Explaining output price heterogeneity in Dutch horticulture

Abstract

Recent empirical literature pays increasing attention to farmer‐retail power relations in agricultural supply chains, yet seems to neglect potential differences between prices that primary producers receive for their products. Via both a Markov chain analysis and a hybrid panel data model, we empirically test whether primary producers receive prices in a consistent way and what explains any price differences. Using a unique data set containing individual farm‐specific output prices in various horticultural markets, we show substantial price dispersion across farms and reveal relations between farm characteristics and observed output prices. The Markov analysis shows that the same farms are constantly found in the higher and lower quartiles of the price distribution, implying prices are not distributed randomly. The results of the hybrid panel data model show that characteristics as farm size and production orientation are strongly associated with differences in the obtained output prices as well as the price/cost ratio between farms. [EconLit Citations: D22, D40, L11, Q13].