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Cost Pass-Through In The U.S. Coffee Industry

Author

Listed:
  • Leibtag, Ephraim S.
  • Nakamura, Alice
  • Nakamura, Emi
  • Zerom, Dawit

Abstract

A rich data set of coffee prices and costs was used to determine to what extent changes in commodity costs affect manufacturer and retail prices. On average, a 10-cent increase in the cost of a pound of green coffee beans in a given quarter results in a 2-cent increase in manufacturer and retail prices in that quarter. If a cost change persists for several quarters, it will be incorporated into manufacturer prices approximately cent-forcent with the commodity-cost change. Given the substantial fixed costs and markups involved in coffee manufacturing, this translates into about a 3-percent change in retail prices for a 10-percent change in commodity prices. We do not find robust evidence that coffee prices respond more to increases than to decreases in costs.

Suggested Citation

  • Leibtag, Ephraim S. & Nakamura, Alice & Nakamura, Emi & Zerom, Dawit, 2007. "Cost Pass-Through In The U.S. Coffee Industry," Economic Research Report 7253, United States Department of Agriculture, Economic Research Service.
  • Handle: RePEc:ags:uersrr:7253
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    File URL: http://purl.umn.edu/7253
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    References listed on IDEAS

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    1. Jerry Hausman & Ephraim Leibtag, 2009. "CPI Bias from Supercenters: Does the BLS Know that Wal-Mart Exists?," NBER Chapters,in: Price Index Concepts and Measurement, pages 203-231 National Bureau of Economic Research, Inc.
    2. Barsky, Robert B & Miron, Jeffrey A, 1989. "The Seasonal Cycle and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 503-534, June.
    3. Severin Borenstein & A. Colin Cameron & Richard Gilbert, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 305-339.
    4. Krivonos, Ekaterina, 2004. "The impact of coffee market reforms on producer prices and price transmission," Policy Research Working Paper Series 3358, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Podhorsky, Andrea, 2015. "A positive analysis of Fairtrade certification," Journal of Development Economics, Elsevier, vol. 116(C), pages 169-185.
    2. Peter Berck & Ephraim Leibtag & Alex Solis & Sofia Villas-Boas, 2009. "Patterns of Pass-through of Commodity Price Shocks to Retail Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1456-1461.
    3. Gregory, Alexandra & Featherstone, Allen M., 2008. "Nonparametric Efficiency Analysis for Coffee Farms in Puerto Rico," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6765, Southern Agricultural Economics Association.
    4. Emi Nakamura, 2008. "Pass-Through in Retail and Wholesale," American Economic Review, American Economic Association, vol. 98(2), pages 430-437, May.
    5. Durevall, Dick, 2017. "Cost Pass-Through in the Swedish Coffee Market," HUI Working Papers 120, HUI Research.
    6. Koopmans, Carl & Lieshout, Rogier, 2016. "Airline cost changes: To what extent are they passed through to the passenger?," Journal of Air Transport Management, Elsevier, vol. 53(C), pages 1-11.

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