Cost Pass-Through in the U.S. Coffee Industry

28 Pages Posted: 17 Jan 2008

See all articles by Ephraim Leibtag

Ephraim Leibtag

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Alice Orcutt Nakamura

University of Alberta - School of Business

Emi Nakamura

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

Dawit Zerom

California State University, Fullerton

Date Written: March 2007

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-for-cent 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.

Keywords: cost pass-through, retail prices, manufacturer prices,commodity costs, coffee

Suggested Citation

Leibtag, Ephraim and Nakamura, Alice Orcutt and Nakamura, Emi and Zerom, Dawit, Cost Pass-Through in the U.S. Coffee Industry (March 2007). USDA-ERS Economic Research Report No. 38, Available at SSRN: https://ssrn.com/abstract=1084512 or http://dx.doi.org/10.2139/ssrn.1084512

Ephraim Leibtag (Contact Author)

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
202-694-5349 (Phone)

Alice Orcutt Nakamura

University of Alberta - School of Business ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

Emi Nakamura

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dawit Zerom

California State University, Fullerton ( email )

800 N State College St
Fullerton, CA 92831
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
586
Abstract Views
3,459
Rank
85,324
PlumX Metrics