COST PASS-THROUGH IN THE U.S. COFFEE INDUSTRY

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.


Issue Date:
2007
Publication Type:
Report
PURL Identifier:
http://purl.umn.edu/7253
Total Pages:
28
Series Statement:
Economic Research Report
38




 Record created 2017-04-01, last modified 2017-08-23

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