In this paper hypotheses are tested concerning long-run relationships between the four indicator prices of coffee. These relationships are assumed to exist based on a previous study of the coffee market by the same author. The four coffee prices are investigated in more detail in this paper. After a brief introduction to the price formation on the coffee market the univariate properties of the coffee prices are checked first. Then the tests for co-integration, as developed by Johansen (1988) and Johansen and Juselius (1989) are performed. These tests appear to be very informative with respect to the way the prices may be linked in the long run, concerning the number and the form of the relationships. Specifications of three equilibrium relationships among the coffee prices are detected and commented.

We develop a short-run econometrie model for the world coffee market and we give empirical evidence on the behavioral equations of the model for the major coffee importing and exporting countries. The behavioral relationships for producers, inventory holders, speculators and consumers are derived from optimizing considerations in an uncertain environment. Spot and futures prices adjust to clear the spot and futures markets at each period. International trade flows of coffee are determined by the optimizing behavior of the agents (eountries) i n the model. The «mplrical evidence confirms our hypothesis of a highly structured model which is consistent with profit maximizing behavior under uncertainty.

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