Responding to the Coffee Crisis: What Can We Learn from Price Dynamics
We develop a semi-structural price vector autoregression to capture coffee price dynamics over various time horizons. The presence of the International Coffee Agreement is permitted to alter supply responses to price signals through yield and planting effects. In the short run, the ICA caused Brazilian farm prices to become disconnected from international prices. In the long run, the ICA promoted supply response by providing a stable environment in which producers could use current price information to predict future prices. In the intermediate run, it muted supply response by necessitating an institutional price wedge between wholesale and farm level prices. In net, the ICA created a price cycle that does not exist in non-ICA periods. Oxfam's proposal to burn 300 million pounds of coffee will provide temporary relief to farmers, but cannot be used repeatedly as a long term strategy. The low coffee prices experienced since the disintegration of the ICA may be due to the interaction of supply lags, a shift in the composition of coffee demand, and low price response due to price uncertainty. No evidence of asymmetric price transmission is found.
|Date of creation:||Apr 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.aae.wisc.edu/pubs/sps/
More information through EDIRC
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.:
- Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
- Jean-Paul Chavas & Aashish Mehta, 2004.
"Price Dynamics in a Vertical Sector: The Case of Butter,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 86(4), pages 1078-1093.
- Chavas, Jean-Paul & Mehta, Aashish, 2002. "Price Dynamics in a Vertical Sector: The Case of Butter," Staff Paper Series 452, University of Wisconsin, Agricultural and Applied Economics.
- Chavas, Jean- Paul & Mehta, Aashish, 2002. "Price Dynamics in a Vertical Sector: The Case of Butter," Working Papers 201555, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
- Bettendorf, L & Verboven, F, 2000. "Incomplete Transmission of Coffee Bean Prices: Evidence from the Netherlands," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 27(1), pages 1-16, March.
- Durevall, Dick, 2005. "Demand for Coffee: The Role of Prices, Preferences and Market Power," Working Papers in Economics 162, University of Gothenburg, Department of Economics.
- Otero, Jesus G., 2000. "Coffee, economic fluctuations and stabilisation: an intertemporal disequilibrium model with capital market imperfections," Journal of Development Economics, Elsevier, vol. 62(1), pages 105-129, June.
- Feuerstein, Switgard, 2002. "Do coffee roasters benefit from high prices of green coffee?," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 89-118, January.
- Mehta, Aashish & Chavas, Jean-Paul, 2008.
"Responding to the coffee crisis: What can we learn from price dynamics?,"
Journal of Development Economics,
Elsevier, vol. 85(1-2), pages 282-311, February.
- Mehta, Aashish & Chavas, Jean-Paul, 2004. "Responding to the Coffee Crisis: What Can We Learn from Price Dynamics," Staff Paper Series 472, University of Wisconsin, Agricultural and Applied Economics.
- Bohman, Mary & Jarvis, Lovell & Barichello, Richard, 1996. "Rent Seeking and International Commodity Agreements: The Case of Coffee," Economic Development and Cultural Change, University of Chicago Press, vol. 44(2), pages 379-404, January.
- Herrmann, Roland, 1986. "Free riders and the redistributive effects of international commodity agreements: The Case of Coffeee," Journal of Policy Modeling, Elsevier, vol. 8(4), pages 597-621.
- Takamasa Akiyama & John Baffes & Donald Larson & Panos Varangis, 2001. "Commodity Market Reforms : Lessons of Two Decades," World Bank Publications, The World Bank, number 13852.
- Cardenas, Mauricio, 1994. "Stabilization and redistribution of coffee revenues: A political economy model of commodity marketing boards," Journal of Development Economics, Elsevier, vol. 44(2), pages 351-380, August.
- Otero, Jesus & Milas, Costas, 2001. "Modelling the spot prices of various coffee types," Economic Modelling, Elsevier, vol. 18(4), pages 625-641, December.
- Koerner, Julia, 2002. "The dark side of coffee. Price war in the German market for roasted coffee," FE Working Papers 0204, Christian-Albrechts-University of Kiel, Department of Food Economics and Consumption Studies.
- Jesus Otero, 2001. "Coffee export booms and monetary disequilibrium: some evidence for Colombia," Applied Economics, Taylor & Francis Journals, vol. 33(2), pages 267-276.
- Ben Shepherd, 2005. "Market Power in International Commodity Processing Chains: Preliminary Results from the Coffee Market," International Trade 0511013, EconWPA.
- Robert H. Bates, 1998. "Open-Economy Politics: The Political Economy of the World Coffee Trade," Economics Books, Princeton University Press, edition 1, volume 1, number 6067.
- Varangis, Panos & Siegel, Paul & Giovannucci, Daniele & Lewin, Bryan, 2003. "Dealing with the coffee crisis in Central America - impacts and strategies," Policy Research Working Paper Series 2993, The World Bank.
- Gilbert, Christopher L., 1987. "International commodity agreements: Design and performance," World Development, Elsevier, vol. 15(5), pages 591-616, May.
- McMahon, Gary, 1989. "The income distribution effects of the Kenyan coffee marketing system," Journal of Development Economics, Elsevier, vol. 31(2), pages 297-326, October.
- Calfat, Germán & Flôres Junior, Renato Galvão, 2002. "Government Actions to Support Coffee Producers - An Investigation of Possible Measures from the European Union," Economics Working Papers (Ensaios Economicos da EPGE) 448, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Roberts, Mark J., 1984. "Testing oligopolistic behavior," International Journal of Industrial Organization, Elsevier, vol. 2(4), pages 367-383, December.
When requesting a correction, please mention this item's handle: RePEc:ecl:wisagr:472. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.