Coffee is characterised by high levels of price fluctuation, which exposes coffee producers to price risk. Coffee is widely traded in international commodity futures markets. This offers scope for producers to mange their price risk by hedging on these markets. The hedging mechanism proposed is based on the use of put options. The paper uses historical data of actual coffee put options contracts to estimate the costs of the mechanism; the benefits are inferred from field evidence. It emerges that the costs are relatively low, the benefits outweighing the costs for most producers. The paper then looks at the operational feasibility of the mechanism for producers and compares it with other hedging mechanisms. The mechanisms differ in their strengths and weaknesses; their choice largely depending on their viability in individual coffee producing countries.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University of Dundee, Economic Studies in its series Discussion Papers with number
199.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)