Vertical Price Transmission of Milk Prices: Are Small Dairy Producers Efficiently Integrated Into Markets?

Acosta, Alejandro; Valdés, Alberto

doi:10.1002/agr.21357

Cited by 26 publications

(29 citation statements)

References 11 publications

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“…We found asymmetric prices transmission between milk farm prices and consumer price of butter, and an asymmetric transmission between farm price of pork and the retail prices of pork chops and pork bacon. These results are consistent with the results of other studies found in the literature such as those of Stewart and Blayney (2012) for cheddar cheese in USA; Acosta and Valdé s (2014) for the dairy sector in Panama; Kinnucan and Tadjion (2014) for the dairy sector in USA; Rosa, Waever and Vasciaveo (2015) for the dairy sector in Italy and Liu, Rabinowitz and Chen (2016) for the pork sector in USA. Similar results are found in different agri-food production chains such as wheat, corn and soybean in Brazil (Balcombe et al, 2007); in the rice value chain (Widyarini and Simatupang, 2013); in the aquatic products sector (Simioni et al, 2013); and in the potato sector (Assefa, Kuiper and Meuwissen, 2014).…”

Section: Discussionsupporting

confidence: 92%

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Short and Long-term Asymmetric Farm-Retail Price Transmission Analysis in the Canadian Agri-food Industry: Evidence from Dairy and Pork Sectors with Threshold Cointegration Models

Atozou¹,

Lawin²,

Valéa³

et al. 2019

JFR

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Empirical studies show that market concentration and pricing policies regulation have an important impact on price transmission. These factors lead to an asymmetric price transmission, particularly in agricultural commodities markets. This paper investigates farm-retail price transmission along the Canadian dairy and pork values chains using Threshold Autoregressive, Momentum Threshold Autoregressive, Error Correction Models and Granger causality test. Using monthly price data, we found that farm-retail price transmission is asymmetric in short and long-term between raw milk and butter price while it is symmetric in the cheese case. In the pork sector, price transmission is asymmetric in long-term and symmetric in short-term between farm price and respectively pork chops and bacon prices. Because of processor and retailer concentration, consumer prices respond more quickly to upward than downward of farm prices. The processors, retailers and distributors concentration along the value chain in Canadian dairy and pork sectors and the supply management regulation policies as well as income stabilization insurance program are the main factors generating this market structure. Consideration of the characteristics of farmers, processors, and retailers in the value chain and the actors' potential reactions to the agricultural policy could better protect consumers and producers from market distortion.Keywords: asymmetric price transmission, Canadian dairy and pork's value chain, market power, threshold error correction model JEL codes: Q13, C22, D4 This phenomenon called "asymmetric price transmission" has some implications for economic policies outcomes. On the one hand, consumers do not fully benefit from input price reductions, while producers, on the other hand, do not benefit from consumer price increases (Meyer and von Taubadel, 2004). According to Vavra and Goodwin (2005), when price transmission is not total and symmetric, trade liberalization effects on consumer welfare are overestimated.Price dynamic analysis in agri-food industry was a major preoccupation for policy-makers, agri-food firms, and consumers. Several authors such as Kinnucan

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Section: Discussionsupporting

confidence: 92%

“…Retail prices in the dairy and pork sectors respond differently both in the long-term and in the short-term as a result of an increase or decrease in farm prices. These results were found in the dairy sector in the US by Stewart and Blayney (2012); in Panama by Acosta and Valdé s (2014), in Italy by Rosa, Waever and Vasciaveo (2015).…”

Section: Discussionmentioning

confidence: 76%

Short and Long-term Asymmetric Farm-Retail Price Transmission Analysis in the Canadian Agri-food Industry: Evidence from Dairy and Pork Sectors with Threshold Cointegration Models

Atozou¹,

Lawin²,

Valéa³

et al. 2019

JFR

View full text Add to dashboard Cite

show abstract

“…Bor et al (2014) applied an asymmetric error correction model to monthly price data and their results suggest that there is a positive price asymmetry in the farm-retail price transmission in the Turkish milk market. Other researchers found similar asymmetries using different econometric methods: Acosta and Valdes (2013) for Panama, Falkowski (2010) in the Polish fl uid milk sector and Holm et al (2012) in the German milk market.…”

Section: Introductionmentioning

confidence: 69%

Vertical price transmission along the diary supply chain in Russia

Kharin¹

2015

Stud. Agr. Econ.

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“…Asymmetric price transmission from farm gate milk prices to retail prices for a variety of dairy products in Spain was reported in Serra and Goodwin (2003). Vertical transmission effects between wholesale and small dairy producers' prices in Panama were analysed in Acosta and Alberto (2014). Spatial transmission between EU butter and SMP wholesale prices for four different EU member states was studied by O'Connor (2006), who found transmission between these member states.…”

mentioning

confidence: 99%

An analysis of price and volatility transmission in butter, palm oil and crude oil markets

2016

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Recent changes to the common agricultural policy (CAP) saw a shift to greater market orientation for the EU dairy industry. Given this reorientation, the volatility of EU dairy commodity prices has sharply increased, creating the need to develop proper risk management tools to protect farmers' income and to ensure stable prices for processors and consumers. In addition, there is a perceived threat that these commodities may be replaced by cheaper substitutes, such as palm oil, as dairy commodity prices become more volatile. Global production of palm oil almost doubled over the last decade while butter production remained relatively flat. Palm oil also serves as a feedstock for biodiesel production, thus establishing a new link between agricultural commodities and crude oil. Price and volatility transmission effects between EU and World butter prices, as well as between butter, palm oil and crude oil prices, before and after the Luxembourg agreement, are analysed. Vector autoregression (VAR) models are applied to capture price transmission effects between these markets. These are combined with a multivariate GARCH model to account for potential volatility transmission. Results indicate strong price and volatility transmission effects between EU and World butter prices. EU butter shocks further spillover to palm oil volatility. In addition, there is evidence that oil prices spillover to World butter prices and World butter volatility.

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Vertical Price Transmission of Milk Prices: Are Small Dairy Producers Efficiently Integrated Into Markets?

Cited by 26 publications

References 11 publications

Short and Long-term Asymmetric Farm-Retail Price Transmission Analysis in the Canadian Agri-food Industry: Evidence from Dairy and Pork Sectors with Threshold Cointegration Models

Short and Long-term Asymmetric Farm-Retail Price Transmission Analysis in the Canadian Agri-food Industry: Evidence from Dairy and Pork Sectors with Threshold Cointegration Models

Vertical price transmission along the diary supply chain in Russia

An analysis of price and volatility transmission in butter, palm oil and crude oil markets

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