discount rate, and relatively short payback periods. There is no statistically significant difference in financial feasibility between the two systems, mainly because both generate returns that exceed production costs and remain profitable under current conditions. Meanwhile, farmers processing the coffee harvest into green beans have earned higher and more profitable incomes. This finding has proven the importance of coffee farming through the processing stage for maximizing profitability. Furthermore, strategic steps are required from the perspective of government regulations and policies, and technical improvement at the farmer level, for the sustainability of coffee farming as a source of livelihood.