Price transmission in the agri-food value chain - from a farmer perspective

TY - GEN

T1 - Price transmission in the agri-food value chain - from a farmer perspective

AU - Hansen, Henning Otte

N1 - Conference code: 20

PY - 2015

Y1 - 2015

N2 - Price transmission in the agri-food value chain - when changes in one price cause another price downstream to change - is an important issue for farmers, markets and the economy as an efficient market price setting is crucial for all market players. However, there are numerous examples of price transmission in the agriculture value chain not working optimally, and there are several different forms of incompleteness and imperfection. There are a number of possible causes, but it is difficult to document on the basis of empirical data.The aim of this article is therefore to document the presence of imperfect price transmission, to determine some of the underlying causes and driving forces behind the phenomenon as well as highlight farmers’ interests, role and opportunities in connection with ensuring more effective price transmission.On the basis of an example of a grain-bread value chain, it is apparent that the price increases downstream occur relatively quickly and are significant, while the price decreases become smaller and significantly slower as one moves forward in the value chain. Both lags and asymmetric price transmission are present. The example also shows that bread prices increase far more than can be explained by the increase in the price of grain. Bread prices have, therefore, overreacted to the increase in the grain price.Farmers can move downstream in the value chain via their cooperatives and in this way contribute to the creation of improved price transmission, while at the same time, gain access to segments with higher margins and greater market power.

AB - Price transmission in the agri-food value chain - when changes in one price cause another price downstream to change - is an important issue for farmers, markets and the economy as an efficient market price setting is crucial for all market players. However, there are numerous examples of price transmission in the agriculture value chain not working optimally, and there are several different forms of incompleteness and imperfection. There are a number of possible causes, but it is difficult to document on the basis of empirical data.The aim of this article is therefore to document the presence of imperfect price transmission, to determine some of the underlying causes and driving forces behind the phenomenon as well as highlight farmers’ interests, role and opportunities in connection with ensuring more effective price transmission.On the basis of an example of a grain-bread value chain, it is apparent that the price increases downstream occur relatively quickly and are significant, while the price decreases become smaller and significantly slower as one moves forward in the value chain. Both lags and asymmetric price transmission are present. The example also shows that bread prices increase far more than can be explained by the increase in the price of grain. Bread prices have, therefore, overreacted to the increase in the grain price.Farmers can move downstream in the value chain via their cooperatives and in this way contribute to the creation of improved price transmission, while at the same time, gain access to segments with higher margins and greater market power.

M3 - Article in proceedings

VL - 1

SP - 129

EP - 137

BT - Healthy agriculture for a healthy world

A2 - Watson, Heather

A2 - Lipari, Mathieu

A2 - Gendron, Sophie

A2 - Bouchard, Marie-Claude

A2 - Couture, Suzanne

A2 - Nadeau, Nathalie

PB - International Farm Management Association

CY - Québec

T2 - 20th International Farm Management Congress

Y2 - 12 July 2015 through 17 July 2015

ER -