Vertical price transmission in Swiss dairy and cheese value chains

Abstract

In Switzerland, there are separated value chains for dairy and cheese products, which differ in terms of industry concentration, value chain governance, and product characteristics. We analyze how milk prices are passed on along these different value chains. Using detailed price data on farm gate, wholesale, export, and retail levels, we apply asymmetric vector autoregressive and vector error correction models to study vertical price transmission in Swiss dairy and cheese chains. Contrary to most existing literature, we find almost no long-run price relationships and no significant asymmetries between the different stages and products and discuss the potential reasons.

A note on the correspondence between horizontal and vertical price transmission

“…The presence of negative values for and in Table 2 underscores the potential for omitted‐variable bias to produce estimates of vertical EPTs that are negative in sign. Although such estimates are rare in the literature, they are not absent (e.g., see Hillen, 2021).…”

Asymmetry and transmission of international price shocks of cocoa and coffee in Togo

“…Although threshold co-integration has seen more recent development, the model of Enders and Siklos (2001) was judged appropriate to examine the relationship between the world and domestic prices of coffee and cacao. Recently, a number of studies have used the TAR model to evaluate the direction and the speed of APT between international and domestic markets (Abunyuwah 2020;Fitria et al 2020;Alam et al 2021;Hillen 2021;Ramsey et al 2021), and specifically for coffee and cocoa markets (Ajetomobi & Dlamini 2017;Luckstead 2018;Rahmanta et al 2020;Ghoshray & Mohan 2021).…”

“…These questions are not new to the literature of asymmetric transmission of agricultural commodity prices. They have been discussed extensively in the asymmetric price transmission (APT) literature over the last five years (Jacomini & Burnquist 2018;Meyer et al 2018;Rudinskaya 2019;Abunyuwah 2020;Fitria et al 2020;Lanie 2020;Gizaw et al 2021;Hillen 2021;Ramsey et al 2021Antonioli & Santeramo 2022.…”

Heat risks in Swiss milk production

“…We use a THI to regress heat effects on annual milk revenues and veterinary expenses because cows' responses to heat stress depend on the combination of temperature and relative humidity as highlighted in Supporting Information: Section . More specifically, we use the THI‐formula shown in Equation () because this THI is suitable for pasture‐based milk production and the Swiss climate (Bohmanova et al, 2007; Finger et al, 2018; Hammami et al, 2013; Herbut et al, 2018; Lambertz et al, 2014). $$$\mathrm{THI}=(1.8\times {T}_{\mathrm{db}}+32)-(0.55-0.0055\times \mathrm{RH})\times (1.8\times {T}_{\mathrm{db}}-26).$$$…”