Production Efficiency and Diversification in Mexican Coffee-Producing Districts

Coffee production system is analyzed for 24 municipios (districts) in Veracruz, Mexico, from 1997 to 2002. A stochastic frontier approach is used to estimate an input distance function and to evaluate production efficiency. Results show the production process to be stable over time despite global price fluctuations. Production of staple crop (corn) with either coffee or other cash crops results in increased efficiency as a result of the economies of complementarity, while production of coffee with other cash crops leads to lower efficiency. Factors contributing to higher efficiency included higher population density, road availability, and higher altitude, typically associated with production of higher-quality coffee.