Price transmission of Arabica coffee (Coffea Arabica) between Sumatera Utara and major export destination countries in Asia and Australia

Abstract

Increasing global coffee consumption is driving the increasing need for world coffee. Indonesia is a coffee producing country in the world where one of Indonesia's coffee production is produced in Sumatera Utara Province. This research was conducted to analyse the pattern of price transmission between the Sumatera Utara coffee export market and the Japanese, Singapore, Malaysia, Taiwan, Australia markets and to analyse whether there is an effect of coffee prices on other exporters' markets, importer's markets, import volumes and Indonesian Rupiah exchange rates against the US Dollar in the formation of coffee export prices on the Sumatera Utara exporter market. Based on statistical analysis using the Asymmetric Error Correction Model and Error Correction Model, it is known that the transmission pattern of coffee prices occurs symmetrically in the long run, whereas in the short term the price transmission occurs asymmetries. The formation of coffee export prices in the Sumatera Utara market in the long run is influenced by import prices in the Japanese and Malaysian markets, and the volume of exports, while in the short term is influenced by import prices in the Australian, Japanese, Malaysian markets, export volumes, and exchange rates Indonesian Rupiah against US Dollar.