The Impact of the International Coffee Agreement on Producing Countries

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Abstract
Simulations of a global coffee model incorporating a vintage capital approach to production are run. Over the recent period of operation of the International Coffee Agreement's export quota system, the authors find that the quota system had a stabilizing effect on world coffee prices. The quotas reduced real export revenues for most small exporting countries, but large producers gained. Most small countries gained, however, in terms of risk reduction. If a brief suspension of the quota occurs from time to time, caused, for example, by adverse weather which results in a shortfall in world supply, the quota system works like a buffer stock scheme; on average, producing countries as a whole lose transfer benefits but gain risk benefits.

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