Analysis of coffee prices in the international market

Abstract

Brazil is the world’s largest coffee producer and the world’s second largest coffee consumer. Although there are several coffee species, the ones considered commercially relevant are two, arabica and robusta, which have different market dynamics. The main producing countries of arabica are Brazil and Colombia. The main producing country of robusta coffee is Vietnam, followed by Brazil. The coffee market was marked by interventions throughout the 20th century, and the International Coffee Agreement (AIC) was the main market regulating instrument. In the 1990s, with the end of AIC, the coffee market was deregulated, and the coffee price started to be regulated by the stock market exchanges. Coffee traded worldwide is one of the products with the highest price volatility, whose reasons are related to several factors, from speculative ones to those related to supply and demand. This paper proposed to study how arabica and robusta coffee prices, in the main international trade exchanges, interfere with coffee prices produced in Brazil, which were marketed both in the domestic market and in the foreign market and, for that, this study made use of time series econometric tools. The study results suggest that the international trade exchanges influence on Brazil coffee prices is empirically confirmed.