Market-based price-risk management for coffee producers

Sushil Mohan

    Research output: Working paperDiscussion paper

    11 Citations (Scopus)
    226 Downloads (Pure)

    Abstract

    Coffee is characterised by high levels of price fluctuation, which exposes coffee producers to price risk. Coffee is widely traded in international commodity futures markets. This offers scope for producers to mange their price risk by hedging on these markets. The hedging mechanism proposed is based on the use of put options. The paper uses historical data of actual coffee put options contracts to estimate the costs of the mechanism; the benefits are inferred from field evidence. It emerges that the costs are relatively low, the benefits outweighing the costs for most producers. The paper then looks at the operational feasibility of the mechanism for producers and compares it with other hedging mechanisms. The mechanisms differ in their strengths and weaknesses; their choice largely depending on their viability in individual coffee producing countries.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 2007

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.199
    ISSN (Print)1473-236X

    Fingerprint

    Coffee
    Price risk
    Risk management
    Costs
    Hedging
    Put option
    Fluctuations
    Commodities
    Option contract
    Futures markets
    Viability

    Cite this

    Mohan, S. (2007). Market-based price-risk management for coffee producers. (Dundee Discussion Papers in Economics; No. 199). University of Dundee.
    Mohan, Sushil. / Market-based price-risk management for coffee producers. University of Dundee, 2007. (Dundee Discussion Papers in Economics; 199).
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    Mohan, S 2007 'Market-based price-risk management for coffee producers' Dundee Discussion Papers in Economics, no. 199, University of Dundee.

    Market-based price-risk management for coffee producers. / Mohan, Sushil.

    University of Dundee, 2007. (Dundee Discussion Papers in Economics; No. 199).

    Research output: Working paperDiscussion paper

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    Mohan S. Market-based price-risk management for coffee producers. University of Dundee. 2007. (Dundee Discussion Papers in Economics; 199).