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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
    DOI: 10.22004/ag.econ.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. Krivonos, Ekaterina, 2004. "The impact of coffee market reforms on producer prices and price transmission," Policy Research Working Paper Series 3358, The World Bank.
    3. Shepherd, Ben & Stone, Susan, 2017. "Trade and Women," ADBI Working Papers 648, Asian Development Bank Institute.
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    Cited by:

    1. 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.
    2. Durevall, Dick, 2017. "Cost Pass-Through in the Swedish Coffee Market," HUI Working Papers 120, HUI Research.
    3. 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.
    4. Emi Nakamura, 2008. "Pass-Through in Retail and Wholesale," American Economic Review, American Economic Association, vol. 98(2), pages 430-437, May.
    5. 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.
    6. Daniel Grandisky Lerner & Helder Marcos Freitas Pereira & Maria Sylvia Macchione Saes & Gustavo Magalhães de Oliveira, 2021. "When Unfair Trade Is Also at Home: The Economic Sustainability of Coffee Farms," Sustainability, MDPI, vol. 13(3), pages 1-14, January.
    7. de Paula, Aureo & Hansman, Christopher & Hong, Harrison & Singh, Vishal, 2020. "A Sticky-Price View of Hoarding," CEPR Discussion Papers 14633, C.E.P.R. Discussion Papers.
    8. Ziaul Haq Adnan & Ertunga Özelkan, 2019. "Bullwhip effect in pricing under different supply chain game structures," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(5), pages 393-404, October.
    9. Atanu Ghoshray & Sushil Mohan, 2021. "Coffee price dynamics: an analysis of the retail-international price margin [Commodity dependence and development: suggestions to tackle the commodities problem]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 48(4), pages 983-1006.
    10. Shi, Wenming & Wang, Ganggang & Zhao, Xu & Feng, Xuehao & Wu, Jun, 2018. "Price determination in the electrolytic aluminum industry: The role of electricity prices," Resources Policy, Elsevier, vol. 59(C), pages 274-281.
    11. Felt, Marie-Hélène & Hayashi, Fumiko & Stavins, Joanna & Welte, Angelika, 2023. "Regressive effects of payment card pricing and merchant cost pass-through in the United States and Canada," Journal of Banking & Finance, Elsevier, vol. 154(C).
    12. Arnade, Carlos & Cooke, Bryce & Gale, Fred, 2017. "Agricultural price transmission: China relationships with world commodity markets," Journal of Commodity Markets, Elsevier, vol. 7(C), pages 28-40.
    13. Canyakmaz, Caner & Özekici, Süleyman & Karaesmen, Fikri, 2019. "An inventory model where customer demand is dependent on a stochastic price process," International Journal of Production Economics, Elsevier, vol. 212(C), pages 139-152.
    14. Podhorsky, Andrea, 2015. "A positive analysis of Fairtrade certification," Journal of Development Economics, Elsevier, vol. 116(C), pages 169-185.

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