Price transmission along the Lithuanian pigmeat supply chain

Abstract

Introduction. The paper analyses structural changes of pig farming in Lithuania and explores price behaviour along the Lithuanian pigmeat supply chain. Materials and methods. The conducted study uses annual indicators collected by Statistics Lithuania and weekly prices published by SE Agricultural Information and Rural Business Centre (AIRBC). Methods of comparative analysis and graphical representation allow investigating the most important changes of the Lithuanian pig farming. Price behaviour is studied employing econometric tests showing the characteristics of the analysed pigmeat price series and different aspects of price relations in the short-and long-Term perspective. Results and discussion. The share of small-sized farms is decreasing in the structure of pig farms, while farmer and family farms have lost their key role in pig farming, in particular between 2004 and 2018. In 2004, the share of pigs that were grown on farmer and family farms accounted for 56.7% of the population, while in 2018 a drop to a critically low 24.9% level was demonstrated. During the period from 2007 to 2016, the decrease in the share of farms with 10 animals and more was from 3.1 to 2.5%, while the share of farms with 3 9 pigs increased from 34.7 to 47.9%. This development direction of pig farming was caused by multiple factors, including the change of the business environment after 2004, the transformation of agricultural support model and aftermaths of price hikes, the impact of the governmental intervention due to the integration into the Eurozone, as well as animal health issues. Price transmission analysis demonstrates that the pork market had faced several critical shocks that had an impact on price behaviour and stakeholders welfare. However, the Johansen cointegration tests show that the most significant structural break was in 2013. The Granger causality test confirms that the price setting direction runs from retail to farm, while, in the long run, the hypothesis of the asymmetric behaviour is not supported. According to the results of Vector Error Correction Model, pigmeat prices return to the described equilibrium with a speed 3.6% for the analysed period. Conclusions. The study confirms the dramatic change of the Lithuanian pig farming sector. A test for price symmetry does not show market efficiency problems, but in the short-run one-way causality is present.