exercise with a major Tanzanian Arabica coffee cooperative, it was found that month-to- month losses on inventory value in the post-harvest season at times exceeded well over a million dollars).
If the cooperative enters into PTBF contracts with exporters, they have to properly time their price fixing. Normally, in a PTBF contract, the seller can fix incremental parts of his sales price between the period of the initial signature of the contract and the time of delivery. The “safe” way to use a PTBF contract would be to spread out the timing of price fixation—e.g., in the first week, the price of 10 per cent of the volume-to-be- delivered is fixed, in the second week, a further 10 per cent, etc. However, the temptation to set opportunistic pricing—fix the major part when prices are perceived to be high—can be large. As seen in a number of cases across the world, the risk of this is that, in a collective decision-making structure, when prices are falling, the cooperative fails to fix any prices until the last moment, thus receiving the worst possible price rather than the average price of the period.