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Abstract
Abstract We examine the dynamics of the margin between retail and international coffee prices from 1980 to 2018. We find no significant trend in the margin using a robust procedure for estimating a trend. Further, we establish that any deviations in the margin are transitory for the full sample as well as the periods prior to and after the demise of the ICA, but with asymmetric adjustment. One of the reasons for the observed asymmetry could be market concentration in the coffee supply chain at the coffee roasting level, which allows coffee roasters to keep a higher share of the profits.
Highlights
Most agricultural commodities move through a complex processing and distribution supply chain
We examine the dynamics of the margin between retail and international coffee prices from 1980 to 2018
We establish that any deviations in the margin are transitory for the full sample as well as the periods prior to and after the demise of the International Coffee Agreement (ICA), but with asymmetric adjustment
Summary
Most agricultural commodities move through a complex processing and distribution supply chain. We examine the dynamics of the gap between retail and international coffee prices or in other words, the price margin.. The focus of the paper is to analyse the dynamics of the margin between retail and international coffee prices. In an analysis of the value of the global coffee chain, the World Coffee Producers Forum, Colombia, 10–12 July 2017, declared that the share reaching coffee-producing countries is very low, in contrast to that remaining in the hands of roasting companies in consuming countries. Not all agree that market concentration has contributed to the fall in the share in the value chain reaching coffee-producing countries, arguing that it is more of a rhetoric against multinational roasting companies. We analyse the dynamics of the price margin by using a robust econometric model to test whether the margin between retail and international prices has increased over time and whether deviations from the margin are asymmetric.
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