THE CLIMATIC CAUSES OF PRICE VOLATILITY IN DOMESTIC COFFEE MARKETS WITH SPECIAL REFERENCE TO COFFEE ECONOMY OF KERALA

Coffee is characterized with high price volatility in domestic as well as international markets. The price fluctuations in the Indian domestic coffee market due to climatic factors with special reference to coffee economy of Kerala was evaluated during the study. Kerala is the second largest producer of coffee in India and is characterized by the cultivation of trade dependent plantation crops such as coffee. Kerala accounted for 19.2 per cent of the area and 20.3 per cent of the production of coffee. The time series data on coffee pertaining to the period from 1994-95 to 2019-20 (before covid-19 scenario) were analysed in the study. A linear regression model was fitted and step-wise regression analysis was employed to understand the climatic and other allied factors contributing to price volatility in Indian coffee markets. Eight variables were chosen for the fitted linear regression model after step-wise regression analysis. Among the eight independent variables, only six were found to be significant in the estimated model and found that the volatility of coffee wholesale prices in the domestic market is significantly dependent on various factors such as production and consumption of coffee, weather parameters and Indian Rupee-US Dollar exchange rates.