Economics of Coffee processing in Wayanad district of Kerala

Abstract

The present study examines the economics and financial feasibility of coffee processing units in Wayanad district, Kerala a major coffee-producing region in India. A total of 30 processing units were selected and categorized into small, medium, and large groups based on their processing capacities. Data were collected through structured interviews and analysed using statistical tools like averages, percentages, and financial metrics such as Net Present Value (NPV), Benefit-Cost Ratio (BCR), Payback Period (PBP), and Internal Rate of Return (IRR). The analysis revealed that the majority of capital investment goes into working capital especially raw materials, which alone account for 88.38 per cent of total costs. Large units dominated both in scale and profitability, accounting for the highest share of capital investment and production. Labour usage showed a male-dominated workforce, with large units employing the highest number of workers. While small units relied more on manual labour and had higher labour costs proportionally, large units demonstrated greater efficiency due to economies of scale. In terms of profitability, all unit sizes were economically viable, with large units reporting the highest net returns (?7.63 crore) and BCR (1.65), followed by medium units (BCR 1.29) and small units (BCR 1.35). The average overall BCR was 1.35. Break-even analysis further confirmed the stability of large units, which had a high margin of safety (382.99 tonnes) compared to medium and small units. Financial feasibility measures showed positive outcomes across all unit sizes. Large units recorded the highest NPV and IRR (22.98%), while at overall level payback period was of 3-4 years. Overall, the findings confirm that coffee processing is a profitable and economically sound investment in Wayanad, particularly at larger scales of operation.