Global competitiveness of Kenyan coffee: the price volatility perspective

Abstract

Kenyan coffee is globally recognized for its high quality and distinct flavor, securing a strong reputation in international markets. However, it faces growing competition from major producers such as Brazil, Colombia, Vietnam, Cuba, and Ethiopia. This study evaluates Kenya’s competitiveness in the global coffee industry by examining price dynamics and volatility from 1990 to 2022 across 21 coffee-producing countries. Data were sourced from the International Coffee Organization, World Bank, and FAOSTAT. The analysis employed price analysis, hedonic regression, and volatility models (GARCH, TARCH, and EGARCH). Results show Kenya ranks sixth among Arabica coffee producers in terms of production. Hedonic regression reveals that coffee prices are significantly influenced by macroeconomic and supply-side factors. Volatility models confirm the presence of volatility clustering, where high-price volatility persists over time, but show no significant asymmetry—indicating that both positive and negative shocks impact prices similarly. These findings highlight the need for market stabilization strategies, including hedging tools, improved market access, and stable exchange rates, to protect producers from adverse price movements. The study provides vital policy insights for enhancing Kenya’s resilience and long-term competitiveness in the global coffee value chain.

Keywords

• Price volatility
• coffee production
• coffee exports
• exportable coffee
• hedonic regression
• volatility models