We test the long-standing hypothesis that agricultural households in low-income contexts
engage in intermittent enterprise activity as a way to mitigate shocks. We link panel data
on smallholder coffee farmers in Tanzania with a time series of global coffee prices. We first
verify that global coffee prices matter for these households, through their effects on farmgate
prices, quantity of coffee sold, farm revenues and, consequently, household expenditures.
We then show that enterprise ownership increases by 5 percentage points (22 percent)
during coffee price busts. Surprisingly, “persistent” entrepreneurs–those households whose
businesses stay open during booms and busts–increase input intensity when the coffee price
is high, and reap large rewards in terms of profits and business survival. Our results suggest
that policymakers should 1) encourage smoothing mechanisms like savings, commodity
storage, and price floors to better insulate households from global commodity market
fluctuations; and 2) help intermittent household enterprises by reducing geographical and
informational barriers to trade during busts.