ANALYZING THE UNITED STATES IMPORTS OF ORGANIC AND NON-ORGANIC COFFEE AND TEA

Author

Awf Alsaad, Southern Illinois University CarbondaleFollow

Date of Award

12-1-2017

Degree Name

Doctor of Philosophy

Department

Agricultural Sciences

First Advisor

Moon, Wanki

Second Advisor

Rendleman, Matt

Abstract

The US market of organic food is expanding increasingly. Organic food imports percentage out of the total food imports is on the raise. This reflects a big demand on this kind of food that need to be met. One vital piece of information is that the US does not produce many organic food products due to weather requirements. So, importing these agricultural products is the only way to meet the growing demand on them. The United States Department of Agriculture (USDA) does not have detailed data on organic sales on the retail level. According to the USDA, consuming organic food products is now expanding, and more people consume it occasionally (USDA, 2017). People usually tend to consume organic food because of concerns related to health and environment. There is still a lack on detailed studies on the habits and pattern of organic food consumption. This work focused on the US imports of organic and non-organic coffee and tea. These two commodities are from the most traded products around the world. People everywhere consider them very important for their daily consumption. Main objective was to estimate import budget shares economic systems of organic and non-organic coffee and tea to get elasticities. This helps to come up with main results for the trend and characteristics of consuming these commodities. Monthly data on the US imports quantities and values were collected from the USDA and the USITC and other sources. The seemingly unrelated regression was the statistical technique, and the linear approximation of almost ideal demand system was the economic model. Four kinds of import budget share systems have been specified. The first and the second system were for regular coffee beans and regular tea imports by country of origin for the period 1994:03-2016:12 and 1992:04-2016:12 respectively. The third and fourth systems were for organic coffee and organic tea for the period 2011:01-2016:12. Results varied depending on the imports system. First, results confirmed that product differentiation is an appropriate procedure to deal with coffee and tea import budget share systems. Second, Brazilian share of coffee imports has the highest expenditure elasticity, and behaved as a luxury good. In fact, most coffee beans that came from this country is the premium variety Arabica. This variety is known with its high price compared to other types such as Robusta. As income increases, the US spend more income to import high quality Arabica coffee beans. Third, this work came up with a conclusion that blending in coffee and tea industry is an important tool to increase profits. Elasticities from coffee imports system suggested complement relationship between Brazilian and other coffees. Actually, Brazilian Arabica coffee beans blended with other beans to get high quality coffee or to have new flavors. In the case of tea imports, share of Argentinian and rest of world tea were also blended with other tea imports because both had complementary relationship with other varieties. Major contribution on this study was analyzing the US organic coffee and tea imports. In this part of the study, two systems were estimated according to the variety of these two commodities. A substitute relationship was found between black and green tea. Also, a complement relationship was also found between organic tea, black non-organic, and green non-organic tea imports. The fact that organic tea is the expensive and high-quality variety supports the results. The study recommended to continue analyzing in focus organic coffee and tea imports and the trend of consuming them in the future. The limited availability of data on organic market is a big obstacle. Also, it will be important to consider the supply side to figure out the situation of the whole market of organic coffee and tea and organic products in general.