Price Dynamics in a Vertical Sector: The Case of Butter

Chavas, Jean‐Paul; Mehta, Aashish

doi:10.1111/j.0002-9092.2004.00654.x

Cited by 66 publications

(48 citation statements)

References 17 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The transmission of prices in levels along the chain is necessary for a market to operate efficiently (Chavas and Mehta, 2004), for maximising producers and consumers welfare, and for an effective transmission of policy induced price measures (Meyer and von Cramon-Taubadel, 2004;Vavra and Goodwin, 2005;Ben-Kaabia and Gil, 2007). However, price volatility transmission entails the transmission of risks from unpredictable price changes from one market to another (Apergis and Rezitis, 2003) and this transmission should rationally be minimized.…”

Section: Price Volatility Transmission Versus Price Transmission: Defmentioning

confidence: 99%

“…This category is represented by the papers of Chavas and Mehta (2004), Zheng et al (2008), Mehta and Chavas (2008), Serra (2011 and Rezitis (2012). This category is also dominated by studies for the US and Greek markets, but shows some variations in the products studied.…”

Section: Price Volatility Transmission In Food Supply Chainsmentioning

confidence: 99%

“…compares farm and retail price volatilities, and concludes that both prices are volatile with farm price volatility being higher. Chavas and Mehta (2004) and Mehta and Chavas (2008) investigate the effect of changes in prices (in levels) on the covariance of price volatilities in two chain stages. Both studies conclude that price levels in one market determine how price volatilities co-vary in two markets.…”

Section: Price Volatility Transmission In Food Supply Chainsmentioning

confidence: 99%

“…Price volatility can be defined as the "portion" of price changes that cannot be predicted by market fundamentals. The transmission of predictable price changes, which can also be termed as price transmission, is necessary for the efficient transmission of market signals as a basis for informed economic decisions (Chavas & Mehta, 2004). The transmission of price volatility, on the other hand, implies the transmission of risk and uncertainty and may have negative impacts on investments in new technologies in other stages of the chain.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

The transmission and management of price volatility in food supply chains

Assefa¹

View full text Add to dashboard Cite

The 2006-2011 period has been marked by increased volatility in food an agricultural commodity prices at a global level. In the EU, the continuous liberalization of agricultural markets under the Common Agricultural Policy has led to the exposure of EU agricultural to increasing market price volatility. This thesis has investigated the transmission and management of price volatility in EU food supply chains. The transmission of price volatility in various food supply chains is first investigated through a literature review followed by an empirical analysis of price volatility transmission in the case of the German fresh pork supply chain. The effect of market power was also taken into account in the latter empirical analysis. Next, the management of price volatility was investigated through interviews conducted with actors of selected EU food supply chains. This was followed by the analysis of the effectiveness of selected price volatility management strategies. Lastly, in light of the policy support for agricultural insurance within the Common agricultural policy, premium rates of an agricultural revenue insurance contract were calculated for the Dutch ware potato sector.One of the gaps identified in the reviewed literature is the lack of attention given to the effects of contextual factors on price volatility transmissions in food supply chains. Contextual factors include market power in the chain and pricing strategies (e.g. contracts) by chain actors. Results of the price volatility transmission analysis conducted in this thesis in the case of the German pork chain show that retail market power limited both the transmission of price levels and price volatility. This thesis shows that price volatility is perceived as risky by all actors in the food supply chain. Deviations of prices by more than 10 to 15 % from expected levels were perceived as price volatility by a majority of the chain actors. Results further show that price volatility management strategies in EU food chains are diverse and well beyond traditional instruments such as futures and forward contracts. Contrary to expectations, price fixing contracts were not found to be desirable by interviewed chain actors. This thesis also found that the effectiveness of contracts in reducing price volatility depended on how the contract price was set.Results of this thesis further show that premium rates of a revenue insurance contract for the Dutch ware potato sector across categories of farms. The average premium rates calculated were 32.1%, 22.2%, 33.1% and 24.0% on guaranteed revenue per hectare for the high expected yield, low expected yield, high yield variance to expected yield ratio and low yield variance to expected yield ratio categories of farm, respectively. The difference in premium rates across categories of farms implies that charging the same average premium rate to all Dutch ware potato farms can lead to adverse selection.

show abstract

Section: Price Volatility Transmission Versus Price Transmission: Defmentioning

confidence: 99%

Section: Price Volatility Transmission In Food Supply Chainsmentioning

confidence: 99%

Section: Price Volatility Transmission In Food Supply Chainsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The transmission and management of price volatility in food supply chains

Assefa¹

View full text Add to dashboard Cite

show abstract

“…Recientemente, Chavas y Metha (2004) proponen un modelo de corrección del error ampliado que permite que la dinámica de ajuste de los precios pueda diferir según los diferentes regímenes definidos por los correspondientes umbrales. Sin embargo, en su modelo, la determinación de los umbrales se realiza de forma exógena.…”

Section: Enfoque Metodológicounclassified

Asimetrías en la transmisión de precios en el sector del tomate en España

Kaabia

Roig

2011

EARN

View full text Add to dashboard Cite

RESUMEN:El objetivo de este trabajo consiste en analizar el proceso de transmisión de precios a lo largo de la cadena comercial en el sector del tomate en España. Para ello se han considerado el precio percibido por el productor y el pagado por el consumidor. El enfoque metodológico adoptado se basa en la estimación de un Vector de Corrección del Error con umbrales. Los resultados indican que, a largo plazo, los dos precios son homogéneos. Sin embargo, en el corto plazo las reacciones de precios, tanto en velocidad como en magnitud, son asimétricas. Es más, los resultados indican que los detallistas se benefician (en el sentido de que son capaces de aumentar el margen comercial) de cualquier shock, ya sea positivo o negativo, que afecte tanto a las condiciones de oferta como de demanda. Esta capacidad de actuación sobre los márgenes comerciales es uno de los principales determinantes de los procesos inflacionistas en este sector. PALABRAS CLAVE: Asimetrías, cointegración por umbrales, precios, tomate.Clasificación JEL: C32, Q13. Price transmission asymmetries in the Spanish tomato sectorSUMMARY: This paper aims to investigate the non-linear adjustments between farm and retail prices in the tomato sector in Spain. The methodology used is based on the multivariate approach to specify and estimate a Threshold Autoregressive Model. The results indicate that, in the long run, price transmission is perfect. In the short-run, price adjustments between the farm and the retail levels are asymmetric. Retailers always benefit (in terms of increasing marketing margins) from positive and negative shocks affecting supply or demand conditions. Moreover, marketing margins have been found to be main determinants of inflation in the Spanish tomato sector.

show abstract

Do Inventories Have an Impact on Price Transmission? Evidence From the Canadian Chicken Industry

2012

View full text Add to dashboard Cite

This paper investigates the influence of inventories in explaining the magnitude of price transmission. The empirical strategy consists of two distinct steps. First, the flexible nonlinear framework of Hamilton is used to investigate the influence of inventories on price transmission. The procedure detects significant non-linearities and suggests that the price transmission elasticity is increasing in the level of the farm price and decreasing in the ratio of inventories to sales. This evidence leads to specific functional forms for the price transmission and target inventory equations which are estimated in a second step. The estimation procedure accounts for potential simultaneity between sales at the wholesale level and the wholesale price. Our results suggest that price transmission is lower (higher) when inventories are below (above) a target which is function of domestic sales.

show abstract

Price Dynamics in a Vertical Sector: The Case of Butter

Cited by 66 publications

References 17 publications

The transmission and management of price volatility in food supply chains

The transmission and management of price volatility in food supply chains

Asimetrías en la transmisión de precios en el sector del tomate en España

Do Inventories Have an Impact on Price Transmission? Evidence From the Canadian Chicken Industry

Contact Info

Product

Resources

About