Philippine E-Journals

Analysis of the Asymmetries and Trends of Determinants of Farmgate Prices of Coffee in the Philippines

Zandro Catacutan | Mailah Ulep

Discipline: Economics

 

Abstract:

Previous studies examined the determinants and transmission of coffee prices from the world market to the auction market, to the producer market, and finally to the retail market. Relevant findings showed unsettled generalizations from the transmission shocks running from these markets that eventually affected coffee prices at the farmgate level. These uncertainties can be attributed to the heterogeneities in the domestic market structure and supply chain that significantly impact the cost of operations and net returns of producers and farmers. Thus, this study was conducted to empirically examine the determinants and trends in the cost per kilogram and net returns in coffee and their effects on farmgate prices. It is also intended to deeply assess the determinants of transmitted shocks and innovations that are pragmatically observed in the Philippine context. The study utilized vector autoregressive models using time series data from the periods of 1997 to 2016, which comprised of production costs, net returns, and farm gate prices derived from the Philippine Statistics Authority. Results indicated asymmetries in the bidirectional causal relationships running between cost per kilogram and farm gate price, and net returns and farmgate price in the short run, which were found to be statistically significant, respectively. Thus, government policies and programs may focus on cost reduction and efficiency mechanisms that will bring economies of scale, wherein lowered costs of production will result in stable farm gate prices and higher net returns for coffee farmers and producers.